Accountancy Cyprus - No. 140 - April 2023

The Institute of Certified Public Accountants of Cyprus

(ΣΕΛΚ) is proud to announce our distinguished line-up of finance experts who will participate in the 2nd ICPAC Mediterranean Finance Summit, taking place on 18-19 May 2023 at the Four Seasons Hotel in Limassol, Cyprus!

The 2nd ICPAC Mediterranean Finance Summit 2023 is a premium gathering of finance leaders and key decision-makers. This interactive summit will focus on the evolving role of the CFO, the intelligent technologies breaking new ground, risk management, the volatile regulatory landscape, customer centricity, and much more. Our guest Inspirational speaker is the legendary Nicos Zisis, former Greek international Basketball player and Euro League Legend. The event is targeting an audience of around 200 senior executives, including CEOs, COOs, CFOs, CIO's Finance Directors, and Senior Finance Managers, locally and from the region.

Advertising Order Form YEAR 2022-2023

Following the research carried out by the Selk among its members, and taking in view of their opinion, our magazine returns in electronic form mainly and with new appearance.

Thank you in advanced. For more info:22870030

Special Prices

More than one advert in the same issue you will be entitled with 10% discount

Name: ..................................................... Position: DIRECTOR .....................................

Company: ........................................................................................................................

Adress: ............................................................................................................................

E-mail: ............................................................................................................................

Telephone: ............................................. Fax: ..............................................................

..Signiture: .............................................. Date: ............................................................

1 Please mark with an X any quarter as appropriate

2 The above amounts do not include VAT

Contact Person

THE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS OF CYPRUS

11 Byron Avenue, 1096 Nicosia

P.O.Box 24935, 1355 Nicosia, Cyprus

Telephone: +357 22 870030, Fax: +357 22 766360

info@icpac.org.cy

www.icpac.org.cy

ICPAC FORM (April 2021)

Kyriakos Iordanou General Manager

GM’s corner: Thinking ahead!

By Kyriakos Iordanou, General Manager of ICPAC

New year, new hopes, new challenges

Eventually, 2023 is here! Having passed 2 unprecedented years coping with the covid 19 pandemic and a phenomenal 2022 carrying the effects of the Russian invasion in Ukraine and the surging inflationary economies, we look at new year with a hopeful and an optimistic glance.

However, the new year brings along much more than the above. It is actually a testing field for economic and social challenges, coupled by the introduction of new words in our casual vocabulary, such as Generation Z, ESG, cyclical economy, inflation, etc.

My feeling is that it would be a pivotal year, during which we shall be called to keep various equilibria, maintain balances (political, social, economical, financial), take sides (mainly in the international political scene), retrain and upskill, adapt to the digital transition and administer the content, effects and repercussions of the trifold ESG (Environment, Social, Governance) in a manner that would entail preservation of the natural and human resources as well as the sustainable development of economies and communities.

The new socioeconomic landscape that is being formed around Cyprus and globally is characterized by factors that were taken for granted in the last years, namely cost of energy, cost of money, labour cost and conditions, inflation and last, but not least, the public finances of the countries. Given that the prices of goods and cost of living are surging, interest rates and energy price is increasing, the public finances face difficulties as governments tried to mitigate the effects of the Covid-19 pandemic and to contain the purchasing power of the households, it appears as inevitable for all of us to adjust to the prevailing conditions and adapt to the new realities. Another aggravating factor is the uncertainty and liquidity of the landscape, deterring us from making long term plans, looking however to the short term for mitigation and preservation.

In this scenery, we are also called to integrate the new generation of young people into the current society, a generation that bear different characteristics, priorities and perceptions than the elder. A generation raised with the privileges of the well being of the previous years, without having presentations of other eras.

The above apply of course to our profession, apply to businesses and to the economies in a wider sense. It is an adjusting period for all of us, repositioning priorities, cutting down unnecessary wastefulness, preserving resources and redefining goals. There is no other way…

We find ourselves in a game of the survival of the fittest where the most adaptive species shall be able to advance. These are times that need for collective actions and cooperation between the whole spectrum of stakeholders, try to cut away unnecessary cost, make the ultimate use of all available resources, whilst capitalizing on the comparative advantages and competitive edges, seeking innovation and digital applications, in order to remain abreast and stand out from competition and peers.

Usually, challenging times give rise to more opportunities. This is where we should focus on, that is, identify the opportunities offered, differentiate from the rest of the herd and though a well-thought planning, try to rise above the stirred waters in a pursuit for a sustainable personal, business, social and state growth and prosperity.

ACCOUNTANCY CYPRUS

ISSN 1450-2380

The Institute Council Pieris Markou (Chairman) Nicos Chimarides (Vice-Chairman)

Eleni Pyrgou (Secretary)

Members

Andreas Andreou, Andreas Avraamides, Odyseas Christodoulou, Stavros Ioannou, Gabriel Onisiforou, Maria Pastellopoulou, Petros Petrakis, Demetris Siakallis, Spyros Spyrou, Demetris Taxitaris, Demetris Vakis, Christos Vasiliou

General Manager

Kyriakos Iordanou

Address

11 Byron Avenue, 1096 Nicosia, Cyprus

Mailing Address

P.O.Box 24935, 1355, Nicosia, Cyprus Tel.: +357 22870030

Fax: + 357 22766360

e-mail: info@icpac.org.cy www.icpac.org.cy

The publication is prepared by FMW Financial Media Way

23B Armenias Street, Office 101

Strovolos, 2003, Nicosia

Tel.: 22342005

Fax: 22342006

e-mail: info@fmw.com.cy www.fmw.com.cy

Design and Pagination: Christiana Loizou

Accountancy Cyprus is published quarterly by the Institute of Certified Public Accountants of Cyprus and is send free to all members of the Institute as well as to a large number of other persons, companies and organisations. The Institute can accept no responsibility fot the accuracy of contributed statements or articles appearing in this publication and any views or opinions expressed are not necessarily endorsed by the Institute, its Council or by the Editors.

08 ICPAC NEWS

• International Compliance Certification in Anti money Laundering for CBA & ICPAC members

• Launch of ICPAC's AML-CFT Certification

• New initiatives to expand Cyprus-Greece business cooperation

• ICPAC Kicked Off the first bi-annual virtual PAO Knowledge Exchange for Accountancy Education Directors in Middle East and North Africa (MENA) region, launched by the International Federation of Accountants (IFAC)

14 INTERVIEW

PRESIDENT NIKOS CHRISTODOULIDES

The comprehensive tax reform is one of the key policies of our Governmental programme

18 COVER STORY

• The Tax issue

ICPAC: Urgent need for a new tax reform

20 THE TAX ISSUE

• INSIGHT: Treaty Shopping—Is the New Principal Purpose Test a Game Changer? [PART 2]

Christos A. Theophilou Taxand Cyprus | Partner | International Tax –Transfer Pricing

• Business in Europe: Framework for Income Taxation

Petros Krasaris Partner Head of International Tax and Transaction Services at EY Cyprus

• VAT on financial services and fintech: The story of the CFO and the need for reform George Liasis, Partner - Indirect Tax at EY Cyprus

28 AUDIT & ACCOUNTING

• From Financial to Corporate Reporting

Pantelis Pavlou Director and a member of the Central, Eastern and Southeastern Europe & Central Asia (CESA) IFRS team at EY

30 INSOLVENCY

• Why Do Examinerships Fail? The Case of Cyprus Socrates Socratous Managing Director Revita Turnarounds Ltd

BUSINESS & ECONOMY 32

• Confirming the Illegality of UBO Registry Public Access

Pantelis Christofides Advocate – Director, Head EU & Regulatory Law Department, L. PAPAPHILIPPOU & CO LLC Advocates & Legal Consultants

• ICPAC’s crucial role in the development of the tourism industry

Angelos Loizou ISHC Chairman of the Hospitality Industry Committee ICPAC / Special Advisor of The Association of Cyprus Tourist Enterprises (ACTE)

• Factoring and Supply Chain Finance

Paris Georgades Manager Factors, Bank of Cyprus

A Surprising Downside To Growing Our Careers (That Nobody Talks About)

• Antigoni Marinou, FCA GCDF CT CSMM MSc BA(Str), CEO of Rokket by Antigoni Marinou, A bespoke Coaching & Training House

•

International Compliance Certification in Anti money Laundering for CBA & ICPAC members

Participants received the necessary information for the new joint certification exam for compliance officers and other stakeholders. At the same time, they were informed extensively about the importance of specific strategic cooperation. In the presentation panel, the Press Spokesperson/Member of the Board of Directors of PDS, Ms. Tzortzia Constantinou Panagiotou, Ms. Amalia Hadjimichael, Head of Monitoring & Compliance, on behalf of ICPAC, Mr. Pekka Dare, vice president of ICA, and the moderator of the discussion was ICPAC's General Manager, Mr. Kyriakos Iordanou.

Launch of ICPAC's AML-CFT Certification

ICPAC, acting in its capacity as a competent authority for AML/CFT matters and implementing its obligations towards the relevant Law and Directives, agreed with the International Compliance Association (ICA) for the joint examination leading to an AML/CFT Certification based on best international standards. The obligation to obtain an AML/CFT Certification applies to ALL existing and newly appointed Compliance Officers and stems from the fit and properness criteria required for the appointment of a Compliance Officer. It aims at establishing the required knowledge in AML/CFT compliance necessary to perform the

UPCOMING ICPAC EVENTS

functions of a Compliance Officer.

The AML/CFT Certification is also available to any individual who wishes to obtain practical AML/CFT knowledge applicable to their day-to-day work. ICPAC has issued Regulation “6.700 – Compliance Officer Certification” which establishes the regulatory framework governing the obligation and the Certification. Also, the Regulation incorporates exemptions and deferral provisions under certain circumstances and given specific criteria apply. ICPAC has also issued a set of questions and answers.

The AML/CFT Certification can be

obtained through registering or the exam and succeeding in one of the four exam sittings provided each year.

Existing Compliance Officers will have an adjustment period of 12 months ending on the 31st of January 2024, to obtain the Certification in order to remain eligible to hold the position.

Any other individual wishing to be appointed as a Compliance Officer in a firm licensed by ICPAC, as of the 3rd of April 2023 is required to have successfully passed the AML/CFT Certification, irrespectively of whether or not they are members of the Institute, in order to hold the specific position.

Meeting the three main Presidential Candidates

In the context of its continuous discussions and open dialogue maintained with key stakeholder groups and individuals, ICPAC held separate meetings with the three main Presidential Candidates. During the meetings, the three main Presidential Candidates were given the opportunity to outline their positions and explained their vision regarding Cyprus economy, the future of business world in Cyprus, the tax system reform and more.

New initiatives to expand Cyprus-Greece business cooperation

The mission of the Cyprus Chamber of Commerce and Industry, the Business Association of CyprusGreece and the ICPAC had important contacts in Athens, in the context of which meetings were held with:

Minister of Development and Investments at Government of the Hellenic Republic

With the Minister of Finance Mr. Christos Staikouras.

With the President and representatives of the administration of the Athens Chamber of Commerce and Industry.

With the administration of the Central Union of Chambers of Greece (Central Union of Chambers of Greece).

ICPAC Kicked Off the first bi-annual virtual PAO Knowledge

Exchange for Accountancy Education Directors in Middle East and North Africa (MENA) region, launched by the International Federation of Accountants (IFAC)

The Below Article was published by IFAC post the completion of the presentation from Ms. Efi M. Marcou, Head of Learning and Development at the Institute of Certified Public Accountants in Cyprus (ICPAC) with subject “The challenge of attracting high[1] quality professional accountants – ICPAC’s Experience and Actions”.

Collaborating to Attract New Talent to the Profession: Working with Accountancy Education Directors in MENA

EFI MARCOU , HELEN PARTRIDGE, DANA JENSEN | NOVEMBER 28, 2022 IFAC, the World Bank and the Arab Federation of Accountants and Auditors (AFAA) hosted a webinar on June 21, 2022 to encourage regional collaboration, foster collaboration with those who influence the accounting education system, and provide access to experts (for more information, see Accountancy Education Ecosystems Are Complex. Our Ability to Attract Potential Accountants Suffers). As part of a pilot project targeting accountancy education in the Middle East and North Africa (MENA), IFAC launched the first bi-annual virtual PAO Knowledge Exchange for Accountancy Education Directors in MENA to provide a forum for conversation amongst peers on the unique challenges and opportunities we face within the profession in the region. The first knowledge exchange in the series, which attracted 125 registrants and 93 live participants, focused on how professional accountancy organizations (PAOs)

can address the need for more high-quality professional accountants in MENA. The session kicked off with a presentation from Ms. Efi M. Marcou, Head of Learning and Development at the Institute of Certified Public Accountants in Cyprus (ICPAC). Efi shared ICPAC’s experiences and initiatives increasing the number of high-quality professional accountants in the jurisdiction. Following the presentation, participants discussed perspectives from their respective countries. In Cyprus, while the number of graduate accountants increased by 19.5% between 20142021, the number of students simultaneously decreased by 28.4%. After acknowledging the challenge at hand, ICPAC decided that it needed to not only increase the number of students in the pipeline, but to also increase the number retained after graduating. To do so, ICPAC first secured a firm strategic commitment from its Board to embed this area of focus in its day-today operations. This enabled ICPAC to allocate resources at hand to undertake specific, practical actions targeting tertiary education, secondary education, and the general public as detailed in the slides below. The full recording of the presentation can be viewed at the IFAC

COMMENT BY IFAC

“We are very thankful to ICPAC and Efi Marcou for sharing their experience with respect to challenges faced in attracting high quality talent to the profession and some of the initiatives undertaken by ICPAC to overcome such challenges. The presentation was clearly appreciated by all PAO accountancy education directors from the Middle East and North Africa region in attendance and inspired discussion and action across the region.”

Helen Partridge - Director, Accountancy Education, International Federation of Accountants (IFAC)

YouTube channel.

PAOs need to step down and get closer to the stakeholder group that we as a profession are trying to embrace—we must make ourselves visible and accessible to students. We must also keep up to date with current accounting technology to avoid finding ourselves at a disadvantage in the war for talent. Given the rapid digital transformation taking place in the accountancy profession, many PAOs

are considering opening their pipelines to candidates with skillsets in areas beyond what the CPA designation currently offers. By starting with targeting high school or secondary school students and drawing on recent high-quality college graduates, PAOs will inevitably be better poised to solidify long-term sustainability well into the future.

We look forward to enhancing and continuing these engagements!

CHRISTODOULIDES:

PRESIDENT NIKOS

The comprehensive tax reform is one of the key policies of our Governmental programme

he implementation of a comprehensive tax reform is one of the key policies of our Governmental Programme», as mentioned by the President of Cyprus Mr Nikos Christodoulides. In his exlusive interivew to ICPAC magazine «Accountancy Cyprus», he said:

• We are committed in modernizing the tax system and enhancing its competitiveness, while taking into consideration the digital and green transition.

• Within this framework, we are promoting a holistic tax transformation that will lead to a fair and simple tax system, promoting income redistribution and taking into consideration the current European and international developments, while retaining the elements that make Cyprus an attractive business destination. Also, he expresses his optimism that the Cyprus economy continues to demonstrate strong resilience, despite the effects of the pandemic and the ongoing war in Ukraine.

Which are the government forecasts for the remaining of the year 2023

The Cyprus economy continues to demonstrate strong resilience, despite the effects of the pandemic and the ongoing war in Ukraine. Both in 2021 and 2022, the economy exhibited strong growth of 6.6% and 5.6% respectively, while maintaining high employment rates.

As regards economic policy, the government will continue on the path of fiscal sustainability, the maintenance of a stable and robust financial system and the promotion of structural reforms. More specifically, our fiscal policy will be fully in line with that of the EU and the Eurozone, where strict fiscal rules apply. Our aim is to continue promoting critical structural reforms and the full utilization of all the available tools, such as the absorption of European funds for the green and digital transition.

At the same time, harnessing inflation in a socially just manner, while respecting fiscal viability will be the guiding principle for our economic policy making.

Taking all the above elements into consideration, I remain optimistic for the course of our economy. The projections of the Ministry of Finance Illustrate that growth is expected to continue on a positive path in the medium term, albeit at a decelerated pace, with an annual growth rate of around 3% in real terms, in 2023. Over the period

2024-2025, growth is expected to stabilize, with real GDP growth projected at 3.3% and 3.2% respectively. It is worth noting that further improvement in the balance position is expected, with the fiscal position reaching a surplus of 1.7% of GDP in 2023 and 2.3% of GDP in 2024 and in 2025, respectively. Debt-to-GDP ratio is estimated to continue its downward trend declining further to 70% by the end of 2025.

What other measures is the government considering in order to contain energy costs and inflation, and to enhance business competitiveness and the citizens standards of living?

The uncertainty introduced by geopolitical developments, require us to keep a vigilant stance. Having said that, the government will continue to take measures to alleviate the impact of the increase in energy prices for households and companies, in a responsible manner. As regards our main economic goals, we are promoting a growth model that will broaden the productive base of

the economy, fully capitalizing on research, innovation and technology and utilizing our country’s rich human talent. In this framework, we endorse the long-term Economic growth strategy of Cyprus “Vision 2035”, will ensure the long-term viability, competitiveness and resilience of the economy, as well as the well-being of the citizens of Cyprus.

In parallel, there are two emblematic EU multi annual programmes in our disposal – Thalia and the RRP with a total budget of €3bn – that aim to shape the Cyprus of Tomorrow. Both programmes are already under implementation and include reforms and critical projects, as well as support schemes to businesses and citizens. The vision of this government is, among others, to further promote the digitization of the economy, to significantly decrease our carbon footprint and to enhance innovation and technological entrepreneurship. It should be noted that the investment programmes’ objectives are fully aligned with the Vision 2035 Strategy and support its implementation.

Having said that, we are fully aware of adverse effects that the challenges of the economy pose on the society as a whole. In this framework, the recent announcements to support the renovation of refugees housing, along with the ongoing support for increased energy prices, demonstrate the sensitivities of the government as regards

The Cyprus economy continues to demonstrate strong resilience

the welfare of its citizens.

We will therefore continue implementing measures towards the most vulnerable, while ensuring the viability of public finances. We are committed to conducting economic policy in a responsible manner, without ignoring the realities on the ground, yet with a vision for having an economic model fit for the future.

What are your thoughts on the upcoming tax reform?

The implementation of a comprehensive tax reform is one of the key policies of our Governmental Programme. We are committed in modernizing the tax system and enhancing its competitiveness, while taking into consideration the digital and green transition.

Within this framework, we are promoting a holistic tax transformation that will lead to a fair and simple tax system, promoting income redistribution and taking into consideration the current European and international developments, while retaining the elements that make Cyprus an attractive business destination. This includes the adjustment of the VAT rates based on the relevant ECOFIN decision.

The Ministry of Finance is taking concrete steps towards the realization of this commitment, including the assignment of an expert study by academics, which will examine the tax framework of Cyprus, draw from best practices of other juristictions and pave the way for the reform, in full collaboration with social and economic stakeholders. It goes without saying, that we consider ICPAC as one of our key partners in this process, drawing from the valuable expertise and knowledge of the profession. Meanwhile and until the finalization of the study, we will be promoting a number of necessary amendments to alleviate the burden on the labour market, as well as on households and SMEs.

In addition, through the tax reform, we aim to reduce the para-economy by 15-20%, in line with the relevant objective of the Vision2035 strategy. It is also important to fight tax evasion through transparency and better information arising from the digital economy. In all our efforts, we remain committed to keeping the public engaged and fully on board in the whole process of this very important reform.

How will Economic Diplomacy contribute to the attraction of new foreign investment?

Economic Diplomacy is coordinated by the Ministry of Foreign Affairs through a targeted and specific Strategy that was adopted in October 2021 that has the attraction of Foreign Direct Investment at its core. The Strategy is being promoted through a collaborative and participative approach with all relevant Ministries and key organisations, like Invest Cyprus and that is a key element for its success. Furthermore, the Strategy allows for the utilization of Cyprus’ Diplomatic Missions network, which provide valuable insights and intelligence on business opportunities, in their host countries.

In this respect, the Government also works closely with the private sector in order to achieve our common goal, which is the further internationalization of our economy and its promotion as a competitive and attractive business hub.

Therefore, Economic Diplomacy contributes to attracting FDI both by articulating in a targeted way, the message of what it is that makes Cyprus an appealing destination for foreign investment. In other words, promoting a coherent brand for Cyprus, showcasing our country’s investment potential and highlights its comparative advantages.

What are your thoughts on a new credible and aligned with the EU requirements investment program for Cyprus?

The Government abolished the Cyprus Investment Program in November 2020 due to weaknesses that became evident. There is no intention of a new programme.

What further initiatives will you take towards the implementation of the reform of local government?

The reform of Local Government has been structured in three pillars, comprising of three different legislations, which were approved by the House of Representatives on the 3rd of March 2022. More specifically, the legislations are: (a) the Municipalities Law of 2022, (b) the Communities (Amending no.2) Law of 2022, and (c) the District Local Government Organisations Law of 2022. According to the government, this reform –based on appropriate technical and economic studies– will allow Cyprus to comply with the Recommendation 389(2016) of the Congress of Local and Regional Authorities of the Council of Europe, which has been used as a guide.

The new legislation for Municipalities involves a significant reorganisation of the present structure of Cypriot local authorities: 20 new municipalities will be established, following the amalgamation of the current 30 municipalities and 63 communities (out of the existing 350).

Furthermore, the legislation concerning the establishment of five District LocalGovernment Organisations, provides for the amalgamation of the existing sewage councils, water supply councils, solid waste management and the urban planning authorities, at a district level. The main aim of this legislation, is to improve the efficiency of water supply, sewerage and solid waste management through economies of scale, as well as implementing a unilateral policy on the issuing of urban planning and building permits at a district level.

What message would you like to deliver to ICPAC members?

ICPAC represents the professionals of one of the most critical sectors of our economy. Their high level of professionalism is something that we are proud of as a country. The Government appreciates the valuable contribution of ICPAC in all matters pertaining to economic policy and I am confident that our excellent long-standing cooperation will continue. I would also like to reiterate the Government’s commitment towards an economic policy that ensures the stability and competitiveness of our economy, allowing for further growth its key sectors, including those represented by the Accounting Profession.

ICPAC represents the professionals of one of the most critical sectors of our economy. Their high level of professionalism is something that we are proud of as a country

Urgent need for a new tax reform

At last year’s conference we have learned some lessons, which, inter alia, include the following:

• the business and economic foundations of the country can be affected by events happening elsewhere, reference is of course made to the warfare between Russia and Ukraine and the repercussions it carries on Cyprus,

• geographical boundaries are becoming less and less relevant, since economies are open and susceptible to the impact of globalisation,

• energy resources and cost are playing a massive and catalytical role in the economic activity and social framework in every country,

• competitiveness is fundamental for every country’s economic growth model, whilst robust and sustainable fiscal policies are mandatory,

• concentration on ESG, with everything relating to the preservation of the environment, the natural resources and Sustainable Development Goals (SDGs) is the way forward.

Hence, it is hereby proven that the international business and economic scenery are volatile and liquid, highlighting how imperative it is to install solid, robust and adaptive economic models, with widely enriched portfolio of activities and associates, whilst remaining compliance friendly.

Cyprus has a small but open economy, susceptible to the fluctuations of the international business affairs and challenges. Currently, many initiatives instigated by various organisations including the EU are under way, which affect the international tax outlook. These initiatives place particular emphasis on the combat against aggressive tax planning, tax evasion and profit shifting, on enhancing compliance, reporting and transparency, as well as on efforts to address digital business and technology, substance rules as well as ESG priorities. Coupled to that, we also hold the hot potato of the consequences of the restrictive measures and sanctions imposed on Russia due to invasion to Ukraine.

The discussions around the “Unshell” Directive of the EU, the “Foreign Direct Investments Screening” Regulation, the UBO Registers, the “BEFIT” proposed directive, OECD’s Pillar II requirements, Transfer Pricing regulations, Anti Avoidance directives, Country by Country Reporting, EU’s DACs 6-7-8 on exchange of tax information, digital tax and taxation on multinational companies, coupled by the data protection and privacy restrictions (as per recent decisions by the European Court of Justice in Luxembourg) are of paramount importance and create a really complex puzzle. It is for these reasons that I take this opportunity to re-iterate ICPAC’s call to the government and to the political establishment to proceed with a wider Tax Transformation, as we named it. We have an obligation to fortify the country’s business arsenal so as to protect it from international competition, whilst

planning for the future on a modern and more relevant blueprint. Having in mind the international driving forces and considering the domestic needs for social and economic policies and development, there is no other option but to soon start working on a holistic, across the board and deep down plan to transform our tax regime into a modern, flexible, lean and neat, transparent and adapted to the Long Term Strategic Growth Plan for the Economy (known as “Vision 2035”), offering stability and predictability to the local population, as well as to the investors and foreign businesses which aspire to operate in or from Cyprus. This exercise should contain a radical and outside the box approach, possibly away from our comfort zones, thus creating lasting additional value, fair perception and competitive advantages for the country, based on proportionality, relevance, use of digital applications, with as little as possible bureaucracy and an effective tax justice framework. We do live in an era where countries around the globe strive to keep their economies at an acceptable survival level, with their primary attention being on the health and safety of their populations, as well as on the sustainable development of the business activity and of the enterprises that constitute the productive cells of each country’s economy. Jurisdictions on one hand, governments and corporations on the other, claim their own fair share of tax revenues. This is what Cyprus should do too.

It is for these reasons that we would like to coney a direct and straightforward message to the newly elected President and his government, in order to place the whole subject at the top of their priority list, given that valuable time has already been lost. All of the above, and many more, occupy a substantial part of the tax agenda. The rules of international taxation shape the nature and substance of the international business, which in turn, has a fundamental influence on the economic models of various countries. The traditional international business centers tend to be considered obsolete, with extensive substance, transparency and reporting requirements being more imminent, coupled by a gradual containment of the globalization theorem. Hence, the differentiation from the standard practices of the recent past looks more evident than ever, forcing jurisdictions, businesses and authorities to adjust. ICPAC remains at the disposal of the government and the rest of the economy stakeholder to actively work towards the further improvement and reform of Cyprus’ tax regime, which must me coherent with the local policies and international realities.

Kyriakos Iordanou

General Manager of ICPAC Extract from his address at the 6th International Tax Conference

(PART 2) PRINCIPAL PURPOSE TEST

In order to end tax loopholes used by multinational enterprises (“MNEs”) for improper use of tax treaties, the Organization for Economic Co-operation and Development (“OECD”) has recommended, under base erosion and profit shifting (“BEPS”) Action 6: Prevent Treaty Abuse, an anti-abuse provision, namely the Principal Purpose Test (“PPT”). Such a provision will come into effect in selected tax treaties through the Multilateral Instrument (“MLI”).

INSIGHT: Treaty Shopping — Is the New Principal Purpose Test a Game Changer?

Effectively, more than 100 jurisdictions (including Cyprus, Russia and Ukraine) have concluded negotiations on the MLI that will swiftly implement a series of tax treaty measures to update international tax rules and lessen the opportunity for tax avoidance by MNEs.

Following the signing ceremony held in Paris on June 7, 2017, 84 countries have signed the MLI and another six jurisdictions have expressed their intent to sign the MLI. It is expected that a few thousand tax treaties will be amended in order to implement the BEPS treaty proposals, such as the PPT.

Accordingly, the MLI will only apply to double taxation treaties (“DTTs”) in cases where both contracting states are party to the MLI; therefore the MLI will not impact any DTTs where only one of the contracting states is a party to it. Cyprus, under Articles 1 and 2 of the MLI, extended its application to the 55 individual treaties signed by Cyprus, plus the three treaties covered under the old treaty with the Republic of Yugoslavia (Bosnia and Herzegovina, Montenegro and Serbia) plus the three treaties covered under the old treaty with the USSR (Azerbaijan, Kyrgyzstan and Uzbekistan). As a result, no tax treaties of Cyprus have been excluded.

The next steps of the MLI process in Cyprus are:

• ratification of the MLI, which is already completed;

• publication in the Official Gazette, expected soon;

• exchange of notes with the respective countries; and

• publication in the Official Gazette for the amendment of individual treaties.

Thus, the MLI will be effective as from January 1 of the following year (which is the earliest that they can come into effect). Nonetheless, as

noted above, the provisions of the MLI will come into effect when the other contracting state has also ratified the MLI. Thus, the individual 55 tax treaties are expected to be amended gradually in the coming years.

PPT: Division of Three Parts

Turning to the PPT, which reads as follows:

“Notwithstanding the other provisions of this Convention, a benefit under this Convention shall not be granted in respect of an item of income or capital if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit in these circumstances would be in accordance with the object and purpose of the relevant provisions of this Convention.”

Notably, in 2014, the OECD has included in its Commentary a similar wording that provides similar powers to contracting states. The PPT can be analyzed in three parts. The first part of the PPT (“Notwithstanding the other provisions of this Convention,”) makes it clear that it applies, irrespective of any other anti-abuse provision of any double tax treaty, and therefore it will serve as a safety net to the tax authorities to counter any tax treaty benefits that could not have done so through a specific anti-abuse provision such as the beneficial owner clause.

Put simply, “notwithstanding” means that the PPT does not go through other specific anti-abuse provisions included in the treaty and therefore leaves them intact, thus they still apply. As a result, the PPT appears to be an additional weapon included in the tax authorities’ arsenal against aggressive tax planning techniques used by MNEs.

Christos A. Theophilou Taxand Cyprus | Partner | International Tax –Transfer Pricing

Thereafter, the PPT is divided in two parts. The first part (“a benefit under … in that benefit”) the tax authorities need to “reasonably conclude” that “one of the principal purposes” was to obtain a treaty “benefit.” Such a threshold, however, seems likely to be very low as it is expected from the tax authorities only to “reasonably conclude” and not to factually prove.

It can be argued that the words “reasonably conclude” can have a very broad meaning. It would be very easy for the tax inspector to reasonably conclude not the principle purpose but one of the principle purposes. In other words, “reasonable to conclude” means that if you have set up a structure to take a treaty benefit, then the tax inspector of that country can disallow the treaty benefit if it is indeed reasonable to conclude (it takes a reasonable person to conclude) by a tax inspector who by looking at the burden of proof does not need conclusive evidence but, from their perspective, one of the principle purposes is taking a treaty benefit.

However, the tax inspector would deny the treaty benefit if it was only “one of” the principle purposes and not the main purpose. Effectively, the OECD is using a very low threshold as the tax inspector could still deny the treaty benefit even if there are commercial reasons for using a treaty.

In other words, if you have a strong commercial reason for having the structure and also a similar tax reason, then it seems likely that this is one of the principal purposes of having the tax structure. Put simply, taxpayers, when entering into transactions, are encouraged to take into consideration only non-tax reasons. Finally, regarding the last part (‘’unless it is established … Convention”) if the tax inspector has reasonably concluded that one of the

principal reasons of the taxpayer was to take a treaty benefit, then the taxpayer, to avoid denying the treaty benefit, must “establish” that this was “in accordance with the object and purpose” of the treaty.

Thus, unlike the burden of proof that lies on the shoulders of the tax inspector who needs reasonable and conclusive evidence, the taxpayer must provide concrete evidence to prove their position. What is more, unlike the taxpayer, the tax authorities need to prove that the benefit was in accordance with the object and purpose of the treaty.

Effectively, the object and purpose of the treaty comprise the title, preamble and text of the treaty. In other words, the burden of proof eventually lies on the shoulders of the taxpayer and therefore the taxpayer has to come up with proof/provide evidence that this specific crossborder structure, granting the treaty benefit, is in accordance with the relevant provisions of the double tax treaty.

In light of the above provisions, companies have two options. First, it may be reasonable to take a treaty benefit but such benefit need not be one of the principal purposes of establishing the structure. Consequently, commercial and business reasons need to prevail over tax reasons of having a particular cross-border structure. Second, in a different case, such a structure needs to be in accordance with the object and purpose of the treaty.

PLANNING POINTS

In light of the above, the uncertainty of the Beneficial Ownership Clause will undoubtedly be further compounded by the PPT, particularly regarding financing, holding and licensing structures.

Although it is unclear whether the Beneficial

Ownership Clause requires economic substance, the PPT, apart from economic substance, requires business purpose and commercial reasons as well. Notably, the PPT was introduced as an additional treaty anti-avoidance tool to fill in the gaps of other specific treaty anti-avoidance tools such as the Beneficial Ownership Clause, in order to prevent treaty shopping.

Put simply, the PPT works as a safety net when other provisions are circumvented. As a result, to minimize the additional uncertainty, such structures need to be analyzed and reviewed bearing in mind, on the one hand, that there are no contractual obligations in place to pass on the income to another person and, on the other hand, that there are no tax reasons when entering into a transaction and if so, this would be in accordance with the object and purpose of the treaty.

It would be considered rather difficult to prove the existence of any business and commercial reasons of a simple holding structure whose parent company purpose is limited to holding one subsidiary.

Instead, it would seem more likely that a top holding company, whose purpose is to hold and manage numerous subsidiaries, will have more economic substance as compared to a single holding company structure. What is more, a single holding company structure purpose seems to be to route the dividends received from its subsidiary to its shareholder.

By contrast, the top holding company structure example that holds numerous subsidiaries, in case the dividends are not routed directly to the shareholders but are reinvested within the group, provides further commercial and business purposes to the structure itself.

• The holding company SPV is no longer a preferred solution;

• Taking into account any business risks/ considerations (if any), a company, in addition to its holding activities, could provide financing to group companies, license intangibles, provide services and carry out trading activities; and

• This would substantiate a claim that there are various business reasons for the existence and operation of the company. The current international tax environment is certainly becoming more and more demanding for MNEs in terms of economic substance, but also for providing business and commercial reasons as well. Hence, structures such as holding, financing and licensing SPVs need to be revisited to ensure that they comply with the new requirements.

* The article was published in Bloomberg BNA at International Tax News

Business in Europe: Framework for Income Taxation

Through the Business in Europe: Framework for Income Taxation (BEFIT) proposal, the European Union (EU) is proposing a comprehensive solution for business taxation in the EU. This initiative aims to introduce a single corporate tax rulebook within the EU which will be based on a common tax base and formulary apportionment of profits to Member States (MS) resulting to a more effective and fair allocation of profits between EU countries. The BEFIT proposal will replace the pending proposal of a Common Consolidated Corporate Tax Base (CCCTB). This article is aiming to touch upon on a high-level basis on some of the most important pillars of the BEFIT proposal. At the same time, the article aims to address possible issues, uncertainties, and challenges stemming from the proposal.

THE NEED FOR BEFIT

The EU Commission (Commission) is of the view that BEFIT will boost the competitiveness of the single market by removing tax barriers and thus supporting investment in the EU. Moreover, it will reduce tax compliance costs, especially for small and medium-sized enterprises (SMEs) and will result to a more effective and fair taxation in terms of allocation of tax revenues to MS. However, despite the Commission’s positive view on BEFIT, a lot of stakeholders are challenging whether there is a real need for it.

If one of the objectives of the BEFIT proposal is to simplify and reduce the tax compliance burden, BEFIT may be a step towards the right direction. However, this may not be the case for all taxpayers and may have the exact opposite effect.

Moreover, it is evident that the main objective of the BEFIT proposal is to tackle tax avoidance and increase tax revenues to address increased public debt levels resulting from Covid-19 and the effect of macroeconomic trends such as the growing aging population. This is supported by the report adopted by the Committee on Budgets of the European Parliament (BUDG Committee) on 17 April 2023. The report proposes to source EU Budget with new taxes and is aiming to achieve a diversification of the EU financing sources. The report proposes, inter alia, the BEFIT initiative as a starting point for a new

own resource.

However, it is questionable if a common corporate tax base and allocation of profits to MS based on a formula is the right tool to achieve this as there are various other tools to combat tax avoidance (e.g., Base Erosion and Profit Shifting (BEPS)- Pillar 2, Anti-Tax Avoidance Directive 3-Unshell Directive, tax transparency & exchange of information mechanisms and changes to the Interest & Royalty Directive).

ENTITIES WITHIN THE SCOPE OF THE BEFIT PROPOSAL

In terms of the design and entities within scope of the BEFIT proposal, the Commission provides for two options:

• Option 1: BEFIT to apply only to multinationals with consolidated global revenues exceeding EUR 750 million or

• Option 2: BEFIT to have a broader scope with a lower revenue threshold and with an opt-in possibility

Given the overlap of the BEFIT proposal with other new legislative initiatives which are yet to come into force, such as BEPS Pillars 1 & 2, if the BEFIT proposal is implemented, it will likely introduce great uncertainty and complexity in the short-term. As such, a lot of stakeholders are of the view that BEFIT should be optional to taxpayers. Such optionality would be advantageous for a number of reasons, for example, the size and sector of

Petros Krasaris

Partner Head of International Tax and Transaction Services at EY Cyprus

businesses that will opt in for BEFIT may vary and this would provide a good indication of what works and what does not.

DETERMINATION OF THE TAX BASE

The EU Commission is suggesting two options as to the determination of the tax base for the purposes of BEFIT:

• Option 1: use standardized financial statements subject to limited adjustments and

• Option 2: introduce a new comprehensive corporate tax system, with detailed rules for determination of the tax base.

It is widely recognised that via BEFIT, the Commission is relaunching CCCTB. However, there is now one important difference; that is, by giving their approval to the Pillar 2 Directive, MS have effectively agreed to a tax base on financial income with certain limited adjustments, which is Option 1 under BEFIT. To the contrary, Option 2 will introduce a new comprehensive corporate tax system which will lead to undesired outcome as tax compliance will become overly complex. Given the above, the expectation is that Option 1 may be the option to be favoured by both the Commission and MS.

CROSS-BORDER LOSS COMPENSATION

Currently, it is quite a challenge for EU businesses to claim loss relief for final losses despite jurisprudence of the Court of Justice of the EU as there are several conditions and limitations. If BEFIT were to include a satisfactory loss offset mechanism, this could

make the regime attractive, and businesses may be incentivised to opt into the regime. For BEFIT to become even more appealing, the loss offset should also capture third countries outside the EU. This will be in line with one of the main objectives of BEFIT which is the removal of barriers to cross-border activities and bolstering the competitiveness of the EU economy.

TRANSFER PRICING CONSIDERATIONS

Under BEFIT, the Arm’s Length Principle (ALP) and the Transfer Pricing (TP) rules will not apply on transactions between companies of the BEFIT group as profits would be apportioned based on a formula which would be based on a pre-determined set of weighted factors. However, the ALP will apply on transactions with companies that are outside the BEFIT group and associated enterprises in the EU that will not be part of the BEFIT group. It is debatable whether replacing the ALP and the OECD TP Guidelines, which have been in existence for decades, with a formula for apportionment would result in a fairer allocation of tax revenues. This will be a drastic change with an unpredictable impact on the tax revenues of MS.

IMPACT ON BILATERAL TAX TREATIES

Currently, there is uncertainty as to how Double Tax Treaties and BEFIT will co-exit. For the time being, the implementation of BEFIT seems to distort the allocation of taxing rights. Under BEFIT, it remains to be seen whether third countries will apply and respect

treaties with EU countries or whether BEFIT would be a source of new challenges, for example, in terms of beneficial ownership of income in case the underlying income is apportioned to more than one EU MS. Another challenge that would arise for BEFIT when it comes to administration is how to design the dispute resolution procedures with third countries i.e., Which treaty should apply? Is it the one in the EU MS in which the transaction was conducted or would it be the responsibility of the MS in which the BEFIT return is filed? While it is expected that adequate answers and solutions will be given in the future, it will take substantial time until this happens.

TIMELINE

Even though as per the Commission, the baseline scenario is that current national rules in the EU will remain unchanged, it is evident that the Commission is favouring an action in the form of a directive as it believes this will lead to a more balanced allocation of corporate tax revenues to MS.

The Commission aims in releasing a draft directive in the third quarter of 2023 with implementation deadline by the end of 2024. The draft directive will be subject to another public consultation and will require unanimous approval by all MS before it can be adopted. It remains to be seen whether this is a realistic timeline. Given the recent examples of Pillar 2 and ATAD 3 Unshell Directive, it is likely that BEFIT would take longer than initially anticipated.

On the legislative front, 2023 is a very interesting year with a lot of activity both in terms of consultation, legislation, and implementation of already approved tax policy changes. All these changes and initiatives are connected and will have a medium and longterm impact to businesses and MS alike. BEFIT may have considerable adverse effect on countries like Cyprus with negative impact on tax revenues. It is suggested that the Cyprus government undertakes its own impact assessment exercise to understand what BEFIT means for Cyprus. One possible course of action is for Cyprus to take the position that BEFIT should be optional as this will be beneficial in terms of understanding how the new BEFIT framework “plays out” across the EU and how this affects the ability of Cyprus to attract business.

Note: The views expressed above by the author do not necessarily represent the views of EY.

VAT on financial services and fintech: The story of the CFO and the need for reform

For my intervention at the 6th IMH international tax conference held, strangely enough, on Valentine’s Day, I was supposed to cover the subject of VAT on financial services and fintech from a VAT technical perspective. I was the only speaker on VAT, in a house full of direct tax people, and this made me fear I would be in the receiving end of significant booing. So, I decided to trick them by disguising a technical presentation inside a story. The story of the CFO. Here it is…

The year is 1977. The CFO of an EU bank, going through the news headlines, reads that EU lawmakers, after reaching an agreement have adopted the sixth VAT directive, aiming to introduce a harmonised VAT law throughout the troubled European Union.

The life of this CFO was hard overall, but he was happy that VAT was not going to be one of his big concerns. You see, when VAT was introduced, because of the difficulty in taxing margin based financial services, and for other socioeconomic reasons, it was decided by European policymakers that financial services should remain VAT exempt.

The EU VAT directive included therefore, seven simple, generic definitions, which covered, as VAT exempt, the financial world of that era. Income wise therefore, our CFO had minimal worries. He had of course the side problem of nonrecoverable input VAT on expenses, but that was not a significant issue for him because, you see, back then, banks and other financial institutions, predominantly insourced all their needs. As the years passed and the financial liberalisation arrived, from the mid-80s to the millennium, the life of this CFO became much more complex. His bank now provided many more financial services in the sphere of securities, derivatives, underwriting, participation in M&As, private banking and many many more, including the very difficult area of transactions concerning money, payments and transfers, requiring significant investment in technology.

Most importantly, his Bank was rethinking its operating model. She was going cross border rapidly, started focusing on core functions, outsourcing non-core and slowly but steadily

started going digital, purchasing a variety of services from different sources. All these expenses had VAT charged on them which remained a cost. The CFO now had too many items in his plate, and, sadly, VAT was becoming one of them. The 1977 definitions were too generic to fit this new world of financial services. There was huge uncertainty in terms of defining what is VAT exempt and what is subject to VAT. Different European countries applied the definitions differently. Harmonisation on this matter was thrown out of the window. In addition to the uncertainty, the irrecoverable VAT cost of the Bank, skyrocketed. This CFO was living a nightmare. His CEO and his Board of Directors were furious. Music in the ears of VAT consultants who did help but did not have all solutions after all. He had to find a solution but there was none.

In 2007 there was light at the end of the tunnel. The European Commission took the initiative to solve the problem. They proposed an EC Regulation with refined definitions, aiming to capture the modern world of financial services, alleviating the uncertainty that existed from the generic definitions. The Commission also proposed tools aiming to limit the impact of irrecoverable VAT cost. Such tools were in the likes of an enhanced VAT grouping regime, a cost sharing arrangement exemption applicable for Financial Services, and a refined Option-to-Tax mechanism, whereby Banks and financial services businesses could select which of their supplies they could forfeit the exemption and render them subject to VAT, earning therefore the right of input VAT recovery. Being a businessperson, our CFO thought to himself, we are now in 2007, logically by the end

George Liasis Partner - Indirect Tax at EY Cyprus

of 2010 this should be over. The Gods of Politics started laughing.

Fast forward 16 years to today, the CFO of our story is now retired, enjoying a good old single malt he saved from back in the day, yet, the VAT rules for financial services are exactly the same as they were the day they were introduced back in 1977. They don’t stand a chance against the modern financial world, new operating models and fintech. The problems of uncertainty and the irrecoverable vat cost are exponentially higher. The European Court of Justice takes the role of law maker, which is a problem in its own regard. Even worse, the VAT rules are affecting the way financial services organisations are structuring their business in order to optimise their VAT position. For example, they choose to work with fixed establishments instead of setting up different entities or even refrain from outsourcing so as to avoid the corresponding VAT cost. This is counter intuitive for a pro-entrepreneurship European Union and a pro-business…pro-tech-business Cyprus. One of the main challengers of the reform was the UK. You see, irrecoverable VAT was one of the largest taxes paid by the sector in the UK. This continues to be the case also today. The European Commission – post Brexit – and as part of the 2020 Tax Action Plan – restarted the initiative with aggressive plans to help in tackling the problems. The pandemic, the war in Ukraine, the energy crisis and of course the inflation and the resulting interest rate increases, once again pushed back the reform to an unknown horizon. Our hero – the CFO –looking at the situation – appreciates retirement even more.

Now; I do appreciate that this is just a story and,

in reality, the CFOs of Banks and FinTech’s have much bigger problems to deal with and, regardless of how badly I want this to be true, they don’t really lose sleep for Value Added Tax. Irrespective of this, the FinTech world took us by storm. The services we see being offered are so complex, the uncertainty when it comes to application of VAT on these businesses is tremendous and this must be appreciated. The high levels of technological advancement, the trends towards outsourcing and the fragmentation of supply chain in various activities and specialised operators increase dramatically both the uncertainty and the VAT cost.

If the CFO of our story was in Cyprus – and many of them are – he would have faced the same issues and potentially even more. This cannot be the case for a country like Cyprus.

Devotees of status quo will logically ask; Isn’t this a pan-European issue with little to nothing we can do as a small country? Indeed, this might be the case. There are plenty we can do however to make the system more attractive and fairer for such businesses and fulfil our vision of being a destination for technology companies including technology companies of the financial and insurance sectors.

First and foremost, we need a stable and consistent system. We cannot issue orders changing the whole landscape for a given area without consultation and without transitional measures. We cannot be seen as hindering Tax Justice.

We need to adopt pro-business practices. For example, we already have in our VAT system, in our current VAT law, the concept of a VAT group

but practically we restrict application, denying its benefits to the VAT exempt financial sector. The reasons behind this practice are appreciated but, must be reconsidered in line with the overall tax strategy of the country.

On the other hand, the European VAT directive, and again, the current EU VAT directive, as it is now and not as we hope it will be after a reform, has various tools and options which can be considered for introduction in the Cypriot VAT legislation. One such tool is the Option-to-Tax for financial services, which if applied positively, it can be a differentiating factor for Cyprus in the attraction and retention of FinTech, in conjunction of course with other tax measures and incentives we already have in place. Am I proposing adoption of an option-to-tax? No! but, I am proposing consideration, consultation and assessment, of this and other points of law. We have examples from other member states. Poland for instance introduced an option-totax for financial services during 2022. To the best of my understanding, it has introduced the option restrictively, resulting in limited adoption. France on the other hand, had for years applied a restrictive option-to-tax and within 2022 loosened the rules with an aim to boost the competitiveness of French businesses operating in the sector. We can learn from their experiences.

From 1 March we will have a new and promising Government. From the pre-election messages of the President-Elect and the presence of his accompanying political office reps at this very tax conference, it is obvious that taxes, including indirect taxes, are high on their agenda.

If I could convey a message on behalf of all of us, the VAT practitioners of the VAT committee of the Institute of Certified Public Accountants of Cyprus, a committee which I proudly chair, that would be a plea for inclusion of the area of VAT in the so much advertised upcoming Tax Reform. We need at last to see matters holistically.

And its not only for FinTech businesses. It is also for Funds, Shipping and many more. The UK for instance is as we speak undergoing consultation for a reform of the VAT rules on Funds which is another area of comparable competitive advantage for Cyprus. Rumour has it that next in the UK is a reform of the VAT rules for financial services overall in line with developments in the sector. This is a call for action; and we are here to help. The actual intervention at the Tax Conference ended with a small but valuable technical discussion on how we approach VAT for complex financial services and FinTech according to the current rules. That part is not covered in this article but as I always say; we are a phone call away.

MENTORS' PROGRAMME

ICPAC, always a pioneer and close to its members, is continuing with great success to offer the Mentors' programme. This innovative, professional development programme, assists in offering different perspectives in our challenging profession, enables new opportunities to be explored and builds strong relationships amongst members. Through participation in this programme, both Mentors and Mentees will gain great benefits. 26 experienced Mentors from the profession in various industries are participating in the programme and will be happy to share their knowledge, expertise and support to Mentees who register.

The Mentors' programme is offered to ICPAC's members for FREE. For more information and registration, please scan the QR code below:

AUDIT & ACCOUNTING

From Financial to Corporate Reporting

It is inevitable that financial reporting will evolve to corporate reporting that includes, among other things, sustainability information. As the new requirements on sustainability reporting are being drafted, refined, and tested, it is obvious that stakeholders will be facing several challenges. Navigating the patchwork of requirements, the lack of widely accepted definitions and the evolving landscape, just to name a few. But the biggest of all is the availability and reliability of data that is needed to address the (potential) overlapping requirements, set by a different regulators and standards setters across the globe.

Our profession will also be impacted, especially, as we have been asked to provide assurance on the corporate sustainability reports once the new rules kick in. Professional accountants should be informed of the new rules and the emerging trends, invest in their knowledge around sustainability, and influence the debate around these current issues. My advice: make sure that you catch the train.

Introduction

The modus operandi of the capital markets was initially developed and subsequently evolved primarily, some may argue exclusively, around the needs of investors and shareholders. To this end, financial reporting, as a means for providing reliable and relevant signals to the market, in an effort to decrease the information asymmetry between management and investors, focused on the financials: assets, liabilities, profits, earnings per share, cash flows, dividends …

As the societies progressed, things have now changed. With a more inclusive capital markets model, access to information, awareness, general curiosity, as well as the focus to corporate responsibility shifted the attention to more than merely a corporate’s fiduciary duties. As a matter of fact, the scrutiny of sustainability matters has become even more important. This doesn’t mean that financial reporting is becoming irrelevant.

On the contrary, financial information is the centrepiece of corporate reporting, around which sustainability information helps in bringing the full corporate story to capital markets.

Moving to more inclusive capital markets model

A more inclusive model means that the needs of a wider stakeholder group shall be addressed via corporate reporting. To achieve this, reporting should incorporate sustainability information, sometimes called ESG: Environmental (e.g., information on the impact of the entity on climate change and the impact of climate change on the entity, details on Green House Gas emissions), Social (e.g., diversity and inclusion), and Governance (e.g., internal controls, addressing fraud). The big leap on this debate is the fact that the stakeholders were heard by policy makers, resulting to new initiatives in developing reporting requirements. In fact, we see several new legislations and standards across the globe. At the international arena, the newly formed International Sustainability Standards Board (ISSB), under the umbrella of the International Financial Reporting Standards (IFRS) Foundation, issued its first two draft standards, addressing the investors’ needs for sustainability reporting. In Europe, the European Commission finalised its long-awaited Corporate Sustainability Reporting Directive (CSRD), under which the European Financial Reporting Advisory Group (EFRAG) has been asked to develop the European Sustainability Reporting Standards (ESRSs). In the US the Securities and Exchange Commission (SEC) published its requirements focusing on climate change. An observer can only be thrilled by the swift responses from standard setters, but equally petrified by the risk of having

Eleni Ashioti Head of Technical and Professional Matters of ICPAC

Pantelis Pavlou Director and a member of the Central, Eastern and South-eastern Europe & Central Asia (CESA) IFRS team at EY

THE ACCOUNTANCY PROFESSION

Our profession is heavily affected. Not only we are facing the same challenges as other stakeholders, but we will also be asked to provide assurance on sustainability information. As we already know from our experience, this requires additional efforts compared to other stakeholders to overcome the same challenges, especially in gaining an understanding around the processes for identifying, extracting, and reporting information, so that we can opine on the final report.

The only way to make sure that our profession remains relevant in this context, and that it is well equipped to face the uncertainties, is to ensure that we all are keeping up with the developments and to the extent possible influence the debate (e.g., by providing input via comment letters, participate to fruitful discussions).

Be aware though that the train has already left the station. I hope that I see you all on board. We are at the dawn of a new era with regards to Corporate Reporting, and all need to be well suited and supported in this journey. At EY, we are committed to maintaining a leading-edge understanding of the changes that may affect the business environment. Our tool, EY Atlas Client Edition (here) is available for free to everyone and offers access to EY interpretations and thought leadership content.

Connect with the author via LI: www.linkedin.com/in/ppantelis

a patchwork of different, overlapping and maybe contradictory requirements across the world. This gives rise to several challenges for all involved in this process.

THE CHALLENGES

Not only preparers of Corporate Reporting, who will be the first to face the challenges ahead, but investors, other interested parties (e.g., employees, NGOs, the society at large) and of course our profession will be heavily impacted. The avalanche of the new requirements will be at our doorsteps very soon.

The number and nature of challenges differ from entity to entity, from stakeholder to stakeholder, but some of them are common. Allow me to introduce three: i) understand the relevant requirements, ii) data, iii) comparability and interpretation. The first is to grasp the relevant requirements that apply to a particular

reporting entity. As discussed earlier, different regulators and standard setters have taken initiatives to develop reporting requirements. These are not always (at least not fully) aligned. For example, the draft standards of the ISSB focus on the needs of investors, while the draft ESRSs include the concept of double materiality (the impact of climate change on the entity – aligned with the ISSB, but also the impact of the entity on the environment). Getting a good understanding on which framework applies to the reporting entity is also a challenge, as the European rules have extraterritorial applications.

Taking all into account, defining the scope and the application of the requirements will be a huge task, which needs to be addressed even before starting the design of the new corporate/sustainability report. Next to preparers (who are directly impacted) other stakeholders need to

go through similar process, so that they comprehend what has been reported and how it compares to other entities/ industries.

Once the scope is set, the second challenge comes to light: DATA. Data other than financial, is not always readily available, and even if is it, it is not subject to the same rigorous internal scrutiny and controls. In addition, entities are required to base their reports on external information, as the current proposals extend beyond the boundaries of the traditional reporting entity. Examples include the scope 2 and scope 3 Green House Gas emissions, covering the direct and indirect emissions of the entities’ supply chain all the way to its final consumers. This means that, to achieve completeness, an entity needs to rely on information that is provided by its suppliers and produce estimates for its customers, which puts additional pressure on the availability and reliability of data. As soon as the first two challenges are addressed, management and other stakeholders will be tasked with understanding the reported information, comparing them across entities (or even within the same entity, e.g., within departments) and making the relevant decisions, e.g., invest, set Key Performance Indicators (KPIs), assess management’s performance against the goals. To be able to overcome all these, one should be able to appreciate data points that are neither well defined, nor easily comparable. Furthermore, some frameworks allow for entity specific information (see for examples ESRS), which will require additional communication to and education of the different stakeholders.

In instances like this, where uncertainty exists and the market participants are not well placed to develop a market practice, regulators step in to close the gap by introducing a number of rules (see the EU Taxonomy on green investments). This is much welcomed in this interim period, however policymakers need to be able to allow flexibility and to ensure that the rules change as needed, e.g., as the stakeholders gain experience, experimentation will allow room for further innovations in corporate reporting to address the emerging information needs.

Why Do Examinerships Fail? The Case of Cyprus

Iworked in England between 1988 and 1992, where I completed my Chartered Accountancy Articles. I was working for Grant Thornton, London, and I managed to spend a good deal of my time as a trainee and then a senior accountant in the departments of Investigation and Insolvency. Audit and tax were, admittedly, not my favourite subjects. One thing that fascinated me as an idea in the world of Insolvency was that of Administration Order, i.e., the possibility of stepping in a company to put things right, before handing it back to its owners. A legal framework was in place for that action and still remains.

I thought at the time that all these developments will be introduced to Cyprus in the years/decades to come.

Socrates Socratous Managing Director Revita

In Cyprus, the concept of Liquidation and Receivership existed for many years and it certainly came more on the limelight after the tragic events and economic disaster of 2013. A disaster which could easily be handed the title of ‘’A chronicle of a death foretold‘’, since problems pre-existed and the system pretended that everything was fine. Half of companies/businesses had been insolvent for years before, the directors/ owners thought they knew everything and did not accept any form of advice, the banks were engaged in continuous bad lending based on questionable collaterals and very poor repayment ability, and so on. The Companies’ Act has been reformed,

including strong updates to the Insolvency Section of the Act. There is even legislation now for the Insolvency professionals delivering services under the provision of the law. New measures have been introduced, including the concept of “Examinership”, a similar concept to Administration Order, which gives the capability to a company to be placed under Court protection for some months, while a survival/recovery plan is being worked out to put it back to a road towards recovery. Our legal framework on Examinership has been based on the Irish model, which apparently enjoyed some success, as approximately 11% of companies in an insolvency state are utilising the measure. Without getting too technical, there are certain legal, practical and of substance criteria to fulfil for an Examinership petition. An Examiner is proposed, and an Expert’s report is prepared for the petition. The Expert could be the Auditor of the company, or an independent professional who is eligible to be an Examiner or Auditor. The main idea is to demonstrate that an insolvent company can become viable again, following a certain restructuring plan, dealing with its liabilities and using its cash generating ability and the introduction of new capital to reach an agreement with its creditors. This is subject to the approval of the latters’ various classes and/or stakeholders.

The petition can be made by the company,

Turnarounds Ltd

a director, a minority (more than 10%) or all shareholders, a creditor (present or future), an employee or a group of employees, even a guarantor of the liabilities of the company. If the company becomes healthy, this is beneficial for everybody, as employment is maintained, jobs may even be created, and economic activity in society improves and flourishes.

In a nutshell, the above is a description of the theoretical framework, yet this useful tool has failed completely to date, following some 30 applications, none of which has been successful. Because, among other things, the law was not properly and timely applied. Therefore, one wonders if it is the fault of the law, the fault of the legal system, or the fault of the Cypriot culture and mentality that do not allow for facts and information to be taken at face value and to be acted upon in good faith and time, in order to raise the bar and move forward. Or is it maybe a combination of all the above?

Most cases were contested heavily, as the stakeholders who believed that their interests had been jeopardised immediately filed an objection against the Examinership. The Expert’s report is often questioned and not accepted by opposing sides, claiming that it is false, one-sided or even not acting in good faith.

To make matters worse, the Courts with their heavy load are not in a position to study

cases immediately, nor is there adequate knowledge and experience of the concepts involved on behalf of the judges. In a small country, it proves difficult to specialise. Worst of all is that the whole idea of Examinership has never been viewed in its real dimension, that is, a genuine effort to save a company. The simple reality remains that local Cypriot entities (for which the law seems to have been designed) do not carry attractive investments for new capital. It has been left on the shareholders to recover the money they had probably abused over the years (and wrongly invested in futile personal ventures of chance), in order to raise the new capital needed to save their own companies.

As a result, some petitions were made to put companies under the protection of the court, in order to buy time and prevent (even temporarily) the appointment of a Liquidator or Receiver (this is one of the provisions of the law). This is a short-sighted view and will not bring any long-term value added, other than consequently prolonging procedures.

In some other petitions, the shareholders did not agree with each other and fought fiercely between them in their overall struggle for power. One may wonder, what good does that bring to a company, its operations, its creditors, or its employees?

A petition for an Examinership cannot be a progression of bad events. We are, however,

running the danger of making it so, due to the way we think and act as a whole. If a petition is successful, the judge can offer a short time period (4 months from filing the petition and possibly 2 additional months) to prepare a sound, feasible and reasonable survival plan. The judge can also give special instructions to that effect, too. How can this be harmful, especially since it will go through classes of creditors to be approved?

To conclude, I am very sceptical as I believe that a law which is supposed to do good should be able to actually work. It hasn’t until this very moment. We should keep trying towards this direction, despite all difficulties and drawbacks, if we wish to escape our comfort zone and proceed towards a healthier business life.

In Cyprus today, there exists 1 business for every 15-20 people, whereas for the EU as a whole the equivalent number is 1 for every 80-90 businesses. Cypriot businessmen should seek advice and healthy measures should be taken at early stage of disease. All stakeholders, be it owners, partners, creditors, banks and employees should try moving in the same direction, abandon aggressive and ‘’I know everything” arrogant approaches and, who knows, maybe they could receive a pleasant surprise as to the results. Certainly, existing laws and practices are far from working smoothly at their current state.

Confirming the Illegality of UBO Registry Public Access

A first reflection on WM and Sovim

SA Court of Justice of the European Union Judgement

n a 22nd November 2022 seminal Judgement in Joined Cases C-37/20 and C-601/20 WM (C-37/20) and Sovim SA (C-601/20) v. Luxembourg Business Registers1, which essentially reinstated legal orthodoxy, the Court of Justice of the European Union (CJEU), declared, the Ultimate Beneficial Ownership (UBO) Public Access related provisions of the EU 5th AML Directive2, as legally invalid, due to the fact that they infringed the freedoms enshrined under the EU Primary Legislation, and in particular Charter of Fundamental Rights of the European Union (the Charter), Article 7 (Respect for private and family life) and Article 8 (Protection of personal data), and the Principle of Proportionality.

CJEU noted that it reaching the above – mentioned Judgement, took into consideration certain factors, including the following3:

1. The publicly accessible information in relation to the identity of the beneficial owner as well as to the nature and extent of the beneficial interest held in corporate or other legal entities, was capable of enabling a profile to be drawn up concerning certain personal identifying data more or less extensive in nature depending on the configuration of national law, the state of the person’s wealth and the economic sectors, countries and specific undertakings in which he or she has invested.

2. The said publicly accessible information was then accessible to a potentially unlimited number of persons, with the result that such processing of personal data had been liable to enable that information to be freely accessed also by persons who, for reasons unrelated to the objective pursued by that measure, seek to find out about, inter alia, the material and financial situation of a beneficial owner.

3. The potential consequences for the data subjects resulting from possible abuse of their personal data were exacerbated by the fact that, once those data had been made available to the general public, they could not only be freely consulted, but also retained and disseminated and that, in the event of such successive processing, it became increasingly difficult, or even illusory, for those data subjects to defend themselves effectively against abuse.

4. Although it is stated, in Recital (paragraph) 30 of the Preamble of the EU 5th AML Directive, that the general public’s access to information on beneficial ownership ‘can contribute’ to combating the misuse of corporate and

other legal entities and that it ‘would also help’ criminal investigations, it must be found that such considerations are also not such as to demonstrate that that measure is strictly necessary to prevent money laundering and terrorist financing.

5. In the light of the above, it could not be considered that the interference with the rights guaranteed in Articles 7 and 8 of the Charter, which resulted from the general public’s access to information on beneficial ownership, was limited to what is strictly necessary, that being proportionate.

Further, the CJEU noted that4, while the Principle of Transparency, as it results from Articles 1 and 10 of the Treaty of the European Union (TEU) and Article 15 of the Treaty on the Functioning of the European Union (TFEU) is given concrete expression primarily in the requirements of institutional and procedural transparency covering activities of a public nature, including the use of public funds, such a link with public institutions could not be established, where the measure at issue had been intended to make available to the general public data concerning the identity of private beneficial owners and the nature and extent of their beneficial interests held in companies or other legal entities. Accordingly, the Principle of Transparency, could not be considered, as such, an objective of general interest capable of justifying the interference with the fundamental rights guaranteed in Articles 7 and 8 of the Charter, which resulted from the general public’s access to information on beneficial ownership.

The CJEU Judgement could be considered as reflecting, amongst other, the previous Judgements of the then European Court of Justice (ECJ) in Digital Rights Ireland5, the Article 29 Data Protection Working Party (WP) Opinion 14/2011 on data protection issues related to the prevention of money laundering and terrorist financing

Pantelis Christofides Advocate – Director, Head EU & Regulatory Law Department, L. PAPAPHILIPPOU & CO LLC

& Legal Consultants

as adopted on 13th June 20116, and the European Data Protection Supervisor (EDPS)) Opinion 1/2017 on a Commission Proposal amending Directive (EU) 2015/849 and Directive 2009/101/EC Access to beneficial ownership information and data protection implications dated 2nd February 20177

The Department of Registrar and Intellectual Property of the Republic of Cyprus, in response to the CJEU Judgement in EM and Sovim SA, duly issued a relevant Announcement on 28th November 2022, in Greek and in English translation8, to the effect that:

a. Access to the Register of Beneficial Owners for the general public has been suspended as of the 23rd November 2022.

b. The relevant information to the competent and supervisory authorities and the Unit as referred in article 12 of Directive R.A.A. 112/2021 and amending Directive R.A.A. 116/2022, will continue to be provided with the applicable procedure.

c. The relevant information will, also continue to be provided to the obliged entities, with the applicable procedure by submitting additionally a solemn declaration confirming that the information on the Beneficial Owners is requested within the context of performing customer due diligence.

Advocates

BUSINESS & ECONOMY

d. The obligation of companies and partnerships to submit and update their Beneficial Owners information is not affected and remains valid.

Further, other EU Member States’ UBO Registers have announced the suspension of public access to the said Registers, including Luxembourg9, The Netherlands10, Malta11, Ireland12, Austria13 and Germany14

Regarding the aftermath of the CJEU Judgement in WM and SOVIM SA, commentators have noted the possibility of a spill over effect into the area of international tax reporting obligations. To that effect, KPMG EU Tax Centre commented, amongst other, that ‘the case could impact other legislation in the field of transparency, including the recently adopted EU Public Country-by-Country Directive. In particular it would be interesting to see how the CJEU would interpret the compatibility of the Charter with opt-in provisions such as the ‘safeguard clause’ under which Member States can allow in-scope groups to defer the disclosure of commercially sensitive information for up to 5 years, and where no clear definition was provided15. Further, the eminent Professor in Tax Law at Queen Mary University of London Christiana HJI Panayi noted16, amongst other, that: ‘Whilst this is general (non-tax specific)

legislation, it will be interesting to see if the Court of Justice will feel equally emboldened to strike down any new EU tax legislation that is introduced which could be in breach of the fundamental rights. The Commission's Unshell proposal is not the only prospective target. In my view, it is not completely utopian to imagine a challenge to an eventually adopted Directive on minimum effective tax rates on the basis of the right to property (Article 17) or right to an effective remedy (Article 47), if there is consistently double taxation and inadequate dispute

resolution mechanisms.

This is potentially an interesting twist to the debate as regards Pillar 2 - especially the UTPR - and the Commission attempts to adopt it.

Food for thought for Brussels...’.

With the above remarks in mind, it remains to be seen whether the CJEU Judgement in WM and SOVIM SA will herald a new period regarding the contests to the legality of mentioned as ‘tax transparency related’ measures, including DAC6, CRS and the EU Commission’s ‘UnShell’ legislative initiative.

1 The CJEU Judgement, in English, is accessible at https://curia.europa.eu/juris/document/document. jsf;jsessionid=B2C57BA079E25F586E4A378F4D1078EA?text=&docid=268842&pageIndex=0&doclang=EN&mode=req&dir=&occ=first&part=1&cid=161951.

2 Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, and amending Directives 2009/138/EC and 2013/36/EU (Text with EEA relevance). Accessible, in English, at https://eur-lex.europa.eu/ legal-content/EN/TXT/?uri=celex%3A32018L0843.

3 See to that effect CJEU Judgement dated 22nd November 2022 in Joined Cases C-37/20 and C-601/20 WM (C-37/20) and Sovim SA (C-601/20) v. Luxembourg Business Registers, indents (paragraphs) 39 – 44 and 75 – 76.

4 Ibid, indents (paragraphs) 61 – 62.

5 See to that effect ECJ Judgement dated 8th April 2014 in Joined Cases C-293/12 and C-594/12 in Digital Rights Ireland Ltd v Minister for Communications, Marine and Natural Resources and Others and Kärntner Landesregierung and Others. Accessible, in English, at https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A62012CJ0293.

6 See to that effect page 4 of the Article 29 WP Opinion 14/2011. Accessible, in English, at https://ec.europa.eu/justice/article-29/documentation/opinion-recommendation/files/2011/wp186_ en.pdf.

7 See to that effect paragraphs 4 – 7 page 1, paragraph 60 page 13 (with reference to the so – called ‘Panama Papers’), paragraph 63 page 14 and paragraph 66 page 15. Accessible, in English, at https://edps.europa.eu/sites/edp/files/publication/17-02-02_opinion_aml_en.pdf.

8 See to that effect, in English translation, https://www.companies.gov.cy/en/knowledgebase/news/suspension-of-access-to-the-beneficial-owners-register-for-the-general-public.

9 See to that effect the Luxembourg Business Registers (LBR) Warning dated 22nd November 2022, accessible, in English, at https://www.lbr.lu/mjrcs-lbr/jsp/IndexActionNotSecured. action?time=1670324001998&loop=3.

10 See to that effect the Dutch Ministry of Finance Announcement dated 22nd November 2022 and the relevant Letter of the Ministry of Finance to the Dutch Parliament dated 22nd November 2022, both accessible, in Dutch, at https://www.rijksoverheid.nl/documenten/kamerstukken/2022/11/22/kamerbrief-over-tijdelijk-geen-informatieverstrekkingen-uit-het-ubo-register-naaraanleiding-van-uitspraak-eu-hof.

11 See to that effect the Malta Business Registry (MBR) Notice dated 25th November 2022, accessible in English, at https://registry.mbr.mt/static-resources/documents/docs/BO%20Register%20 Access.pdf and https://registry.mbr.mt/ROC/.

12 See to that effect the Irish Central Register of Beneficial Ownership of Companies and Industrial and Provident Societies (RBO) Announcement, accessible in English, at https://rbo.gov.ie/.

13 See to that effect the Republic of Austria Federal Ministry of Finance Announcement, accessible in English, at https://www.bmf.gv.at/en/topics/financial-sector/beneficial-owners-registeract/Public-access.html,

14 See to that effect the Federal Republic of Germany Transparency Registry Announcement dated 30th November 2022, accessible at https://www.transparenzregister.de/treg/de/aktuell?1.

15 See to that effect KPMG EU Tax Centre article entitled ‘The CJEU invalidates certain transparency obligations under AMLD’ dated 24th November 2022 by Robert van der Jagt and Ana Puscas. Accessible, in English, at https://home.kpmg/xx/en/home/insights/2022/11/etf-cjeu-invalidates-certain-transparency-obligations-under-amld.html.

16 See to that effect https://www.linkedin.com/search/results/content/?heroEntityKey=urn%3Ali%3Afsd_

profile%3AACoAAABuZPEBIHqimsLNSnM5w3FNXO0Bleo9AZQ&keywords=christiana%20hji%20panayi&origin=SWITCH_SEARCH_VERTICAL&position=1&searchId=0d0f1d87-5251-42aca781-f73003ea29b4&sid=l*U

ICPAC’s crucial role in the development of the tourism industry

The development and implementation of strategies for the realization of goals in the short, medium and long term has always been important for societies and has always contributed to their development. In the modern era, these strategies not only retain their value and importance, but have a powerful impact on socio-economic development. Detecting and meeting goals in a globalized environment has become more complex. But fortunately, today there are more tools, metrics and data at our disposal. All the above, if used correctly, lead to more targeted, data-driven and ultimately successful strategies. The pandemic has speeded up new trends and highlighted even more the importance of having flexibility to be able to adapt to the new behaviours at short notice. And if we accept that the pandemic “taught us a lesson” then we can say that the turmoil that Russia's invasion of Ukraine caused and continues to cause further important considerations that need to be addressed. Since then, economies have been called upon to survive amid unprecedented conditions and a host of consecutive, diverse and multi-faceted challenges that have important socioeconomic impact at both local and global level. Under these conditions, the tourism industry is called upon to cope and continue to

contribute and grow. In this context and recognizing, exactly, this need, the Institute of Certified Public Accountants of Cyprus (ICPAC) has established a new technical committee to address this important part of our economy. This is how the Hospitality Industry Committee was created, which I chair. It is important to point out that the technical committees are established and operate with the aim to provide expertise, mainly, on specialized financial matters, which concern specific sectors at a macro and micro level. In the hospitality sector, many members of ICPAC are employed, at various levels and with various specialties, which underlines the necessity to support the sector through this new Commission, especially in the current, extremely difficult time.

It is therefore important to capture the impact that the tourism industry has on the country's GDP. Its contribution is extremely important for the Cypriot economy and its development; hence its losses were measurable during the pandemic period of strict measures and lockdowns. The tourism industry took a big hit in 2020, by which time an otherwise promising tourism season had been destroyed, following the best-ever in 2019. In 2021, the reflexes worked as much as the restrictive measures for COVID-19 allowed, and the tourism industry in Cyprus managed to take some necessary breaths for its survival.

Coming to 2022 we observe that the available data so far indicate significant improvement. Both arrivals and revenues are bouncing back in the absence of strict restrictive measures. However, the Ukrainian issue and the sanctions against Russia that followed have significantly affected Cypriot tourism as they resulted in the loss of the second most important market, that of Russia, but also the smaller market of Ukraine.

According to the results of the Travelers Survey, which is carried out by the Cyprus Statistical Service, the income from tourism in July 2022 alone amounted to €381.7 million compared to €245.7 million recorded

Angelos Loizou

FCA, ISHC Chairman of the Hospitality Industry Committee

ICPAC / Special Advisor of The Association of Cyprus Tourist Enterprises (ACTE)

during July 2021, marking an increase of 55.4%. The improvement is reflected even more clearly in the statistics for the period January – July 2022, when tourism revenues are estimated at €1,217.4 million compared to just €504.5 million in the corresponding period of 2021. In the same seven months of 2020 the income from tourism was only €164.5 million.

If we look at tourist arrivals, there is an increase of 40.2% in August 2022 compared to August 2021. In real numbers, arrivals last August were 451,133, compared to 321,858 in August 2021. For the period January – August 2022, tourist arrivals

reached 2,127,172 compared to 960,150 in the corresponding period of 2021. The same period of 2020 brought just 424,850 arrivals, while 2,735,839 arrivals were recorded in the pre-pandemic period of January – August 2019. The main source of tourism is the market of United Kingdom. Quoting the statistics and given the importance of the tourism sector for the Cypriot economy, the need for the establishment of the competent ICPAC Committee was obvious. Our target is to be in constant communication and consultation with the Deputy Ministry of Tourism and the sector’s

stakeholders, with a mandate to contribute to the further development of the sector. In the modern age of technology and data analytics, Cyprus, a tourist destination par excellence, cannot lag in the compilation and utilization of useful statistics. The analysis of data can lead us to smart solutions and unlock perspectives through the improvement of our tourism product, the better targeting of marketing actions, the improvement of the services provided and to the so much needed in today’s world transparency.

Through the newly established committee, we have the opportunity to cooperate with the other ICPAC Committees in order to bring the tourism industry on a par of the international accounting standards and to utilize the power, resources and reliability of qualified accountants.

ICPAC has the potential to play a vital role as the most competent body to produce in depth analysis (accounting, auditing, statistical analysis and interpretation) for the formulation of opinions and recommendations that can contribute to addressing challenges and creating perspectives. Our target is to submit innovative ideas and have a decisive contribution to the improvement of the performance of strategies, for the most vital sector of the local economy which is currently going a major reshuffling globally. All these for the benefit of the public sector, the private sector and, society in general.

Factoring and Supply Chain Finance

his year marks thirty years since Bank of Cyprus started providing factoring services and products to Cypriot businesses, through a specialised factoring unit. In other words, acting as an intermediary between a supplier and its debtors, purchasing trade receivables and providing key services, such as receivables collection and management and credit risk insurance, generating instant liquidity. Over the years, the Factoring Unit, has evolved into a reliable partner for Cypriot businesses, offering factoring solutions tailored to the needs of each customer.

Throughout the various cycles of the Economy of Cyprus over the recent years, factoring services have maintained their flexibility and have continued to evolve. The Factoring Unit of The Bank of Cyprus, has been effectively supporting Cypriot businesses to deal with liquidity issues, to eliminate the exposure to credit risk and the stressful burden of collections, enabling them to focus on the essence of their business.

The portfolio of the factoring services offered today by the Bank of Cyprus, includes the following:

• Discounting of invoices/trade receivables at a rate up to 85%

• Managing and collecting trade receivables on behalf of customers

Integrated solutions for working capital finance, receivables management and credit risk insurance. Factoring solutions from The Bank of Cyprus

• Assessment of receivables collectability and debtors’ creditworthiness

• Credit coverage at a rate up to 95% –Debtor insurance through granting credit limits

• Import and Export factoring Factoring services can be combined and offered as a complete factoring solution, to meet the specific requirements and needs of the client.

Today, factoring services are used by hundreds of companies of all sizes and from various segments of the economy. With our unsurpassed know-how and professionalism, the Factoring Unit has established itself as a recognised body which acts as a catalyst at all stages of the supply chain, from the time of creation of the receivable, until its timely settlement. The Unit also plays an important role and contributes to the smooth running of Cypriot businesses, even in unprecedented conditions, such as the coronavirus pandemic, where the liquidity of businesses was a decisive factor for their viability. Following the Bank’s digital and technological transformation and the international developments in the sector, the Factoring Unit is constantly modernizing its operations. Through a new Factoring core system which will soon be introduced, we will offer improved services, introduce new flexible and innovative products and provide our customers with enhanced communication and upgraded experience. At the same time, debtors will have the ability to settle their debts through the 1bank service of the Bank, as well as through other digital channels.

Paris Georgiades Manager Factors, Bank of Cyprus

In today's volatile and demanding business environment, the need for alternative, direct and flexible sources of working capital finance is critical. Financing through the provision of a holistic receivables management services can play an important role in supporting strong business development. We, as the Factoring Unit of The Bank of Cyprus, want to remain a valuable partner to our clients and be their first choice for working capital solutions, by offering high quality and flexible business Factoring services. Our goal is to add value to our customers, to the Bank and to our people.

Factoring solutions of The Bank of Cyprus are offered by a highly specialised Factoring Unit, within the Corporate & SME Division. The Factoring Unit has a local market share of over 90%, with factoring clients’ facilities exceeding 200 million euro, to different sized companies from a broad industry segment. It Is the only Cypriot full member of the largest factoring network association in the world (FCI), which covers more than 90 countries and has over 400 members worldwide.

QUOTE FROM MR PETER MULROY, SECRETARY GENERAL, FCI

‘’Cyprus is quite a special and unique market within the EU and its factoring roots date back to the early 1990s, when the Bank of Cyprus joined FCI as a member in August 1993. The island country has over €3.2 Billion in annualized factored volume, and 16% of the receivables purchased is cross border. The industry has been growing over the past 7 years at a CAGR of 5%, about the same as the average growth rate experienced in the EU region and the volume accounts for app. 11% of its national GDP, slightly above the average of 10% in the entire EU. We enjoy strong bonds with Bank of Cyprus, the only full member from Cyprus at the moment, who hosted the FCI Executive Committee in April 2022 and where we had the chance to meet all of the four FCI members (full, associate and affiliates) from Cyprus. ‘’

A Surprising Downside To Growing Our Careers (That Nobody Talks About)

We all heard the societal pressure of climbing the career ladder since we were young, but what happens when we reach the top?(warning for those who are on their way to reach the top too!). It turns out, climbing the ladder can cut down on the number of jobs you may seem to be a fit for, making career progression really, really challenging. The secret lies within the notion of ‘climbing the ladder’.

LET ME EXPLAIN...

Think of career climbing - not as going up a ladder, but up a pyramid. When you start out in your career, you're at the bottom of the pyramid. The base is wide. There are a lot more jobs technically available to you because they require less skill. But fear not, we have a solution! Here are some signs you may have reached the top of your career pyramid:

• Transitioning to a new job takes a lot longer than it did previously.

• You struggle to find job postings where you are an exact fit.

• The solution lies in marketing specialization. While it may seem counterintuitive, presenting yourself as a generalist can make you look more expensive, unfocused, and desperate.

Instead, let's take a targeted approach to your job strategy.

1. Simplify your resume: No need to show off every single skill you have. Keep it simple and relevant.

While it's tempting to show off every skill you have, a cluttered resume can be overwhelming for recruiters. Instead, focus on the skills most relevant to the job you're applying for. Use bullet points to make your accomplishments stand out and keep your language concise.

2. Use LinkedIn: Attract the attention of recruiters and expand your network. LinkedIn is a powerful tool for building your professional network and attracting the attention of recruiters. Here are some strategies for leveraging LinkedIn in your job search:

• Update your profile: Make sure your LinkedIn profile is up to date and showcases your skills and experience. Use keywords that recruiters are likely to

Antigoni Marinou

FCA GCDF CT CSMM MSc BA(Str)

CEO of Rokket by Antigoni Marinou

A bespoke Coaching & Training House

ANTIGONI MARINOU

FCA GCDF CT CSMM MSc BA(Str)

CEO of Rokket by Antigoni Marinou

A bespoke Coaching & Training House

A Certified Career Coach and experienced Sales Coach with 22 years of experience in the Accountancy, Business Development, Academia and Coaching C-Level and Sales teams. She understand that every day we all sell, either ourselves or our products or services. She is passionate about turning complicated notions and actions into practical guidance and systems of work. She offers actionable advice and insights that stem from experience. Trusted by the major Insurance, World renowned Real Estate, Financial Services, International Health Care and Governmental Organizations. They collaborate with her through the years about confidential matters and areas that drive profitability. Connect with her on LinkedIn for more actionable insights and critical thinking around seemingly conventional matters on your career and sales.

search for.

• Connect with recruiters: Reach out to recruiters who specialize in your industry or field.

• Join groups: Join LinkedIn groups & events related to your industry. This can help you expand your network and stay up to date.

• Post content: Share articles, blog posts, or comment; these demonstrate your expertise. This can help you establish yourself as a thought leader. Do it once a month!

3. Target specific employers: Make a list of employers you would like to work for. Take the list of employers you would like to work for and tailor your job search to them. Here are some ways to do this:

• Research the company: Learn as much as you can about the company's culture, financials and news. This will help you understand their pain points.

• Use keywords: Make sure your resume and LinkedIn profile include keywords that are relevant to the company and the job

you're applying for.

• Personalize your application: Write a personalized cover letter explaining why you're interested in working for the company and how you can contribute to their success.

4. Use a connection story: Stand out from the talent pool

Stand out from the talent pool by telling your story and differentiating yourself. Here are some tips for crafting a compelling connection story:

• Be authentic: Tell your story in your own voice and be honest about your strengths and weaknesses.

• Highlight your accomplishments: Talk about your achievements and how they demonstrate your skills and expertise.

• Explain why you're interested in the job: Show that you've done your research and explain why you're excited about working for the company.

5. Nail that Interview: Make it relevant, make it impactful. Make sure your answers to common interview questions are relevant to the job you're applying for. Here are some examples:

• "Why do you want to work for us?": Show that you've done your research and explain how your skills and experience align with the company's mission and values. Do NOT resight your CV, thus ‘calling’ for THEM to make the connections. You must create the connections of who you are with the PAIN POINTS of the role and how your experience can help address them. "Tell me about a time you faced a challenge at work": Choose an example that demonstrates your problem-solving skills and is relevant to the KEY PAIN POINTS of the INDUSTRY of the job you're applying for.

Remember, keeping your career moving forward takes a different set of tools and techniques. As a seasoned professional, you can still find your next job in spite of the current economic uncertainty. With a targeted approach to your job search, you can combat the unexpected downside of growing your career and continue to succeed in your professional endeavors.

So, let's climb that pyramid of expertise with confidence, shall we?

IFAC Latest Activity

IMPACT #1: STRONG AND SUSTAINABLE ACCOUNTANCY

• A Call to Action for IFAC Members after International Women’s Day! There is striking evidence in the world highlighting the positive impact of women’s leadership and IFAC wants to put the spotlight on outstanding examples from the profession. On International Women’s Day 2023, IFAC launched a year-long initiative to feature inspirational women, with diverse roles and backgrounds, who all have one thing in common: their accountancy education has contributed to their accomplishments. We are looking for contributions from women working in the private, public, entrepreneurship or not-for-profit sectors. We are particularly interested in success stories of women of all ages, highlighting that the qualification is opening-up a very varied offering of attractive careers, possibly with a global reach, allowing adequate work-life balance, and that accountancy education has been a key financial and social enabler. We will feature the selected profiles in our dedicated section of the IFAC’s Knowledge Gateway called Women Take the Lead: Get to Know Accounting's Changemakers as well as on social media. If you know of such outstanding and inspiring women in your membership and you want to see them featured in our series, please send a short biography highlighting who they are, their career path, and how the accountancy education contributed to making them a successful

PROFESSION

webpage which is regularly updated with additional articles, videos, and resources!

• IFAC Offers Digital Access to International Accountancy Standards (IAASB, IESBA, IPSASB) – eIS; Accountancy Education (IES); and the Statements of Membership Obligations (SMOs). Explore the platforms & resources!

change-maker or leader to Cecile Bonino and Darlene Nzorubara.

• The Role Accounting Technicians Can Play in the Global Accountancy Ecosystem — Accounting Technicians (ATs) are part of the global accountancy profession, working across all sectors in financial management roles that are essential. When ATs are empowered with appropriate technical knowledge and practical skills—and valued by employers—they support the production of reliable financial and non-financial information that drives timely, and informed decision making and delivers transparency and accountability.

• For guidance on implementing an AT program, visit IFAC’s dedicated AT resource page!

• PAO Digital Readiness: Explore IFAC’s PAO Digital Transformation Series

• EdExchange — At IFAC, we have the privilege of meeting with global experts on important topics. These experts inform IFAC’s work and our volunteer advisory groups’ thinking. In particular, our work on accountancy education facilitates regular conversations with experts to understand current issues facing our profession, explore implications to the profession, including effects on accountants’ skills and competencies. The IFAC EdExchange video series presents these conversations for all to consider the impact for developing skills and competencies, or acquiring knowledge, for the accounting profession.

• Does your organization have an accomplishment that supports the advancement of accountancy education that we can include in the IFAC Accountancy Education E-Tool and share across the network? Please send to education@ifac.org.

IMPACT #2: STRONG AND SUSTAINABLE PRIVATE AND PUBLIC SECTOR ORGANIZATIONS and reporting to investors, and contribute to the operationalization of stakeholder capitalism.

• Sustainable Debt and the Role of Professional Accountants in Business and the Public Sector — To meet their sustainability commitments, companies are increasingly focused on financing sustainability-related transition projects that require extensive capital at lower cost. This report is based on a presentation by John Uhren, Head of Sustainable Finance, Products and Strategy at BMO, on sustainable finance trends, product types and important considerations in securing, and ensuring confidence in, sustainability debt instruments.

• Case Study: Integrated Profit and Loss Accounting at Natura & Co — This case study article highlights Natura &Co’s Integrated Profit and Loss (IP&L) approach and methodology, as well as the role of the finance team in its development. Natura is a leader in impact accounting, using its IP&L and underlying methodology to quantify the impacts and net value of its corporate performance on environmental, social, and human capital. Natura implemented the IP&L model as a strategic management and decisionmaking tool, as the results can be compared directly with the financial results, which helps in risk management

• Pathways to Accrual – IFAC launched a digital platform, providing a central access point to resources helpful for governments and other public sector entities planning and undertaking a transition from cash to accrual accounting including adopting and implementing International Public Sector Accounting Standards (IPSAS). The platform will continue to improve and adapt with resources and feedback. If your jurisdiction has a case study or resource to share, let us know!

IMPACT #3: STRONG AND SUSTAINABLE FINANCIAL MARKETS AND ECONOMIES

• Momentum Builds for Corporate ESG Disclosure and Assurance, Yet Reporting Inconsistencies Linger, Study Finds: Third Report from IFAC and AICPA & CIMA Identifies Sustainability Trends and Progress over ThreeYear Span — The largest global companies continue to show momentum on corporate reporting and related assurance involving environmental, social and governance (ESG) issues, according to a new report from IFAC and AICPA & CIMA. Significant hurdles remain, however, when it comes to providing consistent, comparable, and highquality sustainability information for investors and lenders.

EVENTS

• IFAC’s Events Page: Please save for your continuous reference IFAC’s events page. The Events page will feature free events held by IFAC, the independent standard-setting boards, IFAC member organizations, and the Forum of Firms. If you have an upcoming event, you would like included on the Events page, please e-mail me.

JUNE 8, 2023

Developing green skills for finance professionals

Date & Time: June 8th at 10:00 – 11:15 AM EST

IFAC, ACCA and Accountancy Europe, as part of the EU Green Week 2023 invite you for a lively online discussion on Developing green skills for finance professionals - Building capacity for a fair and sustainable transition. Our experts will explore the skills and education needed for finance professionals to contribute to a sustainable and just transition. Registration is available here!

INTERNATIONAL FOUNDATION FOR ETHICS AND AUDIT

The International Foundation for Ethics and Audit (IFEA or the Foundation) is a non-profit organization that supports high-quality, international standard setting in ethics, audit, and assurance in the public interest. The Foundation fulfills its mission through its two standard-setting boards, the International Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants.

• New International Foundation for Ethics and Audit

Strengthens Independence of the Standard-Setting System — The Board of Trustees of the International Foundation for Ethics and Audit (IFEA, or the Foundation) celebrates the launch of the Foundation, which implements a key recommendation contemplated in the Monitoring Group’s July 2020 Recommendations, Strengthening the International Audit and Ethics Standard-Setting System. The objective in establishing the Foundation is to move the IESBA and the IAASB to a new entity that is independent of IFAC. Under the new structure, IESBA Chair Ms. Gabriela Figueiredo Dias and IAASB Chair Mr. Tom Seidenstein serve as Co-CEOs of the Foundation. The Public Interest Oversight Board (PIOB) continues its role as an independent oversight board, supporting the public interest responsiveness of the international standards and the effective delivery of the boards’ strategies.

• IESBA Strengthens Global Ethics Standards To Respond To Transformative Effects Of Technological Innovation — IESBA released final revisions to further increase the Code’s robustness and expand its relevance in a world being fundamentally reshaped by rapid technological advancements and accelerating digitalization. The revisions will guide the ethical mindset and behavior of professional accountants in both business and public practice as they take advantage of the opportunities created by technology and adapt to new technology. Revisions will be effective as of December 15, 2024. Early adoption is permitted.

• IESBA Staff Releases Q&As To Spotlight Key Changes To The Definitions Of Listed Entity And Public Interest Entity In The IESBA Code — IESBA staff released a questions and answers (Q&As) publication on the revisions to the definitions of listed entity and public interest entity (PIE) in the Code. The Q&A publication is designed to highlight, illustrate or explain aspects of the PIE revisions in the Code and is intended to complement the Basis for Conclusions for the final pronouncement. It will assist national standards setters, professional accountancy organizations, and firms in adopting and/or implementing the PIE revisions.

• IESBA’S 2023 Global Roundtables on Sustainability — IESBA held a series of four global roundtables to obtain stakeholder input to help shape the development of new ethics and independence standards for sustainability reporting and assurance. Read the briefing materials for attendees here.

• IESBA And IAASB Highlight Commitment To Deliver On Recommendations In New Iosco Report On A Global Assurance Framework For Sustainability-Related Corporate Reporting — IESBA and IAASB welcome the report released today by the International Organization of Securities Commissions (IOSCO) on developing a global assurance framework for sustainability-related corporate reporting. The report calls for timely development of ethics and assurance standards for sustainability reporting by the IESBA and the IAASB. Both the IESBA and IAASB will issue public consultations this year on standards for sustainability ethics and assurance, respectively. Both boards plan to finalize their respective standards in 2024.

• Joint Statement from the IESBA and IAASB Chairs on the ISSB’s Progress Toward Inaugural International Sustainability Standards

Open for Comment

• IESBA Proposes Strategy and Work Plan For 2024-2027 — IESBA released its Proposed Strategy and Work Plan, 2024-2027: Towards a More Sustainable Future: Advancing the Centrality of Ethics for public comment. Comments are requested by July 7, 2023.

• Global Ethics Board Raises Expectations of Ethical Conduct in Tax Planning — IESBA released the Exposure Draft Proposed Revisions to the Code Addressing Tax Planning and Related Services. The proposed revisions respond to public interest concerns about tax avoidance and the role played by consultants, including professional tax advisers. The proposals strengthen the ethical expectations for professional accountants in business and in public

practice when performing tax planning activities for employing organizations or providing tax planning services to clients, respectively. An ethical framework to guide judgments and behaviors of professional accountants when providing tax planning and related services has also been proposed. Comments are requested by May 18, 2023.

Effective Dates

• IESBA Strengthens and Clarifies Independence Requirements for Group Audits — IESBA released final revisions to the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code) to address holistically the various independence considerations in an audit of group financial statements. The pronouncement will be effective for audits of financial statements and group financial statements for periods beginning on or after December 15, 2023, with early adoption permitted.

• Global webinar recording with the IESBA Engagement Team – Group Audits Independence on the revisions is now available.

• Public Interest Entities (PIE) related revisions — this pronouncement will be effective for audits of financial statements for periods beginning on or after December 15, 2024. Early adoption is permitted and encouraged. Visit IESBA’s dedicated Strengthening International Independence Standards webpage for further guidance and resources on NAS, Fee-related, and PIE revisions!

Upcoming Meeting

• June 12 - 16, 2023

• IAASB Advances Timeline for Consultation For Proposal On Sustainability Assurance, Ensuring Timely Delivery in 2024 — IAASB confirmed its intention to advance the consultation on its proposed new standard for sustainability assurance, International Standard on Sustainability AssuranceTM (ISSA) 5000, General Requirements for Sustainability Assurance Engagements. Subject to the expected IAASB approval of the Exposure Draft in June, stakeholders can now expect the public consultation on the proposed standard to open in the latter part of July or early August 2023 and extend into December 2023. The

earlier publication, accompanied by a comprehensive and global outreach strategy, will enable the IAASB to gain broad and early input into the development of ISSA 5000. When complete, ISSA 5000 will be a stand-alone, overarching standard suitable for both limited and reasonable assurance of sustainability information reported across any sustainability topics. The standard will enable engagements of sustainability information prepared under multiple frameworks and be profession-agnostic, supporting its use by both professional accountant and non-professional accountant assurance practitioners in performing sustainability assurance engagements.

• Interview With IAASB Chair Tom Seidenstein On IAASB’s Current Activities And Future Visions — From April 10 to 13, 2023, Tom Seidenstein, IAASB Chair visited Japan. Japanese Institute of CPAs Chairman and President, Tetsuya Mogi, interviewed with Mr. Seidenstein.

• IAASB Digital Technology Market Scan: Digital Assets — In this Market Scan, the IAASB explores Digital Assets, with a focus on recent developments within the Cryptocurrency market and what it might mean for the audit and assurance ecosystem. Future Market Scans will

IESBA

IAASB

build on this area by focusing on related technologies, such as blockchain and smart contracts.

• IESBA And IAASB Highlight Commitment

To Deliver On Recommendations In New Iosco Report On A Global Assurance Framework For Sustainability-Related Corporate Reporting — IESBA and IAASB welcome the report released today by the International Organization of Securities Commissions (IOSCO) on developing a global assurance framework for sustainability-related corporate reporting. The report calls for timely development of ethics and assurance standards for sustainability reporting by the IESBA and the IAASB. Both the IESBA and IAASB will issue public consultations this year on standards for sustainability ethics and assurance, respectively. Both boards plan to finalize their respective standards in 2024.

• Joint Statement from the IESBA and IAASB Chairs on the ISSB’s Progress Toward Inaugural International Sustainability Standards

• IAASB Fact Sheet Helps Auditors

Navigate Quality Management for Group Audits — IAASB has published a new fact sheet on the interactions between International Standard on Audit (ISA) 220 (Revised), which addresses quality management at the engagement level, and ISA 600 on group audits. The fact sheet highlights aspects of a group audit that may be affected by ISA 220 (Revised) and International Standard on Quality Management 1 addressing quality management at the firm level.

OpenforComment

• IAASB Opens Public Consultation For Its Revised Going Concern Standard — IAASB issued proposed revisions to its current standard on going concern, International Standard on Auditing 570 (Revised), Going Concern. The proposed changes aim to enhance and clarify auditors’ responsibilities. Comments are requested by August 24, 2023.

Effective Dates

• IAASB Quality Management Standards

— effective date is December 15, 2022. Explore more on the Quality Management Standards by accessing IFAC’s dedicated Quality Management page to view articles, webinars, videos, implementation guides

and more resources!

• International Standard on Auditing 600 (Revised) — effective for audits of group financial statements for periods beginning on or after December 15, 2023. The Basis for Conclusions and a Factsheet are available to support implementation.

UpcomingMeeting

• June 20 - 28, 2023

• The IPSASB's March Board meeting brought several significant approvals, including new IPSAS. Official pronouncements are expected Q2. Catch up on the latest updates from all the IPSASB's projects in IPSASB eNews: March 2023

• IPSASB Confirms Its Role in Advancing Public Sector Sustainability Reporting

— During their December 2022 meeting, the IPSASB decided to commence the scoping of three potential public sector specific sustainability reporting projects pending securing the resources needed to begin guidance development. This decision builds on IPSASB’s 25 years of public sector standard setting experience as well as the strong global stakeholder support for the proposals in its Consultation Paper, Advancing Public Sector Sustainability Reporting. The IPSASB’s immediate action will be to establish a Sustainability Task Force to lead this first critical phase of research and scoping.

OpenforComment

• IPSASB Seeks Comments on Concessionary Leases Proposals for The Public Sector — IPSASB released Exposure Draft (ED) 84, Concessionary Leases and Right-of-Use Assets In-kind (Amendments to IPSAS 43 and IPSAS 23) for comment by May 17, 2023. ED 84 is part of phase two of the IPSASB’s Leases project.

Effective Dates

• IPSAS 44, Non-current Assets Held for Sale and Discontinued Operations

— Effective date: January 1, 2025 (Earlier application is permitted)

• IPSAS 43, Leases — Effective date: January 1, 2025

UpcomingMeeting

• June 13-16, 2023

www.ifac.org, www.ipsasb.org

“A model professional body, recognized by the state and the society as the primary stakeholder for the accountancy profession and the economy in general, instilling confidence, credibility and value”