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OECD vows to make Cypriot residence-by-investment scheme less attractive

The Organisation of Economic Cooperation and Development expects that the residence-by-investment schemes applied by Cyprus, Malta, and Caribbean countries will not undermine a global effort to clamp down on tax dodgers, the Financial Times reported on Wednesday, citing an OECD official.

The OECD is working on preventing that residence-by-investment schemes will not survive long, the FT reported, citing Pascal Saint-Amans, OECD director of the centre for tax policy and administration.

Cyprus, which provides a permanent residence permit to non-EU nationals who acquire a residence worth more than €300,000, also offers incentives in the form of exemption from the special defence levy on interest, dividends, and rent, to individuals who declare their tax residence in Cyprus.

“The non-domicile status was enacted to attract foreign entrepreneurs and high earners,” President Nicos Anastasiades said on April 7.

Cyprus also extended, from five to ten years, the exemption of 50 per cent of non-domiciled tax residents on annual earnings in excess of €100,000.

The implementation of the OECD’s Common Reporting Standard, agreed in 2014, which provides for the automatic exchange of information between jurisdictions obtained from financial institutions, and the US Foreign Account Tax Compliance Act, widely known as FATCA and introduced in 2010, is likely to force a mass migration of funds held in offshore accounts, estimated at €10tn, in search for safer havens amid shrinking options, the FT reported.

Interior Minister Socrates Hasicos said on Tuesday that the residence-by-investment scheme has generated roughly €700m since 2013. This comes on top of a €3.3bn in foreign investment resulting from the government scheme which allows investors of over €2m to get a Cypriot passport in a three-month period.

Citing Philip Marcovici, a Liechtenstein-based lawyer, the FT reported that it will become difficult for wealthy taxpayers to fake a relocation in order to pay less taxes.

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