DAC6 roadmap for Cyprus lawyers

By Elena Christodoulou

 On March 18, 2021, the Cyprus Parliament approved the draft bill of the Law of Administrative Cooperation in the Field of Taxation (Law 205(I)/2012) (Law) implementing Directive 2018/822/EU (DAC6). This bill was fully enacted into local Cyprus law on March 31, 2021.

On July 23, The Cyprus Bar Association (CYBAR) published an updated announcement providing guidance to its members on mandatory disclosure obligations under DAC6. The announcement is by no means to be construed as a legal opinion or legal advice. Lawyers should review the provisions of the law, as well as the decree that is expected to be issued shortly, in order to familiarise themselves with how this may affect them as intermediaries and their clients as taxpayers.

Applicable timeframe

By way of an update, the CYBAR members are being informed of the extension granted by the tax authorities regarding the reporting deadlines. As can be recalled, on February 26, 2021, the Cyprus tax authority, in response to difficulties arising from Covid-19, issued a directive wherein it was announced that there will be no imposition of administrative fines for overdue submission of DAC6 information that should be submitted by June 30, 2021. This date was further extended to September 30, 2021 via an announcement made on June 3 in the following cases:

2021. Reportable cross-border arrangements carried out between June 25, 2018 and June 30, 2020 that had to be submitted by February 28, 2021.
2022. Reportable cross-border arrangements carried out between July 1, 2020 and December 30, 2020 that had to be submitted by January 31, 2021.
2023. Reportable cross-border arrangements carried out between January 1, 2021 and August 31, 2021, that had to be submitted within 30 days from the date they were made available for implementation, or were ready for implementation, or the first step in their implementation was carried out, whichever occurred first.
2024. Reportable cross-border arrangements for which secondary intermediaries provided aid, assistance or advice, between January 1, 2021 and August 31, 2021 and had to submit information within 30 days beginning on the day after they provided aid, assistance or advice.

It is suggested that all lawyers should review all cross-border transactions they handled starting from June 25, 2018 to date.

When may a lawyer be considered as an intermediary?

Interestingly, a couple of examples are set out by the CYBAR demonstrating when a lawyer may be considered as an intermediary while exercising his profession:

1^st example: Registration of a Cyprus company by drafting its Memorandum and Articles of Association and the relevant compliance form (HE1).

2^nd example: Transfer of seat pursuant to sections 354B – 354IE of Cyprus Companies Laws (CAP. 113).

3^rd example: Registration of trademarks or patents and appearance before any administrative authority for the aforesaid purposes, as well as any other procedures pursuant to Trademarks Law (CAP. 268).

4^th example: Court appearance before any court for a transaction on behalf of any person.

If any of the aforementioned services are provided in the context of a cross border transaction that is reportable under DAC6, the lawyers involved will be considered as intermediaries, and, subject to legal privilege related considerations, will have a reporting obligation only with respect to the information within their possession.

If the same information is disclosed by another intermediary and there is evidence for that, then the lawyer does not have an obligation to inform any other intermediary or the taxpayer. The same applies if the information is disclosed to another EU member state. In such a case, the lawyer should ask for a copy of the relevant submission along with the case’s unique number.

If a lawyer provides the aforementioned services without knowing that these are part of a reportable cross border arrangement, they will not be considered as an intermediary and thus will have no reporting obligations under DAC6.

Legal privilege

A lawyer who is acting as an intermediary is released from the obligation to report to the tax authority as regards any information that is protected by legal privilege.

If a lawyer is subject to legal privilege, they must inform (within 10 days) the other intermediaries, and if there are no other intermediaries, the taxpayer. There is a suggested text (attached to the CYBAR’s announcement) for communicating this to the other parties involved.

Some important points on the legal privilege front:

• It applies to lawyers exercising the profession (ασκούν δικηγορία) according to Advocates Law (CAP. 2).
• There is no time limitation.
• If a lawyer is part of a partnership, the legal privilege applies to all of its members.
• It applies to any information shared by any of his/her colleagues.

Can a client waive his right to legal privilege?

Legal privilege is owned by the client and not the lawyer. Therefore, any privileged information to be disclosed by a lawyer requires prior consent by the client, either at the beginning of their business relationship or at a later stage.

Cases where a lawyer is not bound by legal privilege

There are cases where a lawyer is acting through a service company (εταιρεία παροχής διοικητικών υπηρεσιών (γνωστές ως «ΕΠΔΥ»)) either by providing shareholding, directorship or secretarial related services. Such services may not be considered as falling under legal privilege, irrespective of whether the sole shareholder of the service company is a lawyer.

Form and manner of information submission

Information should be submitted through the Government Gateway Portal (Ariadne) e-services through the upload of an XML Schema file. More information on the submission can be found at the following link: https://www.mof.gov.cy/mof/tax/taxdep.nsf/submitdac6_gr/submitdac6_gr?opendocument.

A summary of the Hallmarks setting out characteristics identified as potentially indicative of aggressive tax planning as well as answers to common questions raised from time to time by CYBAR members with respect to the implementation of the Law in Cyprus are included as appendices in the CYBAR announcement (https://www.cyprusbarassociation.org/files/enimerosi_DAC_6.pdf).

Elena Christodoulou is a senior associate with Elias Neocleous & Co LLC