The European Affair Issue
Kyriakos Iordanou General Manager of ICPAC
| Forward thoughts
Moving on with confidence into the uncertainty
Eventually, the end of the year has arrived. A year generous with challenges, tasks, responsibilities, activities, risks etc. Apparently, the year lapsed without being boring at all. Maybe stressful, tight, demanding, but definitely not boring…
Reaching this stage of the calendar, there are a few things needed to be done: (a) reflect on the period that leaves us, (b) resonate on the outcomes and efforts made, (c) evaluate the overall performance and compare to the targets set, (d) reconsider the priorities, goals and where we wish to be and do next year and, most importantly, (e) plan for it.
Undoubtedly, 2024 was not an easy ride for the profession nor for us at ICPAC. We were called to administer lots of different situations, act on various fronts in a variety of fields, deliver our regulatory duties, support the profession and the members, contribute to the public dialogue and assist towards the development of the economy. The areas of training, tax, IFRS and reporting for small entities, audit, sustainability and CSRD, compliance – sanctions – aml, promotion of the profession, consultation for legislation and other parliamentary activity, coupled by the initiatives to further improve our own modus operandi, effectiveness, digitalisation and offerings to members, dominated our task list.
At the same time, we are working towards the further establishment and expansion of the activities and presence of the Institute, both locally and internationally, rendering ICPAC more visible, useful, relevant and significant. What pose as main challenges ahead, something even beyond our direct control, are the expansion of technology and the introduction of artificial intelligence in our daily work, as well as the attraction and retention of new talent to the accountancy profession. Both are worldwide phenomena ranking top in the global profession’s agenda.
So, looking forward into 2025, we have a dual principal focus: one looking at the redefined strategic objectives of ICPAC for the near and medium future and, the other, looking at the country’s economic continual and sustainable growth. The recent upgrades by the international rating agencies are extremely important, thus I take the opportunity to express our appreciation to the government for the work done and the fantastic achievement. Afterall, a developing and promising economy is the primary driver to a thriving profession too, encompassing our members, our licensed firms and, obviously, everybody. Hence, it is imperative to continue working towards that aim.
In addition, Cyprus being a non-isolated territory from the rest of the world, is affected by the changing geopolitical conditions and the new state of affairs, as we witness it shaping. Amid military conflicts both around our geographical neighbourhood, the flows of immigrants, the continuing war in Ukraine, the politico-economic and trade restrictions, barriers and sanctions, Cyprus needs to masterfully navigate through the dires, adjusting the overall business and economic landscape of the country. Delicate actions and planning, coordination and synergies are of course much needed.
Given our unabundant pool of resources and capabilities, it is necessary to properly evaluate what we have in our basket and prioritise, both as a country and, by expansion, as ICPAC too, matching resources with the corresponding goals.
Hence, I would dare to list a few areas of premium importance in my opinion, as key priorities:
• Commitment and effective materialisation of the strategic plan “Vision 2035”.
The enhancement of the reputation of the country, not merely in marketing terms, but through a committed and coordinated effort under the leadership of the government.
• The above could result in branding or rebranding the business and civic outlook of the country, which will open up opportunities going forward.
• Maintaining growth and surging economic activity through business creation, attracting FDI and setting Cyprus as a hub to carry out the entrepreneurial aspirations on a regional or an international level.
• Enhance the political and economic stability of Cyprus, ensure steady and sustainable growth, whilst upgrade the standard of living for the people.
• Engage actively in the digital transformation, focus on research and innovation, looking to capitalise the competitive and comparative advantages.
• Expediate reforms and adjustments for a more effective and responsive state, with the least possible bureaucracy.
• Enhance the rule of law, accountability and transparency.
In securing that the above will not remain as wishful thinking, it is sine qua non to embrace:
• A common vision for the country, the economy and the prosperity.
• Honesty and integrity in everything we do.
• Effective utilisation of talent, by ensuring that meritocracy, objectivity and competence are the critical factors in decision making and appointments.
• As less populism as possible, whilst expressing constructive scepticism.
• Cooperation, consultation and mutual respect between the state and the private sector, the political establishment and the stakeholders.
• Collaboration, working together to seek maximisation of synergies.
• Being bold and assertive in accepting and introducing new ideas and practices, thinking and acting out of the box.
• Confidence and trust, adding value and prospect.
- The technological reality. The strive towards a sustainable planet, sustainable businesses and civilian future.
• Patience and agility, adaptation and flexibility, understanding and empathy, critical and analytical thinking.
• The new generation, providing them a gentle touch of support and mentoring.
The pace of change is rapid. Most of the times we find ourselves trailing the developments. So, keep moving in a sustainable and positive tread is one way route. The means to achieve it is by setting and pursuing well-structured strategic plans, with long term and clear vision, where all stakeholders and other parties become partners to its accomplishment. We surely need this plan, to move on with confidence into the uncertainty of 2025 and of the day after, pursuing a better society, a better economy and a better future…
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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
ISSN 1450-2380
The Institute Council
Nicos Chimarides (Chairman) Odysseas Christodoulou (Vice-Chairman) Eleni Pyrgou (Secretary)
Members
Andreas Avraamides, Andreas Andreou, Marios Demetriades, Afxentis Zemenides, Stavros Ioannou, Constantinos Kallis, Eliza Livadiotou, Ioanna Nicolaidou, Demetris Shacallis, Nicolas Shiakallis, Spyros Spyrou, George Hadjineophytou
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
• Strategic Planning of ICPAC
• ICPAC meeting with the Auditor General Mr. Andreas Papakonstantinou
• Signing of a Memorandum of Cooperation between ICPAC and the University of Cyprus
• Celebrating 20 years of the Joint Exam Scheme of ACCA - ICPAC
Successful Educational Beach Cleanup by ICPAC
18 COVER STORY
• ICPAC meets the Cypriot Members of the European Parliament
• INTERVIEW by Michalis Hadjipantela Member European Parliament and Member of the Institute of Certified Public Accountants
• The European Parliament
30 BUSINESS & ECONOMY
• Thriving Through Transitions: Making Career Moves Count Antigoni Marinou FCA GCDF CT CSMM MSc
BA(Str), CEO of Rokket by Antigoni Marinou A bespoke Coaching & Training House
• Building fairer and prosperous societies in the EU through tax cooperation
Niki Christofi Member of the Corporate Social Responsibility Committee of the Institute of Certified Public Accountants of Cyprus Business Mentor
34 TAXATION
• Cyprus Compliance: Uncovering Overlooked TP Transactions
Christos A. Theophilou TTaxand Cyprus | Partner | International Tax –Transfer Pricing
• CJEU Confirms and Extends the Remit of Legal Professional Privilege within the ambit of the DAC related saga
Pantelis Christofides Advocate – Partner L. PAPAPHILIPPOU & CO
LLCDemetriades & Associates
38 SUSTAINABILITY
• Sustainability Strategy Fit for a Nonlinear Future
Nicos G. Sykas Strategy, Innovation and Communication Consultant
• The 17 Sustainable Development Goals and the Importance of ESG Criteria
Panos Dimitriou Head of Corporate Social Responsibility (CSR) Together Cyprus
CSR, ESG, CSRD & Sustainability Expert
• Implementing Disclosures in the Area of Human Resources within the Scope of the Sustainability Report
Elsa Marvanejo da Costa Accountant and Tax expert
46 GOVERNANCE
• Maximising board effectiveness in the current environment
Ms Evgenia Christodoulou on behalf of the Governor of the Central Bank of Cyprus
• Conference on corporate governance: maximising board effectiveness in the current environment
Ioanna Achilleos Board Member CYPRUS PUBLIC AUDIT OVERSIGHT BOARD
| ICPAC
Strategic Planning for ICPAC
On November 13th, 2024, ICPAC’ s Council held an a meeting to initiate the discussion on the revised Strategic Planning for the Institute for the 3 year period 2025 – 2027. The meeting aimed at determining the key strategic pillars and priorities. The forum of discussion included a wider participation rather than confining it within the Council members. So former ICPAC Presidents, committee chairpersons or their representative, as well as the senior management team of ICPAC joined in, expressing openly their views and ideas. The discussion addressed topics such as the evolution and vision of the Institute for the near to medium future, its promotional, member-supportive and regulatory responsibilities, the strengthening and appeal of the profession, the role and contribution of ICPAC, alongside the challenges posed by technological advancements. He useful and constructive propositions will form the basis of the new strategic plan.
ICPAC meeting with the Auditor General Mr. Andreas Papakonstantinou
The Institute of Certified Public Accountant met with the new Auditor General of the Republic of Cyprus, Mr. Andreas Papakonstantinou. The meeting focused on strengthening the cooperation between ICPAC and Audit Office, with an emphasis on key issues related to audit, financial management and transparency. The two sides discussed ways to deepen their cooperation,
recognizing the importance of effective accountability in the public and wider public sector. Emphasis was placed on promoting initiatives that enhance transparency and ensure the proper management of public resources, contributing to the overall improvement of administrative functioning. Cooperation between the Audit Office and ICPAC will continue and be strengthened.
| ICPAC NEWS
ICPAC and the University of Cyprus agree for closer collaboration via a joint Memorandum of Cooperation
A decisive step to further strengthen the relationship between the academia and the business was taken, with the signing of a Memorandum of Cooperation between The Institute of Certified Public Accountants and the Faculty of Economics and Management of the University of Cyprus.
The Memorandum lays the foundations for deepening the cooperation between the two entities, aiming at the continuous professional development of the executives of the financial and accounting sector. At the same time, it aims at promoting the research in the accountancy sector, strengthening the competitiveness of the Cypriot economy and contributing to the formation of a dynamic and sustainable business environment. In this context, the General Manager, Kyriakos Iordanou, said: "The signing of the Memorandum of Cooperation with the University of Cyprus marks a new era for the accountancy and financial sector of Cyprus. ICPAC remains committed to a continued investment in knowledge, specialized training and support for the university research and innovation. Our collaboration with the University of Cyprus, an institution of highest academic prestige, creates the conditions for the further development and strengthening of the profession, enhancing at the same time the economic and business community of our country". The Memorandum of Cooperation includes actions that underscore the twoway communication between the academic and business worlds, promoting the practical application of knowledge, the continuous training of professionals and the participation in research projects of common interest, whilst providing useful practical guidance to students for their professional career, bridging them with the labour market.
CELEBRATING 20 YEARS of the Joint Exam Scheme of ICPAC and ACCA
CELEBRATING 20 YEARS
The Institute of Certified Public Accountants of Cyprus (ICPAC) and ACCA (the Association of Chartered Certified Accountants) have celebrated 20 years of their Joint Exam Scheme (JES), providing a world class professional qualification in accountancy. A celebratory ceremony took place to mark the occasion at the Impressionist Hall of the Leventis Gallery in Nicosia. In her address, Helen Brand, chief executive of ACCA, expressed her delight at being in Cyprus to celebrate the long-lasting partnership with the local institute. She told attendees that ACCA will continue to devote resources and energy to ensure that students in Cyprus receive a high quality qualification in accountancy, ensuring high standards for profession in Cyprus, adding that Cyprus is among the most advanced countries in addressing new challenges the sector must focus on. Nicos Chimarides, the president of the board of ICPAC, praised the standards of the Joint Exam Scheme (JES), adding that he hoped that the number of students pursuing the qualification will increase as opportunities for employment for qualified
accountants continue to grow, both in Cyprus and overseas.The General Manager of ICPAC, Kyriakos Iordanous, took the audience back in time to the foundational of the JES. Highlighting key developments along the way, he thanked the ICPAC board and the ACCA directors who signed the scheme nearly 21 years ago.
The keynote speaker at the ceremony was the minister of education, Athena Michaelidou. In her address, she shared her view that education extends beyond high school classrooms, encompassing all knowledge that young people can acquire during their formative years and beyond. Education includes all learning experiences that a student or adult can pursue to prepare for a career full of opportunities for growth and advancement. The Ministry of Education congratulated both ICPAC and ACCA for the opportunities they provide to local high school graduates, and indeed any adult seeking to advance and open doors to a successful career.
Following the speeches, attendees had the opportunity to network during a cocktail reception held at the Hall of the Gallery.
SUCCESSFUL EDUCATIONAL BEACH CLEANUP BY ICPAC
In the occasion of celebration of the “World Cleanup Day”, the Corporate Social Responsibility Committee along with the Limassol-Pafos Coordinating Committee of the Institute of Certified Public Accountants of Cyprus in collaboration with Pentakomo Community Council, the Cyprus Life Saving Federation and the NGO Together Cyprus, proceeded with cleanup up of the Governor’s Beach at Limassol, which is one of the most beautiful beaches in Cyprus.
The total attendants were 200 people, starting from 4 years old, who collected garbage which was either recycled or disposed of appropriately, promoting volunteerism and environmental awareness. Certificate of Achievement was provided to all participants.
Mr. Christos Tsialoupis, President of ICPAC's Limassol-Pafos Coordinating Committee, adopted the protocol of greeting, thanked the General Manager of ICPAC Mr. Kyriakos Iordanou, who promotes and supports all actions of ICPAC relating to sustainable development and Mr. Afxentis Zemenides, member of ICPAC’s Board of Directors, for his contribution to this event. He also thanked Mr. Dimitrios Chioureas, President of ICPAC's Corporate Social Responsibility Committee for his valuable cooperation in organizing the event. At the same time, he addressed a big thank you to all participants, young and old, who spent their morning with a common vision and goal of protecting and cleaning the environment.
Mrs. Konstantina Achilleos, Communication Officer at ICPAC, informed the participants that this is the third consecutive successful cleanup by ICPAC and pointed out that for ICPAC,
actions such as this event are a priority. She stated that this specific action has become an institution and that it has already been extended to other areas of Cyprus.
Mr. Afxentis Zemenidis, member of ICPAC's Board of Directors, emphasized in his greeting that the environmental issues concern all of us because they affect the quality of our lives and of our children. Moreover he mentioned that ICPAC’s members have strong empathy for the environment and he gave guidance for the EU Regulation relating to the protection of the environment.
Mr. Andreas Aggeli, president and co-founder of Together Cyprus, pointed out that the specific cleanup effort is a powerful reminder that the environmental responsibility doesn’t rest on one person or one organization but is a collective effort. He informed the participants that they are not just cleaning the environment but that they are contributing to something bigger: a more sustainable future for Cyprus. He indicated that the Environmental, Social, and Governance (ESG) principles are not just for businesses, but are values for all of us. He said that when we protect our environment, we strengthen our communities and this directly impacts the way we live and thrive. He mentioned that every piece of litter we remove is a step towards a cleaner, healthier Cyprus and that all participants together are setting an example of what active, responsible citizenship looks like. He emphasized that this collaboration shows the power of partnerships, when professionals like ICPAC join hands with NGOs, Councils and Federations, we amplify the impact. He also informed the participants that Together Cyprus organizes the campaign Let’s do it Cyprus,
which is part of the campaign Let’s do it World, the biggest global cleanup campaign that aims to rid the natural areas of the world of rubbish.
ICPAC pioneered in the cleanup, as it organized an Ιnteractive Seminar at the beach, where participants, young and old, were asked to find actions to achieve the 17
Sustainable Development Goals which relate to a healthier planet, as well as to world that is fairer, more peaceful, and prosperous. The 17 Sustainable Development Goals are the world’s best plan to build a better world for people and our planet by 2030. The Instructor of the Seminar, Mr. Panos Demetriou, head of the Corporate Social Responsibility
of Together Cyprus, emphasized that it is up to all of us to contribute to creating a culture of sustainable development which will ensure a better future for the next generations to come.
It is noteworthy that professional lifeguards of the Cyprus Lifeguard Federation provided interactive seminars regarding Safety Rules at the beach as well as well as for First Aid.
Mr. Marios Nicolaou and his colleague Mr. Christos Dionysiou presented protocols for rescuing lives in respect of drowning by swallowing of water or object with regards to adults, children and infants showing real examples at specialized dolls.
Moreover, they pointed out rules such as do not swim alone in the sea, do not dive into cloudy and unknown waters, do not pass the buoys that define the swimming zone, enter the water at least 3 hours after your last meal, do not push or immerse others in the water, drink plenty of cold fluids at hot weather, do not drink alcohol at the beach, staying in a shady place in the summer is important.
The beautiful event was combined with Zumba dance that the kids really enjoyed.
Mr. George Economou, President of the Community Council of Pentakomo, said that he was extremely pleased with the collective event and
pointed out that it is of utmost importance to have proper Accountants.
Mr. Economou acknowledges from his personal experience that ICPAC's Accountants perform their duties with integrity based on the applicable codes of ethics.
To end with, I would like to emphasize that the Environmental Education of citizens is the basic key for the survival of our planet. The planet can be saved if the children experience the protection of the environment. If you teach your children to love the nature, they will love the nature, if you teach them to throw the garbage in the bin or separate it for recycling, they will do so. By your example to the children, you can make a difference. We are the
responsible generation for the rehabilitation. Together, let's create a sustainable future for the earth and the humanity. A sustainable future for Cyprus.
As from 2018, more than 91 million participants have joint worldwide cleanup campaigns according to the “World Cleanup Organization”. You can also make the difference.
Niki Christofi
Member of the Corporate Social Responsibility Committee of ICPAC Business Mentor and Entrepreneur
https://www.worldcleanupday.org/
The European Affair Issue
ICPAC meets the Cypriot Members of the European Parliament
The Institute of Certified Public Accountants hosted an important round table discussion with the participation of Cypriot MEPs Michalis Hatzipantela, Costa Mavridis and Geadi Geadi.
The event focused on critical issues for the future of the EU, such as economic growth, the green transition, tax policy and security, highlighting the need for strategic partnerships.
The General Manager of ICPAC, Kyriakos Iordanou, moderated the discussion by asking key questions to the MEPs, in order to highlight their views on the position and role
ICPAC meets the Cypriot Members of the European Parliament
of Cyprus in the European Union. At the end of the discussion, Mr. Iordanou confirmed ICPAC's commitment to support Cypriot positions at the European level, utilizing the Institute’s expertise and know-how for the benefit of Cypriot society and economy.
The MEPs expressed their appreciation for ICPAC's contribution, stressing that this cooperation is a strong foundation for safeguarding Cypriot interests and economic progress in a dynamic and demanding European scene. With this discussion, ICPAC emerges as a strategic partner in the promotion of national goals, committed to continuously support Cyprus' European positions with evidence-based approaches and effective action.
Site Tour
ICPAC issues technical circulars for the technical support of its members.
The technical circulars of ICPAC aim at informing the members as regards changes or amendments of regulations and procedures relating to the accounting/auditing profession, which stem either from ambiguities or omissions that are identified during accounting or auditing work, or from harmonisation directives of the European Union for the accounting/ auditing profession.
Find the most recent technical circulars sent to the members below.
What is CPD?
Continuous Professional Development (CPD) is the learning and development activity that you will do throughout your ICPAC membership. CPD will provide you with the knowledge and skills required to perform your day-to-day job in your chosen professional role, as well as to enhance your employability for the future.
Find more …
Michalis HADJIPANTELA
Member European Parliament and Member of the Institute of Certified Public Accountants
1. How do you feel about taking on the role of MEP, and what has the transition been like so far?
Becoming a Member of the European Parliament has been a great honour and a profound responsibility. The opportunity to represent Cyprus at the European level gives me the opportunity to bring our country’s unique perspective into the broader European discussions. The transition from Minister of Health to MEP has been both rewarding and challenging. My time as Minister has helped me to prepare and handle high-pressure situations, but also to manage complex negotiations, skills that are proving invaluable in the Parliament. This experience built on the skills acquired during my experience as a chartered accountant, which I believe gives me a unique perspective and ability to perform my new duties as Member of the European Parliament.
At the same time, the EU’s legislative framework, and the decisionmaking process around it, demand a new approach — working collaboratively with representatives from the other 26 Member States and from different political groups, in order to achieve a consensus on decisions. Adjusting to this environment and fully understanding its mechanisms has been a learning process, which I have embraced wholeheartedly. My biggest motivation is the opportunity to contribute to policies that affect European citizens in a positive way.
2. Do you see yourself as the representative of Cypriot accountants in the European Parliament, and how do you plan to address the specific concerns of this sector?
As a chartered accountant by profession, I naturally feel a deep connection and a great understanding of the accounting community in Cyprus and abroad. I started my career as a chartered accountant in London, UK, gaining a valuable insight of the profession from the British capital, before moving to Cyprus and establishing my audit firm on the island. While I no longer practice my profession due to my mandate as a MEP, my past experience equips me with a unique perspective with which to approach legislative files on every subject, while it has instilled to me the values of transparency, integrity, objectivity and due care.
So yes, I do feel like a representative of Cypriot and European
accountants in the European Parliament, in the same way I represent all citizens who believe in the same values as I do. I will use my experience as a chartered accountant to advocate for reducing unnecessary regulatory and administrative burdens, ensuring fair and effective taxation policies, and aligning standards to simplify cross-border operations. I will also engage with organisations such as the Institute of Chartered Accountants to better understand the profession’s evolving concerns. Primarily, I want to put competitiveness back at the forefront of Europe. I will advocate for policies that bring positive change to the people of Cyprus, and Europe, and my experience in accounting will help me in this quest.
3. With your previous experience as Minister of Health during the pandemic, what challenges do you anticipate in the European Parliament?
Serving as Minister of Health during one of the most critical global health crises in recent history has deeply shaped my perspective, know-how and also my understanding of the European framework. The pandemic underscored the importance of preparedness, enhanced collaboration, and robust public health systems. The challenges I anticipate in the European Parliament have to do with how we are going to respond to the various threats that challenge our geopolitical, and global, environment, the rising cost of living, the need to boost our innovation and competitiveness and the necessity to streamline regulation and reduce red-tape. When it comes to health, I would like us to strengthen cross-border health initiatives, tackle the problems faced by patients of rare-diseases with improved Member State cooperation and work on initiatives that improve the level of care that is available to our patients. Drawing from my experience, I will advocate for enhanced coordination among member states,
increased funding for healthcare innovation, and a stronger emphasis on prevention and early detection. These efforts will not only benefit Cyprus but also contribute to a healthier and more resilient Europe.
4. You’ve highlighted migration as a key priority. What specific policies or measures are you advocating for in the European Parliament to address this issue?
Migration is one of the most pressing challenges facing the EU today, and Cyprus, as a frontline state, is acutely affected. I advocate for a balanced approach that ensures fairness, security, and solidarity. We have to strengthen the EU’s border management through increased funding for Frontex and we can become more efficient in doing so, by implementing technology-driven solutions for border surveillance. Additionally, I support a more fair distribution of asylum
seekers among member states to alleviate the disproportionate burden on frontline countries like ours.
Tackling the root causes of migration is equally critical, whether through development aid, conflict resolution, or climate change mitigation in countries of origin. I also emphasize the importance of effective integration measures, such as equipping migrants with the skills and opportunities to contribute positively to host communities. Initiatives like the EU Talent Pool, which matches skilled workers from third countries with labour market needs in Europe, can complement broader integration efforts, fostering mutual respect and social cohesion.
5. You mentioned the need for stronger support for Cypriot farmers. How do you envision advancing this agenda, particularly regarding funding and resources?
The agricultural sector is vital to Europe and, more specifically, to Cyprus’s economy, culture, and food security. Supporting our farmers means addressing their unique challenges, such as limited arable land, water scarcity, and the impact of climate change. I aim to secure increased funding through the Common Agricultural Policy (CAP) to help modernize farming practices and adopt sustainable technologies. This includes advocating for investments in waterefficient irrigation systems and renewable energy solutions for rural areas. Additionally, I will work to ensure that small-scale farmers have easier access to EU grants and subsidies. By promoting Cypriot agricultural products in European markets, we can enhance their visibility and competitiveness. Strengthening the sector not only supports our farmers but also contributes to the EU’s broader goals of sustainability and food security.
6. You are part of five committees, which is an unusually high number. How did you select these committees, and what objectives do you hope to achieve through each of them?
It took elaborate work to succeed in being a member of so many influential committees, and I intend to honour this participation with hard work and determination. My selection of committees reflects my professional background and the priorities I wish to advance in the European Parliament. In the Committee on Economic and Monetary Affairs (ECON), I contribute to shaping financial regulations as well as policies that promote stability and sustainable growth. The Subcommittee on Tax Matters (FISC) allows me to tackle tax avoidance and evasion, and work towards creating a level playing field for businesses across the EU. The Committee on Budgets (BUDG) provides a platform to shape and monitor the EU budget, ensuring that funds are allocated efficiently and benefit all member states. In the Committee on Industry, Research and Energy (ITRE), I focus on fostering innovation, supporting energy transitions, and boosting the competitiveness of European industries. Lastly, in the Committee on the Environment, Public Health and Food Safety (ENVI), I leverage my experience as Minister of Health to address public health challenges and environmental sustainability. With the latest developments of the Subcommittee on Public Health (SANT) becoming a full Committee, I am strongly claiming to join it as well, as it will take on more Public Health responsibilities. Health remains a top priority of mine, due to my experience and knowledge, and I feel confident that I will be able to continue working on it as a member of this Committee too. The large number of Committees does not scare me and I am excited to
be working hard in all of them for putting forward real and positive change in these matters in the EU.
7. Could you elaborate on your position regarding a unified tax policy within the EU? What impact do you think it might have on Cyprus?
A unified tax policy within the EU is a double-edged sword. While it could enhance transparency and reduce tax avoidance, it must respect the unique economic structures and competitive advantages of individual member states. For Cyprus, maintaining its competitive corporate tax regime is crucial for attracting foreign investment, supporting growth and maintaining economic resilience. Personally, I advocate for a balanced approach that upholds key principles of taxation, such as transparency, fairness and the fight against tax avoidance, without undermining the fiscal sovereignty of member states. A one-size-fits-all approach would risk disproportionately harming smaller economies like Cyprus. It is critical that any tax reforms at the EU level should consider the diverse needs and unique economic structures of all Member States.
8. You proposed a joint European pharmaceutical purchasing system and a European Agency for Rare Diseases. What progress do you hope to make in these areas?
The pandemic demonstrated the power of collective action in securing
medical supplies. Since then, we have applied this model through the EU Agency HERA, for procurement of emergency response medical supplies. Extending this to cover essential medical supplies and medicine would enable EU member states to negotiate better prices and ensure equitable access to their citizens. Establishing a European Agency for Rare Diseases, or a platform that would allow healthcare practitioners to share information that would enable them to better identify, diagnose and, thus, treat rare diseases, would be a game changer for their treatment. By pooling together research and resources, experts can foster collaboration and provide better support for patients. My goal is to work with stakeholders to build consensus around these initiatives, emphasizing their benefits in improving public health outcomes and reducing disparities among member states.
9. Why do you believe Cyprus has not yet attained a leadership position within the European Parliament, unlike other small EU nations, such as Malta?
I want to start by saying that there have been great Cypriot politicians who did remarkable work in Europe. Moreover, while it is particularly more difficult for politicians from smaller member-states to attain leadership positions, the example of Malta shows us that this is not impossible. Leadership positions in the European Parliament require strategic engagement, unparalleled ethic and consistent
work. This involves fostering stronger relationships with other member states and political groups, as well as showcasing the expertise and dedication of our representatives. I believe that, by increasing participation in parliamentary initiatives and demonstrating commitment to EU goals, we can enhance our influence and eventually compete for leadership roles. It is a long-term effort, but one that is achievable with the right strategy and persistence.
10. Give us a message to your colleagues and our members.
To my former colleagues and members of the accounting profession, I encourage you to continue upholding the values of integrity, professionalism, and excellence that our industry has shown with its hard work. The contribution of the audit industry really forms the backbone of our economy, ensuring stability and growth even in challenging times. As a former chartered accountant, I remain committed to advocating for policies that support the profession and create opportunities for its continued success. My message to your members is to continue to contribute to a prosperous Cyprus and a resilient European Union, to keep building bridges and driving progress, guided by the shared principles that unite us.
The European Parliament
OOverview
European Parliament is one of the main institutions of the European Union. It is the only directed-elected body of the European Union with 720 Members of the European Parliament (MEPs) representing citizens from all 27-member states. Located in three cities, Strasbourg (France), Brussels (Belgium), and Luxembourg, the European Parliament is a key player in the legislative, supervisory, and budgetary processes of the EU.
The European Parliament’s origins trace back to 1952 when it was first established as the Common Assembly of the European Coal and Steel Community. It was later renamed the European Parliament in 1962. However, the first direct elections to the Parliament, where citizens would be the ones voting their representative, took place in 1979, making a significant step in the development of the EU as it is today.
Currently, the European Parliament compromises 720 MEPs, each elected for a five-year mandate. The number of MEPs for each country is proportional to its population, but the principle of degressive proportionality ensures that no country can have fewer than 6 or more than 96 MEPs.
The current President of the European Parliament is Roberta Metsola from Malta. The President of the European Parliament represents the institution to the outside world and plays a critical role in finalising the EU’s budget.
The Parliament’s work is organised into political groups rather than by nationality, with MEPs collaborating across borders based on shared political ideologies. Today there are eight political parties:
1. Group of the European People's Party (Christian Democrats)
2. Group of the Progressive Alliance of Socialists and Democrats in the European Parliament
3. Patriots for Europe Group
4. European Conservatives and Reformists Group
5. Renew Europe Group
6. Group of the Greens/European Free Alliance
7. The Left group in the European Parliament - GUE/NGL
8. Europe of Sovereign Nations Group.
WORK
The European Parliament operates through committees. These committees thoroughly review proposed EU laws and create suggested amendments, which Members then debate and vote on. The committees play a crucial role in the EU decisionmaking process and in the authority of the European Parliament. The European Parliament consists of 24 parliamentary committees, each made up of Members of the European Parliament.
Each committee is led by a Chair and Vice-Chairs (together referred to as the 'Bureau'), and is assisted by a secretariat. Some committees have associated subcommittees; for example, the Committee
on Foreign Affairs includes two subcommittees, one focusing on human rights and the other on security and defence. Parliamentary committees prepare the work to be discussed in the European Parliament's plenary sessions. They primarily focus on legislative proposals from the European Commission, as well as non-legislative positions of the European Parliament on various issues.
The process of working on these two types of files (legislative and non-legislative) is generally similar within the committees. Typically, one committee is designated as the 'lead committee' for a file, while other relevant committees provide an opinion. Each committee’s responsibilities
EUROPEAN PARLIAMENT’S
are defined in the European Parliament's rules. If there’s a disagreement over a committee’s role, the matter is resolved by the Conference of Committee Chairs. The process for handling a file is similar in both lead committees and those providing opinions. A political group appoints a 'rapporteur' to guide the file through Parliament and negotiate with other institutions like the Council of the EU. Other groups choose 'shadow rapporteurs' to monitor the file and negotiate compromises. Typically, a file has one rapporteur and up to six shadow rapporteurs.
After appointing the rapporteur and shadow rapporteurs, the process begins with an exchange of views. The rapporteur drafts a
'draft report' (in a lead committee) or 'draft opinion' (in a committee giving an opinion), which is then amended by Members.
The rapporteur and shadow rapporteurs work together to reach compromise amendments, which are voted on by the committee.
Committees giving opinions usually complete their work before the lead committee, so the lead committee can consider these opinions. Once the lead committee finalizes its report, it is sent to the plenary for a vote. In the plenaries, which are normally being held in Strasbourg for four days a month, all the MEPs gather in the chamber to give a final vote on the proposed legislation and the proposed amendments.
MAIN RESPONSIBILITIES
The European Parliament plays a crucial role in three main areas: legislative, supervisory, and budgetary functions. After the Lisbon Treaty in 2009, the European Parliament has grown and developed as the Treaty gave it more powers, referring to the European Parliament as exercising the ‘powers conferred upon it’, the new text refers simply to it exercising legislative functions ‘jointly’ with the Council of the European Union. It is argued that the European Parliament's increased legislative authority, along with its new budgetary powers and greater oversight of other institutions, strengthens the democratic legitimacy of both the Parliament and the European Union. With that change, the democratic accountability and decision-making powers of the European Union enhanced, allowing citizens to have more control over the EU’s actions.
For the legislative role, the European Parliament shares the responsibility for making EU laws with the Council of the European Union. In that way, the European Parliament plays an essential role in EU decisionmaking as a co-legislator together with the Council. The majority of European laws are proposed by the European Commission, and European Parliament and Council of the EU debates and votes on them. Co-decision becomes the standard method of legislating, and is renamed the ordinary legislative procedure (OLP). MEPs can propose amendments to legislation, and once the final version is agreed upon, the European Parliament gives its approval.
Sometimes, the European treaties set out special procedures for legislation, like consultation and consent, where Parliament does not have the same power as the Council, unlike in the regular legislative process.
The legislative process in Parliament begins when it receives a proposal from the Commission, which suggests new laws. The proposal is sent to a committee, and a Member of the European Parliament (MEP) is chosen to write a report on it. This MEP is called the rapporteur. If the proposal covers broad issues, co-rapporteurs from different committees may also be appointed. After discussions between political groups and efforts to find a compromise, the committee votes on the report and may make changes. Once the report is revised and approved in a plenary session, Parliament has officially taken its position. The ordinary legislative procedure gives the same law-making powers to the European Parliament and the Council of the European Union on a wide range of areas such as economic governance, immigration, energy, transport, the environment and consumer protection.
The European Parliament also has a supervisory role, as it exercises democratic scrutiny over all EU institutions. These allow it to exercise oversight over other institutions, to monitor the proper use of the EU budget and to ensure the correct implementation of EU law.
One of Parliament's key roles has been to scrutinise the European Commission, the EU's executive branch. Under the Lisbon Treaty, EU heads of state propose a candidate for President of the European Commission, taking into account the results of the European elections. The candidate is elected by the European Parliament. Parliament also can use a host of instruments to hold the Commission to account, such as voting on its investiture or dismissal
Sources:
as a collective body. According to the EU Treaties, the Commission is accountable to the Parliament as a body and must resign if the Parliament adopts a motion of censure. The Parliament's right to dismiss the Commission as a body is regarded as a 'nuclear option'. It has never been enforced, as the required majority of votes has never been reached, but it exerts real political pressure.
The European Parliament also grants discharge, which evolves approving how the EU Budget has been spent. Any EU citizen, resident, company or organisation can submit a petition to the European Parliament about EU law. Parliament can set up a committee of inquiry to look into violations of EU law by member states.
In addition, the President of the European Parliament has the right to speak at the start of each European Council, setting out Parliament’s position on the subjects to be addressed by the heads of state and government. After each summit the President of the European Council presents a report to the European Parliament on the outcome.
Furthermore,
At the beginning and end of each six-month presidency the President of the Council of the European Union discusses their programme with MEPs in plenary. MEPs can table written and oral questions to the Council and can ask it to initiate new policies. The Foreign Affairs Council is permanently chaired by the High Representative for Foreign Affairs and Security Policy. They, or a representative, attend plenary debates on foreign, security or defence policy. Twice a year, the High Representative reports to the European
Parliament about these policies and their financial implications.
Parliament must also be consulted before the President, Vice-President and Executive Board of the European Central Bank (ECB) are appointed by the European Council. The ECB President presents the bank’s annual report in plenary and takes part in a regular monetary dialogue with Parliament’s Committee on Economic and Monetary Affairs.
The third main role of the European Parliament is its budgetary role. The European Parliament shares the power to decide on the entire annual budget of the EU with the Council of the European Union and it has the final say.
The European Parliament must approve both the Annual Budget and the Multiannual Financial Framework (MFF), which sets the long-term budget for the European Union. The long-term financial plan is based on a proposal by the European Commission and has to be adopted unanimously by the EU governments represented in the Council of the EU. Before that however, the European Parliament is the one that has to give its consent. These decisions influence how EU funds are allocated to areas such as research, infrastructure, and development programmes.
When it comes to EU Budget, once the EU budget is adopted, the European Commission is the one responsible for its implementation. However, as a directly elected institution representing EU taxpayers, the European Parliament exercises democratic oversight to be sure that the Commission and other EU institutions use correctly the European funds.
1. https://european-union.europa.eu/institutions-law-budget/institutions-and-bodies/search-all-eu-institutions-and-bodies/european-parliament_en
2. https://eprs.in.ep.europa.eu/filerep/09-Briefings/2010/2010-099-The-European-Parliaments-role-after-Lisbon-FINAL.pdf
3. https://www.europarl.europa.eu/RegData/etudes/BRIE/2024/762398/EPRS_BRI(2024)762398_EN.pdf
4. https://eprs.in.ep.europa.eu/eprs/auth/en/product_2.html?id=353492&ref_id=undefined&src=2&q=id%3A353492%2BAND%2Bsrc%3A2
5. https://www.europarl.europa.eu/about-parliament/en/organisation-and-rules/organisation/political-groups?&at_campaign=2024-AboutParliament&at_ medium=Google_Ads&at_platform=Search&at_creation=Sitelink&at_goal=TR_G&at_advertiser=Webcomm&at_topic=Group&at_location=DE&gad_ source=1&gclid=EAIaIQobChMIpLjNrIftiQMVkICDBx3XqBHOEAAYASAAEgJCDPD_BwE
6. https://www.europarl.europa.eu/about-parliament/en/powers-and-procedures/supervisory-powers
7. https://www.europarl.europa.eu/about-parliament/en/powers-and-procedures/budgetary-powers
Thriving Through Transitions: Making Career Moves Count Ε
Antigoni Marinou
FCA GCDF CT CSMM MSc BA(Str) CEO of Rokket by Antigoni Marinou
A bespoke Coaching & Training House
ver feel like you're standing at a career crossroads, with the "safe" path on one side and the "unknown" on the other? It’s a scenario many accountants and professionals encounter at least once in their careers, especially in fields where roles can feel both structured and varied. Whether you’re considering a shift within your company, exploring a new specialization, or even venturing out to start your own practice, managing career transitions is all about finding the courage to step forward— strategically, of course.
But transitions aren’t just leaps; they’re calculated, meaningful steps that, when done right, bring both growth and fulfillment. The key to thriving through transitions is embracing a mindset shift, where change isn’t intimidating but rather an exciting challenge.
Story Time: Let’s meet Andreas, a seasoned accountant with ten years under his belt at a wellestablished firm. Lately, he’s been feeling restless, dreaming about moving into consulting or even specializing in financial technology advisory. But taking that leap? Terrifying! Andreas felt the fear of losing stability, reputation, and the comfort of his current role. Yet, as he realized, staying “safe” was costing him his sense of purpose and growth. He finally made a plan to launch his consultancy while still keeping some anchor points in his role. His journey was both a challenge and a triumph—and serves as a reminder that transitions don’t have to be all or nothing.
Ready to take that next step? Let’s dive into three essential ways to make your move count.
1. ASSESSING YOUR “WHY”
Why are you feeling the urge to move? Career transitions require more than just a gut feeling. To make your transition meaningful, you need to understand the motivations driving it. Are you seeking growth, better work-life balance, or maybe a new challenge? Identifying your core “why” can be your personal compass, guiding you through the uncertainties of change.
Take a moment and reflect: What do you love most about your current role, and what leaves you feeling unfulfilled? Write these down. If you find yourself drawn to mentoring junior staff or leading projects, for instance, it might indicate that a leadership role would satisfy you. Similarly, if you crave analytical challenges, perhaps specializing in a niche like tax for tech startups or sustainability reporting would keep you engaged.
Prompt: Think of the last six months. What did you enjoy most in your role? If you could do more of that or explore a new angle, what would it be? Keep this insight close as you plan your transition, letting it steer you toward roles that genuinely fulfill you.
2. BUILDING BRIDGES, NOT WALLS
When you’re moving roles, leaving gracefully is just as important as starting strong. Think of your reputation like a legacy; it’s what people remember long after you’ve left. The colleagues and mentors you connect with today may become valuable allies, advocates, or even clients in the future. Ensure you leave on a high note, maintaining solid relationships that could prove beneficial for years to come.
As Andreas learned, leaving gracefully can open doors, even if those doors are closed for now. He made it a point to thank each colleague who supported his growth and left a positive impression behind him. One way to build these bridges is by writing a “thank you” note to colleagues or mentors who influenced your journey. Expressing gratitude isn’t just courteous; it’s memorable. And these relationships? Invaluable.
Quick Tip: Write a brief thank-you note or email to those who helped you along the way. A genuine message can go a long way, building bridges that could become important career assets in the future.
CONCLUSION:
Transitions can feel like standing on a precipice, but they’re also opportunities to reimagine, redefine, and rediscover your career. By assessing your motivations, building bridges, and equipping yourself with new skills, you’ll find that a career move isn’t an intimidating leap into the unknown. Instead, it’s a chance to grow into a version of yourself that feels more aligned, purposeful, and fulfilled.
So, are you ready to make your next career move count? The journey is just beginning.
3. SPOTLIGHT YOUR NEW SKILLS
Every transition brings a chance to pick up something new, whether it’s a technical skill, fresh perspective, or networking opportunity. Embrace these learning opportunities as they’ll add depth to your professional toolkit. Think of each career move as adding a new tool to your toolkit, making you a more well-rounded, adaptable professional.
Fun Exercise: Reflect on the last six months and note down three skills or insights you’ve gained. Which ones are relevant to where you’re heading? If you’re moving into a new specialization, identify which specific skills—like digital accounting tools or data analytics—would be helpful to master. And remember, transitions are one of the best times to focus on skill-building, so consider courses or mentors who can support you.
Example: Let’s say you’re interested in management consulting for finance firms. Building skills in data interpretation and presentation could make you a strong candidate. Spotting the skills you need can help your transition feel less daunting and more like a roadmap for success.
Fun Takeaway: Here’s a quick “Transitional Tip” to make your career change more memorable and rewarding. Write a “farewell note” to your current role as if it were a person. In this note, list the best things you learned, the challenges you overcame, and what you’re grateful for. Keep it as a “career souvenir” and, who knows, perhaps in a few years, you’ll look back and see how far you’ve come.
Challenge yourself: Take some time to list three skills you want to develop in your next role. Think of skills your future self would thank you for—so make them count! And if you’re feeling bold, share your career goals with a mentor or close colleague; voicing your plans can give them life and even bring helpful feedback your way.
Building fairer and prosperous societies in the EU through tax cooperation
Niki Christofi Member of the Corporate Social Responsibility Committee of the Institute of Certified Public Accountants of Cyprus Business Mentor
According to the Article 21 of the Treaty on the functioning of the European Union and the Article 45 of the EU Charter of Fundamental Rights, EU citizens have the right to move and reside within the EU.1 Moreover, EU citizens and businesses have the freedom to operate as well as invest across national borders. This implies that business expertise, development, knowhow, technical knowledge and innovation are shared between the Member States which lead to enhanced economic growth.
Nevertheless, since direct taxation is not harmonized across the EU, this freedom may have as a consequence that taxpayers may attempt to avoid or evade tax. Evasion and fraud in taxes implies fewer revenues in governments. Unreported and untaxed income is considerably reducing national tax revenues which has adverse consequences.
Taxation is essential for each Country for building strong and prosperous societies on the basis that taxes received by the governments are used for public services and for the well-being of citizens. On this basis, it is important to emphasize that the tax revenue is one the most important source of income for Countries that is used to finance the Sustainable Development Goals, which relate among others to a healthy environment, zero-hunger, no property, good health of citizens and quality education.2
In this respect, in today’s globalized world, it is crucial that tax administrations work
together in order to ensure that the right amount of tax is paid to the right jurisdiction with no tax evasion.
Administrative cooperation in direct taxation between the Member States of the EU helps to ensure that all taxpayers pay their fair share of tax burden, irrespective of where they work, retire, hold a bank account, invest or do business. This is based on the Council Directive on Administrative Cooperation 2011/16/EU (DAC 1), which establishes all necessary procedures and it also provides the structure for a secure platform for the cooperation.3
Since its adoption, the original Directive 2011/16/EU (DAC 1) has been amended various times, with the aim of strengthening the administrative cooperation between the Member States as follows:
i. Directive 2014/107/EU (DAC 2) which introduced automatic exchange of financial account information.
ii. Directive 2015/2376/EU (DAC 3) on
1 https://commission.europa.eu/strategy-and-policy/policies/justice-and-fundamental-rights/eu-citizenship-and-democracy/free-movement-and-residence_en
2 https://sdgs.un.org/goals
3 https://taxation-customs.ec.europa.eu/taxation/tax-co-operation-and-control/administrative-co-operation-and-mutual-assistance/enhanced-administrativecooperation-field-direct-taxation_en
4 https://www.europeansources.info/record/proposal-for-a-council-directive-amending-directive-2011-16-eu-on-administrative-cooperation-in-the-field-of-taxation/
5 https://www.europeansources.info/record/proposal-for-a-council-directive-amending-directive-2011-16-eu-on-administrative-cooperation-in-the-field-oftaxation-2/
automatic exchange of tax rulings and advance pricing agreements.
iii. Directive 2016/881/EU (DAC 4) on automatic exchange of country by country reports.
iv. Directive 2016/2258/EU (DAC 5) which ensures that the tax authorities have access to beneficial ownership information collected pursuant to the anti-money laundering legislation.
v. Directive 2018/822/EU (DAC 6) on automatic exchange of reportable cross border arrangements and how the Directive operates.
vi. Directive 2021/514/EU (DAC 7) which extends the EU tax transparency rules to digital platforms.4
vii. Directive 2023/2226/EU (DAC 8) which includes reporting requirements on crypto-assets, e-money and central bank digital currencies.5
The scope of the Directive includes all
taxes with the exception of VAT, customs duties, excise duties and compulsory social contributions for the reason that these are already covered by other European Union legislation on administrative cooperation.
The Directive provides for the exchange of specified information in three forms: spontaneous, automatic and on request.6
It shall be noted that on the website of the Tax Department of Cyprus, can be found more information and guidance regarding the application of the Directive 7
It is crucial to indicate that both within the EU as well as at an international level, the EU is working in order to promote and strengthen tax good governance mechanisms, fair taxation and global tax transparency, aiming to tackle tax fraud, tax evasion and tax avoidance.
The EU list of non-cooperative jurisdictions for tax purposes is part of the EU’s work
Tax fraud, tax evasion and tax avoidance represent a major challenge for the European Union as well as at a global level
to compact tax evasion and avoidance. It is composed of countries which have failed to fulfil their commitments to comply with tax good governance criteria within a specific timeframe as well as countries which have refused to do so.8
On 08 October 2024, the European Council adopted the EU list of non-cooperative jurisdictions for tax purposes. It is composed of 11 countries as follows: It is also important to mention that the Platform of Tax Good Governance, assists the European Commission in developing initiatives to promote good governance in tax matters in third countries, to tackle aggressive tax planning as well as to identify and address double taxation. Members of the Platform are the tax authorities of all Member States and organizations representing business, civil society and tax practitioners. It brings together expert representatives from business, tax professionals and civil society organizations. The European Platform enables a structured dialogue and exchange of expertise which is a coordinated and effective EU approach against tax evasion and avoidance.9
To conclude, tax fraud, tax evasion and tax avoidance represent a major challenge for the European Union as well as at a global level. The exchange of information is pivotal in the fight against such practices. Tax Good Governance is essential for fair and prosperous societies and economies.
https://eimf.eu/product/overview-of-the-directive-on-administrative-cooperation-dac8-marking-the-end-to-crypto-asset-non-taxation-2/
6 https://taxation-customs.ec.europa.eu/taxation/tax-co-operation-and-control/administrative-co-operation-and-mutual-assistance/enhanced-administrativecooperation-field-direct-taxation_en
7 https://www.mof.gov.cy/mof/tax/taxdep.nsf/page20_en/page20_en?opendocument
8 https://www.consilium.europa.eu/en/policies/eu-list-of-non-cooperative-jurisdictions/
8 https://taxation-customs.ec.europa.eu/platform-tax-good-governance_en
Cyprus Compliance: Uncovering Overlooked TP Transactions
For this latest edition we analyse how MNE groups with a presence in Cyprus should review their existing or planned Transfer Pricing arrangements to ensure they are aligned with the new regulations to avoid penalties and additional taxes.
Christos A. Theophilou Taxand Cyprus | Partner | International Tax – Transfer Pricing
Eleni Ashioti Head of Technical and Professional Matters of ICPAC
On May 27, 2024, the Cyprus Tax Authorities (CTA) released additional advancements and guidance, exclusively in Greek, regarding the Cyprus Transfer Pricing (TP) regulations. These updates detail the procedures for filing and completing the summary information table (SIT). The SIT requires comprehensive information on related party transactions, including the identification of counterparties, their tax residency jurisdiction, and the transaction values for each of the five transaction categories: (1) sale/purchase of goods; (2) provision/receipt of services; (3) financial transactions; (4) receipt/payment of IP licenses/royalties; and (5) others. Consequently, the precise identification and documentation of controlled transactions are crucial. However, many transactions not prominently featured in a company’s financial statements are often overlooked, leading to their exclusion from the SIT and the local file. This can result in penalties and additional taxes.
This article outlines the critical controlled transactions we have encountered in practice, which taxpayers must consider when preparing their SIT and local files. Given that corporation tax encompasses the provision of labour and the use of assets, we categorize these transactions into income from assets and income from the provision of services.
INCOME FROM (IN)TANGIBLE ASSETS
Consider a scenario where a Cyprus tax resident company or a Cyprus permanent establishment (PE) of a foreign entity holds a tangible asset (such as an aircraft or real estate), an intangible asset (such as a copyright, patent, or trademark), or a financial asset (such as a loan) on its balance sheet. If these assets are utilized by related companies within the group without any remuneration— for instance, a lease-free arrangement for tangible assets or a royalty-free agreement for intangible assets or an interest-free loan
agreement for financial assets (whether written, oral, or implied)—the Cyprus tax resident company or PE may not recognize any income on their income statement. However, for transfer pricing purposes, these transactions must be evaluated and priced according to the 2022 OECD Transfer Pricing Guidelines (Guidelines). This necessitates an upward transfer pricing adjustment to reflect the arm’s length value of the license or royalty-free arrangement. In other words, the absence of license, rent, interest or royalty income can raise concerns about the arm’s length nature of the transaction. The CTA would typically adjust the pricing to ensure alignment with the arm’s length principle, resulting in adjustments to taxable income and potential penalties for non-compliance.
A similar example involves “off-balance sheet” assets, recognized for transfer pricing purposes but not under IFRS (international financial reporting standards). For instance, the IP definition in paragraph 6.6 of the Guidelines is broader than that under IAS 38. A typical scenario involves costs associated with the internal development of intangibles, such as research and development and advertising expenditures, which are sometimes expensed rather than capitalized for accounting purposes. As a result, the intangibles generated from these expenditures may not be reflected on the balance sheet. Nevertheless, these intangibles can generate substantial economic value and must be considered for transfer pricing purposes. Therefore, an arm’s length remuneration should be calculated if such off-balance sheet intangible assets are transferred (e.g., during a business restructuring) or utilized by group companies.
INCOME FROM THE PROVISION OF SERVICES
An illustrative scenario arises when a multinational enterprise (MNE) group aims to centralize its operations by setting up a
regional service hub to offer intra-group services like accounting, HR, compliance, and marketing. These services are rendered to group affiliates under a no-service agreement or a service-free arrangement, whether written, oral, or implied. The lack of service income from the Cyprus tax resident company may raise questions about the arm’s length character of the transaction. Typically, the CTA would adjust the pricing to ensure alignment with the arm’s length principle, resulting in alterations to taxable income and potential penalties for non-compliance.
Regarding financial transactions, consider the example of financial guarantees, including downstream, upstream, or cross guarantees. For instance, a Cyprus tax resident company may serve as a guarantor, providing a financial explicit guarantee to its subsidiary to secure a third-party loan. If the subsidiary benefits from this arrangement, such as obtaining a lower interest rate or accessing a higher loan amount, transfer pricing principles dictate that the Cyprus tax resident company should charge its subsidiary for this benefit, typically in the form of a guarantee fee. Another example is cash pooling, whether notional or physical. If the Cyprus tax resident company functions as the cash pool leader, its compensation should reflect the functions performed, assets utilized, and risks assumed in facilitating the cash pooling arrangement. Conversely, if the company participates as a cash pool member, its compensation should align with the arm’s length interest rates applicable to debit and credit positions within the pool. In both cases, the absence of income from the Cyprus tax resident company may prompt inquiries regarding the arm’s length nature of the transaction. Typically, the CTA would adjust the pricing to ensure compliance with the arm’s length principle, potentially resulting in changes to taxable income and the imposition of penalties for non-compliance.
CONCLUSION AND PLANNING POINTS
The above paragraphs have illustrated some of the common intra-group transactions that may fall under the scope of transfer pricing rules and should be documented under both the SIT and local file in Cyprus. Failure to do so may result in significant tax adjustments, interest, and penalties, as well as reputational damage and increased scrutiny from the CTA. Therefore, MNE groups with a presence in Cyprus need to review their existing or planned arrangements and ensure that they are aligned with the transfer pricing requirements and best practices as follows:
Perform a functional and risk analysis to identify and evaluate the intra-group transactions that are subject to transfer pricing rules and documentation requirements in Cyprus; Prepare and maintain a SIT and a local file for each tax year, in line with the CTA’s guidance and OECD standards; and Seek professional advice from transfer pricing experts to ensure compliance and avoid potential disputes and penalties. This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
CJEU Confirms and Extends the Remit of Legal Professional Privilege within the ambit of the DAC related saga
Once again, within the remit of the ongoing Directives’ on Administrative Co-operation (DAC) related legal challenge saga, the Court of Justice of the European Union (CJEU) issued on the 26th September 2024, its Ruling concerning Case C-432/23, accessible also in English at https://eur-lex.europa.eu/ legal-content/EN/TXT/HTML/?uri=CELEX:62023CJ0432.
Pantelis Christofides Advocate – Director, Head of EU Regulatory Law Department, L. PAPAPHILIPPOU & CO LLC Advocates & Legal Consultants
Eleni Ashioti Head of Technical and Professional Matters of ICPAC
The said Case related to a Request for a Preliminary Ruling under Article 267 of the Treaty on the Functioning of the European Union (TFEU) from the Cour administrative (Higher Administrative Court) of the Dutchy of Luxembourg in the proceedings as between F SCS, a Law Firm incorporated as a limited partnership in Luxembourg, and the Luxembourg Bar Association (Ordre des avocats du barreau de Luxembourg), as against the Luxembourg Inland Revenue Department (Administration des contributions directes), concerning a Decision issued by the latter Luxembourg Administrative Body addressed to the Law Firm ordering the Law Firm to provide information and documents, and a fine imposed
on the Law Firm for failing to comply with the above – mentioned Decision.
The CJEU confirmed, within the ambit of the above – mentioned Ruling, amongst other, that (see to that effect the content of Recitals (paragraphs) 46 – 52 of the Ruling):
1. it is apparent from the case-law of the European Court of Human Rights that Article 8(1) of the European Convention of Human Rights (‘ECHR’) protects the confidentiality of all correspondence between individuals and affords strengthened protection to exchanges between lawyers and their clients. Like that provision, which protects not only the activity of defence but also legal advice, Article 7 of the Charter of Fundamental Rights of the European Union (‘the Charter’) necessarily guarantees the secrecy of that legal advice, both with regard to its content and to its existence. Individuals who consult a lawyer can reasonably expect that their communication is private and confidential. Therefore, other than in exceptional situations, those persons must have a legitimate expectation that their lawyer will not disclose to anyone, without their consent, that they are consulting him or her.
2. the specific protection that Article 7 of the Charter, under which every person has the right to respect for his or her private and family life, home and communications, and the corresponding Article 8(1) ECHR, afford to lawyers’ legal professional privilege, which primarily takes the form of obligations on them, is justified by the fact that lawyers are assigned a fundamental
role in a democratic society, that of defending litigants. That fundamental role entails, on the one hand, the requirement, the importance of which is recognised in all the Member States, that any person must be able, without constraint, to consult a lawyer whose profession encompasses, by its very nature, the giving of independent legal advice to all those in need of it and, on the other, the correlative duty of the lawyer to act in good faith towards his or her client.
3. it follows from the above - mentioned considerations that, whatever the area of law to which it relates, legal advice given by a lawyer enjoys the strengthened protection guaranteed by Article 7 of the Charter to communications between lawyers and their clients.
It is also noted that the CJEU based its above views on, amongst other, the content of Recitals (paragraphs) 27 – 28 of the previous CJEU, once again DAC related, Judgement dated 8th December 2022 in Case C-694/20 Flemish Bar Association (Orde van Vlaamse Balies), IG, Belgian Association of Tax Lawyers, CD, JU against Flemish Administration of Belgium (Vlaamse Regering), accessible in English at https://eur-lex.europa.eu/legalcontent/EN/TXT/?uri=CELEX%3A62020CJ0694:
‘27 As regards the validity of Article 8ab(5) of amended Directive 2011/16 in the light of Article 7 of the Charter, it is apparent from the case-law of the ECtHR that Article 8(1) ECHR protects the confidentiality of all correspondence between individuals and affords strengthened protection to exchanges between lawyers and their clients (see, to that effect, ECtHR, judgment of 6 December 2012, Michaud v. France, CE:ECHR:2012:1206JUD001232311, §§ 117 and 118). Like that provision, the protection of which covers not only the activity of defence but also legal advice, Article 7 of the Charter necessarily guarantees the secrecy of that legal consultation, both with regard to its content and to its existence. As the ECtHR has pointed out, individuals who consult a lawyer can reasonably expect that their communication is private and confidential (ECtHR, judgment of 9 April 2019, Altay v. Turkey (No 2), CE:ECHR:2019:0409JUD001123609, § 49). Therefore, other than in exceptional situations, those persons must have a legitimate expectation that their lawyer will not disclose to anyone, without their
consent, that they are consulting him or her.
28 The specific protection which Article 7 of the Charter and Article 8(1) ECHR afford to lawyers’ legal professional privilege, which primarily takes the form of obligations on them, is justified by the fact that lawyers are assigned a fundamental role in a democratic society, that of defending litigants (ECtHR, judgment of 6 December 2012, Michaud v. France, CE:ECHR:2012:1206JUD001232311, §§ 118 and 119). That fundamental task entails, on the one hand, the requirement, the importance of which is recognised in all the Member States, that any person must be able, without constraint, to consult a lawyer whose profession encompasses, by its very nature, the giving of independent legal advice to all those in need of it and, on the other, the correlative duty of the lawyer to act in good faith towards his or her client (see, to that effect, judgment of 18 May 1982, AM & S Europe v Commission, 155/79, EU:C:1982:157, paragraph 18).’
Another key feature of interest as to the content and legal consequences of the CJEU Ruling dated 26th September 2024 concerning Case C-432/23, as also mentioned in the Summary of the Request for the said Preliminary Ruling, accessible in English at https://curia.europa. eu/juris/showPdf.jsf?text=&docid=277147& pageIndex=0&doclang=en&mode= req&dir=&occ=first&part=1&cid=10516658 (see to that effect paragraph 4 at pages 2 – 3
of the Summary), is that the Director of the Luxembourg Inland Revenue Department had notified the Law Firm, prior to imposing the relevant fine, that its response had not been satisfactory, and reminded, via a letter, the Law Firm, of the content of Commentary on Article 26 of the OECD Model Tax Convention:
‘A requested State may decline to disclose information relating to confidential communications between attorneys, solicitors or other admitted legal representatives in their role as such and their clients to the extent that the communications are protected from disclosure under domestic law. However, the scope of protection afforded to such confidential communications should be narrowly defined. Such protection does not attach to documents or records delivered to an attorney, solicitor or other admitted legal representative in an attempt to protect such documents or records from disclosure required by law. Also, information on the identity of a person such as a director or beneficial owner of a company is typically not protected as a confidential communication. Whilst the scope of protection afforded to confidential communications might differ among States, it should not be overly broad so as to hamper effective exchange of information. Communications between attorneys, solicitors or other admitted legal representatives and their clients are only confidential if, and to the extent that, such representatives act in their capacity as attorneys, solicitors or other admitted legal representatives and not in a different capacity, such as nominee shareholders, trustees, settlors, company directors or under a power of attorney to represent a company in its business affairs’ (Update to Article 26 of the OECD Model Tax Convention and its Commentary, approved by the OECD Council on 17 July 2012, paragraph 19.3).’
The differentiated position adopted by the CJEU, within the ambit of the 26th September 2024 Ruling thereof, must always be born in mind concerning the application of the Principle of Supremacy of EU Law, including the Charter and the CJEU Rulings, pursuant to Articles 1A and 179 of the Constitution of the Republic of Cyprus, also taking into account that the Republic of Cyprus is not an OECD Member State.
Sustainability Strategy Fit for a Nonlinear Future
Congratulations to the Institute of Certified Public Accountants of Cyprus for organizing the successful Sustainability Conference 2024. This very useful interdisciplinary conference held recently in Nicosia focused on many of the topics examined in the present article.
Extreme weather events, the COVID 19 pandemic, supply chain disruptions and the cost-of-living crisis have highlighted both how fragile the global energy system is and the urgency for a resilient netzero-emission system that is prepared for any black swan event in the future. Black swans –high impact events that defy prediction– are everywhere and they happen much more frequently than before. Our models should be prepared for such extreme shocks. We need to plan accordingly in order to avoid negative black swans or develop strategies to manage their consequences.
Picturing the earth’s 4.5 billion years of existence as an annual calendar, humans have been present for only 37 minutes of the last day and have used one-third of the earth’s natural resources in the last 0.2 seconds. We reached the point of nonrenewal of natural resources in 1970 when the population was about 4 billion, half of what it is today. Some estimates suggest that about 99% of all species that have ever existed on earth are now extinct.
Climate change, biodiversity loss and pollution pose an existential threat to life on earth. The UN’s Intergovernmental Panel on Climate Change has warned that without immediate and deep emissions reductions across all sectors, limiting global warming to 1.5°C is beyond reach. Environmental pollution –pollution of air, water, and soil–compounds both biodiversity loss and climate change.
‘No one would know from national statistics that natural capital is being degraded even as GDP is growing.’ Partha Dasgupta.
G.
Strategy, Innovation and Communication Consultant
Targets for economic growth need to shift the focus from the concept of gross domestic product to net domestic product that is inclusive of social and environmental impacts. Economic analysis needs to stop encouraging GDP growth that does not deduct the social and environmental damage. Many governments have continued to use many incentives to boost short-term GDP growth, while doing relatively little to invest in environmental protection and climate mitigation, which generally take time to yield visible results.
The way forward is for economies to shift the focus away from GDP-centric growth and towards low carbon, quality growth. To better value natural capital, green accounting methods are increasingly available. When the destruction of natural capital is not accounted for, the results inflate growth prospects. And not accounting for this sends the wrong signals
for pursuing GDP growth at the expense of running down natural capital, which eventually hurts the growth process itself.
SUSTAINABILITY ACCOUNTING
Annual financial reports will soon need to include regulated disclosure of greenhouse gas emissions, and companies need a strategic approach – fast. For many companies, climate-related disclosure is on the verge of becoming part of their mandatory annual financial reporting. This is an undeniable milestone for accounting that requires new capabilities in the CFO’s office. More important, it’s a pivotal moment for integrating sustainability into a company’s strategy and core operations – one that will have repercussions well beyond financial functions.
Making climate disclosure a more regulated process that may require assurance from an auditor or similar external reviewer has far-reaching implications, partly because the change is arriving from many directions at once. Take the EU’s Corporate Sustainability Reporting Directive, which will start to shape environmental and social disclosures in full-year 2024 reports published in 2025. These requirements won’t just hit large and listed companies within the EU’s 27 member nations; they are also likely to apply to European subsidiaries of almost all Fortune 500 companies due to the size of their European footprint.
Fulfilling the requirements will require deep expertise in financial disclosure, carbon accounting, innovation and sustainability – and how each of those elements affects business strategy. The increased transparency and accountability
Nicos
Sykas
implicit in regulated disclosure means that failure to deliver on promises will be quickly noticed and punished – not just by investors but also by customers (many of whom will be facing their own pressure to cut indirect emissions from suppliers) and by employees keen to understand and support their company’s sustainability activities.
STANDARDS: DRIVER FOR INNOVATION & GREEN GROWTH
Standards are everywhere:
Business continuity. ISO 22301 is applicable to all organizations, regardless of size, industry or nature of business.
Risk management. ISO 31000 is applicable to all organizations, regardless of type, size, activities and location.
The International Standard on Quality Management (ISQM) deals with a firm’s responsibilities to design, implement and operate a system of quality management for audits or reviews of financial statements, or other assurance or related services engagements.
ACCOUNTING FOR NATURAL CAPITAL
Environmental aspects are an organization’s interactions with the
environment, while its environment impacts are the consequences of these interactions. An impact can be positive or negative.
ISO 14008, Monetary valuation of environmental impacts and related environmental aspects, is the world’s first internationally agreed reference for assessing the economic value of an organization’s environmental aspects and impacts.
ISO 14008 is complemented by ISO 14007, Environmental management – Guidelines for determining environmental costs and benefits.
ISO 14097, Greenhouse gas management and related activities – Framework including principles and requirements for assessing and reporting investments and financing activities related to climate change, offers support to organizations reporting in accordance with the recommendations of the Task Force for Climate-related Financial Disclosures.
ISO 14097 serves as a triple objective:
a) Guide investors and finance managers in identifying climate related risks and opportunities.
b) Provide the data and information necessary to make informed decisions
to minimize or eliminate climate-related risks, and to take advantage of the opportunities.
c) Enable the transition to a low-carbon economy and fewer climate risks and catalyze a greater investment in the opportunities.
Green bonds and loans. ISO aims to provide harmonization, structure, transparency and credibility though its ISO 14030 series that helps to determine the eligibility and credibility of green bonds and loans, as well as a robust reporting mechanism for investors.
Greening financial projects. But what defines a potential green project, asset or activity? To answer this question, a newly published standard describes the environmental criteria the borrower needs to consider. ISO 14100 provides organizations on both sides of financial transactions with guidance on determining environmental risks and opportunities associated with potentially beneficial projects, assets and activities.
ISO 14054 Natural Capital Accounting for Organizations is intended to provide specifications and guidance for the process of preparing natural capital accounts. Natural capital accounting is a systematic way of collating financial, socio-economic and environmental information about an
organization’s impacts and dependencies on nature and presenting it in formats that are familiar to decision makers. Such accounts enable organizations to see all the information in one place, think about their impacts and dependencies in a holistic way, and prioritise ‘material impacts and dependencies’. The standard ensures the whole process is transparent by requiring the documentation of scope, data, assumptions, gaps and implications of all these on the way accounts are interpreted for decision making.
The new standard ISO 14054 addresses two important aspects:
1. The Natural Capital Balance Sheet shows your organization's dependence on natural capital assets, i.e. natural resources such as forests, water or healthy soils.
2. The Natural Capital Income Statement shows the impact of your organization on natural capital assets.
The use of state-of-the-art technologies is crucial in enhancing compliance effectiveness and achieving sustainable compliance. Leveraging artificial intelligence and innovative technologies facilitates real-time analysis of vast amounts of data, enabling early detection of violations and breaches of rules. By embracing these technological advancements, companies can sustainably strengthen their compliance function and enhance their overall compliance effectiveness.
Modern technologies such as compliance analytics and forensics have become indispensable for detecting non-compliant behaviour, including identifying suspected money laundering cases. Effective analysing and processing of relevant data enables the detection of violations and breaches of rules in a timely and relevant manner.
Today the global community is failing to sufficiently secure innovation’s myriad benefits at a cost to growth and quality of life. Innovative genius –from quantum computing to artificial intelligence– has the ability to change what we produce and how. And yet, instead of the high investment, high productivity and high growth decade in which the application of innovation makes us all better off, we appear condemned to a low growth, low productivity, low
investment decade.
The main problem is that we approach nonlinear multisource, multilayer problems (geoeconomic confrontation, erosion of democracy, energy crisis, net zero transition, economic downturns, supply chain disruptions, climate crisis, natural disasters, biodiversity loss, pandemics, cancer, Alzheimer’s disease etc.) in a linear manner. This great asymmetry has a huge negative impact on social, economic, human and planetary well-being.
Meta–innovation, the new nonlinear framework I developed, provides a solution to this challenge. This pioneering, crosscutting tool takes into account complexity, vital uncertainties, exponential risk, fragility, nonlinear interactions, emergent phenomena, black swans (positive and negative asymmetries) and tipping points
(critical thresholds).
This novel Innovation Model is presented analytically in a practical Toolkit I have prepared which, among other describes a total of 212 strategic tools, frameworks, mechanisms, creativity techniques, methods and standards that can be applied accordingly (case-by-case) to help public and private companies and organizations, communities and all products and services modify their exposure in order to exploit positive asymmetries (open to opportunities) and avoid negative asymmetries (close to dangers). The detection and exploitation of favorable asymmetries captures exponential multiplicative returns whilst the avoidance of unfavorable asymmetries lessens potential damage and eliminates the risk of ruin.
To summarize: In the new era of exponential risk (where risks collide and multiply), Meta–innovation can help Government, Business and Communities create resilient innovations in a systematic and standardized manner.
The 17 Sustainable Development Goals and the Importance of ESG Criteria
As part of the celebration of World Cleanup Day, the Corporate Social Responsibility (CSR) Committee, in collaboration with the Limassol-Paphos Coordinating Committee of the Institute of Certified Public Accountants of Cyprus (ICPAC), the Pentakomo Community Council, the Cyprus Lifeguard Federation and the NGO Together Cyprus, organized a cleanup event at one of Cyprus’s most beautiful beaches, Governor’s Beach in Limassol.
Panos Dimitriou Head of Corporate Social Responsibility (CSR) Together Cyprus CSR, ESG, CSRD & Sustainability Expert
Following the cleanup, an educational event was held to highlight the importance of the 17 Sustainable Development Goals (SDGs) and the criteria of Environment, Society, and Governance (ESG). The interactive seminar was delivered by the undersigned, Head of CSR at the NGO Together Cyprus.
I began by emphasizing that the event serves as a reminder of the responsibility companies have to raise awareness about the importance of achieving the 17 SDGs and their obligation to comply with the European Union’s directive on sustainability reporting.
This directive is a reminder that companies, and society at large, must foster a culture of responsibility through sustainable development actions. These actions should ensure the long-term sustainability of society and protect the environment for future generations.
During the educational seminar, we discussed with participants the European Sustainable Development Report for 20232024, which ranks countries based on their overall progress towards achieving the 17 SDGs. Countries are ranked according to their overall score, which represents the percentage of SDG achievement. A score of
100 indicates full achievement of all SDGs. The report ranks Cyprus 32nd out of 34 countries, with an overall score of 61.02%.
Although the 17 SDGs reflect national goals for each country, they can also serve as tools for companies to design actions that align with these goals. At the same time, companies can create the necessary conditions to incorporate ESG criteria, contributing to positive outcomes for the environment, society, and governance.
Specifically, companies should focus on reducing their environmental impact, enhancing social initiatives for equality and equal rights, and promoting transparency and accountability in governance. By doing so, they can foster a culture of sustainable development, encouraging employees to actively contribute to achieving the 17 SDGs.
Future generations will develop a culture of sustainability by understanding the importance of these goals, such as recycling, equal human rights, and collaboration for shared prosperity.
I highlighted to the participants that 2024 is a pivotal year for Cypriot businesses as they prepare to comply with the European legislation on sustainability reporting requirements.
In conclusion, the 17 Sustainable Development Goals and the ESG criteria serve as a guide for creating a culture of sustainable development for future generations. Implementing these criteria will help companies more easily comply with the European legislation on sustainability reporting and contribute to efforts to improve Cyprus’s ranking in the European sustainability report.
It is therefore up to all of us to contribute to creating a culture of sustainable development to ensure a better future for the generations to come.
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Implementing Disclosures in the Area of Human Resources within the Scope of the Sustainability Report
SSustainability Reporting in the European Union
ustainability is a key topic for businesses in the EU. Regulations requiring companies to report on environmental, social, and governance (ESG) practices are advancing quickly. The Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS) are important for ensuring companies disclose detailed information about their sustainability activities, practices, and impacts. The sources focus on the disclosure requirements expected in human resources, a central part of the social (S) dimension of ESG.
1. EVOLUTION OF SUSTAINABILITY REPORTING
Over the past few decades, growing awareness of the environmental and social risks to global sustainability has pressured governments and businesses to change their procedures. In the EU, discussion on corporate sustainability has led to standards promoting transparency and accountability.
The Non-Financial Reporting Directive (NFRD) in 2014 required large companies to publish information on environmental and social issues. The NFRD was considered insufficient because many companies didn't provide enough detail, hindering report comparability.
In 2021, the EU approved the CSRD, which expands the scope of companies required to disclose ESG information. This includes large companies and listed small and medium-sized enterprises (SMEs). The CSRD requires a more structured and detailed reporting standard, including the ESRS.
2. EUROPEAN SUSTAINABILITY REPORTING STANDARDS (ESRS)
The ESRS provide clear guidance on how companies should report their sustainability practices. These standards are divided into three categories reflecting the ESG dimensions: environmental (E), social (S), and governance (G).
ESRS S1 (Own Workforce) and ESRS S2 (Workers in the Value Chain) provide guidance on how companies should disclose information relating to the management of their direct and indirect workforce.
ESRS S1: Own Workforce
ESRS S1 refers to a company's employees with employment contracts who make up its human resources.
Companies will be required to disclose detailed information on several
aspects of their employees:
• Diversity and inclusion
• Remuneration issues
• Health and safety
• Well-being
These disclosures ensure employers provide fair and equitable work environments and safe and healthy conditions for workers.
ESRS S2: Workers in the Value Chain
ESRS S2 expands on ESRS S1, requiring companies to disclose information on indirect workers/service providers and other suppliers, those acting along the company's value chain. This includes workers from suppliers and subcontractors, who may be located outside the EU in regions with less stringent labour standards. Companies are encouraged to ensure these workers are protected from abuses and rights violations.
The article prepared by FCM technical advisory team.
Elsa Marvanejo da Costa Accountant and Tax expert
3. HUMAN RESOURCES TOPICS IN THE ESRS
Human resources are an essential part of sustainability reports, reflecting the importance of workers in business activities and the need to ensure fair, safe, and inclusive labour practices.
The sources list the main disclosure topics required by ESRS S1 and ESRS S2, with examples:
3.1 Diversity and Inclusion
Promoting diversity and inclusion in the workplace is a central issue in sustainability reports. ESRS S1 requires companies to disclose detailed information about their workforce composition, including the distribution of gender, age, and other socio-economic characteristics. Including this information allows companies to demonstrate their commitment to creating more equitable and representative work environments.
• Example: German companies have adopted proactive policies to increase diversity in leadership positions. In some regions, these policies align with government guidelines requiring quotas for women on boards of directors. However, besides quotas, companies have reported longterm initiatives to create a more inclusive and diverse culture.
3.2 Equal Pay and Fair Remuneration
Pay disparities between men and women and other remuneration inequalities are concerns addressed in ESRS S1. Companies are required to disclose information on the gender pay gap and adopt measures to promote fair and equitable remuneration for all workers.
• Example: Scandinavian companies are known for promoting equal pay practices and are highlighted as examples for other countries.
3.3
Occupational Health and Safety
The physical and mental well-being of workers is another fundamental point in ESRS S1. Companies must report workplace accident rates, risk prevention programmes, and policies implemented to improve workplace safety. Mental health is also a growing area of concern.
• Example: Spain and Italy impose mandatory reporting of safety measures in certain sectors and invest in continuous training
programmes for workers to prevent serious accidents, reflecting the challenges inherent in these more dangerous sectors.
3.4 Training and Skills Development
Retaining and developing talent is key for a company's long-term sustainability. ESRS S1 requires companies to provide information on their training programmes, development opportunities, and career progression offered to workers.
• Example: Some technology companies in Ireland have made substantial investments in digital qualification programmes, ensuring their workers are prepared for rapid technological changes and new market demands.
3.5 Well-being and Work-Life Balance
Worker well-being and work-life balance are essential to creating a healthy and productive work environment. Companies should disclose their policies on parental leave, flexible working hours, and mental health support.
• Example: Some large companies in Portugal have led initiatives that promote work-life balance, with extended parental leave and flexible hours. In their reports, they highlight the benefits of these practices for talent retention and improved worker satisfaction.
4.
Value Chain and Working Conditions (ESRS S2)
ESRS S2 covers workers along the value chain, including the workforce of suppliers and subcontractors. European companies are encouraged to ensure that these workers, many of whom operate outside the EU, have fair and safe working conditions. The lack of transparency in global supply chains is a growing concern, especially in the apparel and electronics sectors, where value chains are often long and complex.
• Example: Some French and German companies already include information in their reports on the working conditions of their suppliers in Asia and Latin America, where such standards tend to be less stringent. These disclosures contribute to improvements in fair wages and working conditions in those countries.
5. Challenges in Implementing Sustainability Reports
Implementing the ESRS and requiring more detailed reporting on human resources practices presents a challenge for many companies in the EU. Collecting worker data, especially along the value chain, can be complex and expensive. Most companies do not yet have adequate systems or procedures to comply with these standards.
6. The Future of Sustainability and Human Resources in the EU
Implementing the ESRS is a significant step towards increasing companies' transparency and accountability regarding their human resources practices. As companies adopt these standards, work conditions and talent management are expected to improve across the EU.
There is still a long way to go, and the success of the implementation and achievement of the intended goals depends not only on legislative compliance but also on companies' willingness to integrate sustainable practices into their organisational culture.
CONCLUSION
Implementing the ESRS and requiring detailed human resources reporting transforms how EU companies approach sustainability. By prioritising transparency in worker-related matters, companies not only meet new legislative requirements but also promote a more ethical and responsible corporate culture. Focusing on human resources can result in long-term benefits for both organisations and society as a whole.
Maximising board effectiveness in the current environment
For the Central Bank of Cyprus, robust Governance is not just a regulatory requirement. It is a commitment to the people of Cyprus. Strong Governance is crucial in maintaining stability, trust, and efficiency in our financial system.
In essence, Governance is about how decisions are made, who makes them, and how these decisions are implemented and monitored to ensure they achieve the desired outcomes.
The topic brings with it many abstract concepts such as integrity, transparency, accountability, independence, and the overarching, and probably most abstract concept of all, ethos. Ethical behaviour may be described as the true, genuine, real and dependable manner and behaviour that place moral values before any other conflicting interests. This concept is even more relevant in today’s world where it is imperative that Environmental, Social and Governance practices are incorporated in everyday company activities, operations and decision making.
Based on the EU relevant regulation, and as a means of translating these abstract concepts into actions, the Central Bank of Cyprus, applies a set of specific requirements for regulated entities. The highlights of these requirements may serve as useful guidelines for the non-regulated entities which could aim towards incorporating a number of these, taking into consideration the nature of the business and the principle of proportionality.
GOVERNANCE DIRECTIVE
First and foremost, minimum requirements are set regarding the Board of Directors composition and responsibilities.
Clearly, the Board has the overall responsibility for the entity and is accountable for proper Governance.
For this to be efficiently accomplished, the Board must be comprised of an adequate number of members who should convene regularly and systematically, with the majority of these and the chair being independent. Board committees such as the audit, risk and nominations and remuneration committee are mandatory. Regular self-assessments of the Board and its members’ effectiveness should be carried out, as well as, an Independent External Advisor’s evaluation on the Governance & Performance of the Board and its committees. Any resignation of a board member, or key personnel, should be sufficiently explained, documented and reported. A key component for effective
and prudent management at all levels, is a suitable, transparent, and documented organisational structure. And it is of course, of paramount importance, that Audited Financial Statements are duly completed and submitted in a timely manner.
As a second, and just as critical pillar, stands the requirement for a sound risk culture within the organization and the need for a comprehensive risk management framework.
Entities must cultivate a robust risk culture aligned with their risk appetite, ensuring informed decision-making through a comprehensive understanding of risks. They are required to assess their resilience to adverse conditions via stress testing and scenario analysis, and to have in place a business continuity plan to sustain operations during disruptions.
Management should communicate core values, encourage open dialogue, uphold ethical standards, and ensure nondiscrimination and gender neutrality. They must also prevent conflicts of interest and implement governance policies to mitigate operational and reputational risks.
The Central Bank of Cyprus intends on enhancing the provisions relating to reputational risk. Entities will be called upon to evaluate their strategy, operations and general behaviour and how their reputation may be affected by these and will need to act proactively and perform relevant stress tests to protect their reputation as well as the reputation of the
Evgenia Christodoulou on behalf of the Governor of the Central Bank of Cyprus
sector as a whole.
The third pillar relates to the requirement for the internal audit, compliance and information security functions to be independent by reporting directly to the Board of Directors and ensuring that robust internal control systems and mechanisms are in place to safeguard the integrity of the financial and operational information and the adherence to the legal and regulatory framework.
The fourth, and equally important pillar, requires that regulated entities develop remuneration policies that promote sound risk management and do not encourage excessive risk taking, with such policies being fully disclosed to all stakeholders.
FIT & PROPER ASSESSMENT
Prudential requirements relating to the appointment of members of the Board and key function holders are also in place.
A relevant suitability assessment is carried out by the Central Bank of Cyprus, and before the assumption of duties, an approval must be obtained, either from the Central Bank or the ECB, depending on the entity’s systemic significance.
• The members of the Board need to collectively satisfy a broad set of qualities and competences. Upon selection, the entities must also promote diversity.
• Nominated members and key function holders are assessed, on various aspects, such as, their competences, skills, experience and qualifications, their time availability, information relevant to their reputation such as bankruptcy, overdue financial obligations, court or other proceedings, and on information that may give rise to a conflict of interest.
CBC GOVERNANCE
The Central Bank of Cyprus, plays a critical role in the Cyprus economy, forms an integral part of the European Central Bank system, and must therefore, constantly be able to respond to the challenges of times. As part of this, it is acknowledged that the Central Bank itself needs to continuously develop and evolve its own internal governance and continue the adoption of best practices and a sound operating model.
FINANCIAL LITERACY
Finally, we conclude by noting that the Central Bank of Cyprus, places great importance in the area of financial literacy in enhancing the well-being of individuals and the broader economy. It has launched several initiatives in this area and has taken a leading and coordinating role in the development of the National Strategy for Financial Literacy and Education in Cyprus. Within this scope, we aim to address the small and medium enterprises sector in relevant areas, including Governance.
Thank you again and looking forward to hearing more on the matter from our distinguished speakers.
Conference on corporate governance: maximising board effectiveness in the current environment
It is a pleasure to be part of this discussion on corporate governance, which the Cyprus Public Audit Oversight Board recognises to be critical for the success and sustainability of organizations and for the protection of public interest.
To begin with, allow me to provide some historical context on the subject. Corporate governance is the system by which companies are directed and controlled, so one can say that as soon as corporations began to exist a few centuries back, so did corporate governance. However, the modern idea emerged in the latter part of the 20th century in the US. Until then, boards largely endorsed management decisions, investors and shareholders were undemanding and there was little legal oversight. Interestingly, while the US was the first to place importance on good corporate governance, businesspeople (and lawmakers) strongly defended the right of corporations to pursue a more laissez-faire business model and there was little immediate legislative impact so, in fact, it was the UK who first introduced a corporate governance “code” in the 90s, with other countries across the globe following suit. Elsewhere in Europe, increased attention began to fall on corporate governance in the early 2000s.
What was it that prompted the increase in the level of control and oversight of organisations? The simple answer: High-profile corporate scandals and bankruptcies, which highlighted the devastating effects that poor governance can have on businesses, their stakeholders and the wider economy. Jobs were lost en masse, savings of stakeholders who had
Ioanna Achilleos Board Member Cyprus Public Audit Oversight Board
unquestioning confidence in the seemingly reputable companies’ financial positions were eradicated and the reputation of the accounting profession suffered a big blow. Suddenly, questions were being asked on how businesses behaved and made decisions. Legislators started putting in place strong governance structures to protect organizations and the public interest.
Today, pressures are even greater. The global supply crisis has created an uncertain environment where investors are shouting for clarity and safety. In addition, the rise in the importance of ESG demonstrates that the world values corporate integrity and wants to maintain that priority in the future. And it’s not just providers of funding that are placing these demands, it’s employees, suppliers, consumers and even the broader community as well. In short, everyone now expects organizations to not only be profitable but also ethical, transparent, responsible and resilient.
Let’s now move on to the key players. Who does corporate governance involve? Within
the organisation, corporate governance is a responsibility shared by corporate executives, internal auditors and other internal control departments and, of course, boards, with the role of audit committees becoming more prominent than ever. Externally, regulators like Securities and Exchange Commissions are responsible for monitoring the financial health of market operators. And of course, the role of the external auditor is crucial in achieving the objective of corporate governance. Now, something highlighted by the corporate scandals mentioned earlier, was the inadequacy of self-regulation in the audit profession, which lead to the establishment of yet another level in the governance chain, i.e. the establishment of independent audit regulators.
Here in Cyprus, the independent audit regulator, the Cyprus Public Audit Oversight Board, was established in its current form in 2017. Its mission is to regulate the audits of all companies in order to protect investors and other members of the public who rely on informative, accurate and independent audit reports. Basically, it audits the auditors. A few words about how the CyPAOB operates. It carries out direct oversight of auditors and audits of Public Interest Entities and indirect oversight of non-PIE auditors and audits, through the delegation agreement with the Institute of Certified Public Accountants of Cyprus. Other than the full-time staff, there is a Board comprised of 7 non-executive members having a diverse experiential background. There is also an independent Disciplinary Committee comprised of 3 members. All are appointed by the Council of Ministers. CyPAOB is a member of The Committee of European Auditing Oversight Bodies (CEAOB) and last June our Director General was elected Chair of the Committee for a four year term.
We are also a member of the International Forum of Independent Audit Regulators (IFIAR).
So, what is it that audit regulators ultimately care about? Simply put, they care about the key elements that promote public trust in the auditing profession. First and foremost they clearly care about competency. Auditing requires a high level of technical expertise and continuous learning, accompanied by professional skepticism, sound judgement and unbiased opinion which investors must be able to rely on. But being competent is not enough. Auditors need to be individuals of the highest integrity and character so that stakeholders trust them. They need to be ethical, accountable and transparent. Furthermore, audit industry concentration, constant technological advancements and the talent crisis are all concerns that require the immediate attention of the industry if it is to remain resilient and sustainable.
While some may argue that it’s all becoming a bit too much, it must be said that it is exactly these high standards that protect both the actual and the perceived value of the profession.
Of course, the assurance provided by auditors is one thing and the quality of financial information provided by the
company itself is another. Which brings us back to audit committees and internal auditors. Nowadays, the audit committee is considered to be one of the cornerstones of corporate governance, playing a central role in ensuring the accuracy and reliability of financial reporting, safeguarding the organization’s assets and enhancing the quality of the audit process. According to our local regulation, all Public Interest Entities must have an audit committee and the responsible regulator overseeing the establishment and performance of audit committees is the CySEC for listed companies, the Central Bank of Cyprus for banking institutions and the Superintendent of Insurance for insurance and reinsurance entities.
Intertwined with the work of the audit committee is that of internal auditors, who operate as the internal watchdog of the company, continually evaluating the effectiveness of its operations and helping to identify areas where improvements can be made.
The interaction between internal auditors, the audit committee and external auditors is essential to maintaining a system of checks and balances within the organization, providing a robust framework for
safeguarding its financial integrity, protecting against fraud and ensuring compliance with legal and regulatory requirements. But beyond crisis prevention, good corporate governance, supported by strong audit committees and diligent auditors, creates a competitive advantage for organizations. It enhances investor confidence and builds a resilient corporate culture that can withstand the pressures of today’s fastpaced, competitive business environment. Moreover, it fosters ethical leadership, which is crucial in maintaining a positive reputation.
In short, the themes we are discussing today are not just about compliance with regulations or ticking boxes on a checklist. Corporate governance is at the heart of building businesses that can thrive over the long term, while meeting the ethical and financial expectations of all stakeholders. Going forward, it is doubtful that this drive for more accountability will fade.
Thank you for your attention and I look forward to an insightful discussion as the panelists delve deeper into these critical issues.
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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:
VISION
“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”