As part of the implementation of the CRS, developed by the OECD’s Global Forum for the automatic exchange of financial account information, the Tax Department highlighted risks linked to identity documents and other credentials obtained through CBI and RBI schemes. It noted that such documents may be used to submit false declarations regarding an individual’s tax residency, potentially undermining due diligence procedures under the CRS.
The department stressed that where a financial institution cannot rely on a self-certification or supporting documents, and knows or has reason to believe that the information provided is inaccurate or unreliable, it must assess all relevant information available. This includes the findings of the OECD’s risk analysis on CBI and RBI programmes.
Where an account holder or controlling person declares tax residency in a jurisdiction offering a potentially high-risk CBI or RBI programme, financial institutions are expected to raise a series of indicative questions. These include how residency rights were obtained, whether the individual holds residency rights in other jurisdictions, whether they spent more than 90 days in another jurisdiction during the previous year, and where they submitted personal income tax returns during that period.
According to the Tax Department, these procedures apply immediately to new clients. For existing clients, they will be applied where the account holder has declared tax residency in a jurisdiction offering a potentially high-risk programme. In such cases, the review process must be completed within six months from the date of the announcement.
Financial institutions are also required to notify the Tax Department by email at dac2@tax.mof.gov.cy, using the subject ‘CBI/RBI-CRS’, if corrective or new CRS declarations are submitted in relation to reportable information concerning existing clients.
Source: CNA
