Cyprus is among 21 countries whose so-called ‘golden passport’ schemes have been identified by the OECD as being a threat to international efforts to combat tax evasion, it emerged on Tuesday.
The list, which includes Cyprus and Malta – the only European Union member-states – followed the OECD’s analysis of over 100 residence and citizenship by investment (CBI/RBI) schemes offered by jurisdictions committed to the OECD/G20 Common Reporting Standard (CRS).
Cyprus offers two types of schemes: citizenship by investment, naturalisation of investors by and residence by investment.
According to the OECD the schemes offered by Cyprus and 20 other countries “potentially pose a high-risk to the integrity of CRS.”
“Potentially high-risk CBI/RBI schemes are those that give access to a low personal tax rate on income from foreign financial assets and do not require an individual to spend a significant amount of time in the jurisdiction offering the scheme,” the report said.
Such schemes are currently operated by Antigua and Barbuda, The Bahamas, Bahrain, Barbados, Colombia, Cyprus, Dominica, Grenada, Malaysia, Malta, Mauritius, Monaco, Montserrat, Panama, Qatar, Saint Kitts and Nevis, Saint Lucia, Seychelles, Turks and Caicos Islands, United Arab Emirates and Vanuatu.
Along with the results of its analysis, the OECD published a guide that will enable financial institutions to identify and prevent cases of CRS avoidance through the use of such schemes.
In particular, where there are doubts regarding the tax residence(s) of a CBI/RBI user, the OECD has recommended further questions that a financial institution may raise with the account holder.
Moreover, a number of jurisdictions have committed to spontaneously exchanging information regarding users of CBI/RBI schemes with all original jurisdiction(s) of tax residence, which reduces the attractiveness of CBI/RBI schemes as a vehicle for CRS avoidance.
The OECD said it will work with CRS-committed jurisdictions, as well as financial institutions, to ensure that the guidance and other OECD measures remain effective in ensuring that foreign income is reported to the actual jurisdiction of residence.
Last week, Cyprus was again red-flagged in an international report suggesting its visa programme, in spite of recent ‘cosmetic’ controls, as it stands, remains at risk of “exposing the EU to the corrupt and the criminal”.
The joint report by Global Witness and Transparency International said programmes run by some European Union countries to sell passports and residency permits to wealthy foreign citizens pose risks of money laundering as some of the schemes are not properly managed.
Such schemes are currently applied in 13 EU countries: Austria, Cyprus, Luxembourg, Malta, Greece, Latvia, Portugal, Spain, Ireland, Britain, Bulgaria, the Netherlands and France. Hungary has terminated its programme.
According to the report, titled ‘European Getaway – Inside the Murky World of Golden Visas’. Cyprus’ CBI marketing says the island offers “the quickest, most assured route to citizenship of a European country”.
“The statistics seem to support this,” the damning report said. “Cyprus’ passports-for-sale scheme is the most prolific of its kind in Europe, with 3,300 foreign nationals having secured EU passports since 2013,” earning the country some €4.8bn.