A Game-Changer in Tax Compliance: What You Need to Know
Cyprus Parliament has voted and implemented the Council Directive (EU) 2021/514 regarding digital platforms into law. Effective from November 3, 2023, this law mandates the automatic and compulsory exchange of information as reported by Platform Operators, the so-called DAC7, covering activities such as property rentals, personal services, sale of goods and rental of any mode of transport. The first reports are due by January 31, 2024, at the Cypriot Tax Department (CTD).
Key Highlights of the New Legislation
- Amendments and Compliance: This law introduces fresh mandates regarding to DAC7 and brings crucial changes to existing legislation, aligning the Common Reporting Standard (CRS/DAC2) and DAC6 Laws with stringent data protection requirements.
Understanding the Impact on Platform Operators
New Responsibilities and Obligations
Platform Operators are now at the forefront of this regulatory shift. Here’s what they need to brace for:
- Registration & Reporting: Mandatory registration with the CTD is a must (or notifying CTD if the platforms are already registered in another EU Member State), alongside conducting specific due diligence and reporting seller information as outlined in the law.
- Consequences of Non-Compliance: Falling short in compliance can lead to monetary penalties and reputational damage.
- Exemptions: Certain Platform Operators without involvement in reportable activities may find relief as excluded entities under this law.
Data Protection: A Crucial Pillar
Enhancing Personal Data Security
In an era where data privacy is paramount, amendments to the CRS Law ensure robust personal data protection, aligning with the GDPR. Financial institutions in Cyprus must now proactively inform individuals about data collection and transfer, ensuring their rights are safeguarded.
Towards Efficient Tax Administration
Facilitating Information Exchange and Joint Audits
This law strengthens the framework for information exchange automatically or upon request and introduces the concept of joint audits. These audits, a collaborative effort among EU Member States, aim to streamline tax administration and enhance transparency.
What’s Next on the Horizon?
Key Dates and Actions
- Law Activation: While most provisions are active from June 1, 2023, specific rules regarding joint audits have a different timeline, with additional information regarding the DAC7 report to be clarified in the coming weeks by CTD.
- Registration & Reporting: Platform Operators must register with the CTD by December 31, 2023. New operators after this date have to register immediately upon commencing activities.
- First Reporting Deadline: Mark your calendars for January 31, 2024, the inaugural deadline for DAC7 reporting.
Implications and Preparations
The Road Ahead for Businesses
With these changes, companies need to reassess and possibly revamp their processes to ensure compliance. It’s also crucial for financial institutions and intermediaries to adapt their procedures and communications in line with the GDPR requirements.
By staying ahead of these changes, you can ensure compliance and strategic alignment with evolving tax norms in the EU. For more information, contact Charles Savva at [email protected] or [email protected].
