No. 135 | JUNE 2019
A New Image and Presence for ICPAC The Institute’s 58th Annual General Meeting DISTRICT POST OFFICE CY-1901 NICOSIA, CYPRUS POSTAGE PAID LICENCE no.33 SEALED UNDER PERMIT no. 133 ΠΕΡΙΟΔΙΚΟ ΤΑΧΥΔΡΟΜΙΚΟ ΤΕΛΟΣ ΠΛΗΡΩΜΕΝΟ ΚΛΕΙΣΤΟ ΕΝΤΥΠΟ ΑΔΕΙΑ ΑΡ. 133 ΑΔΕΙΑ ΑΡ. 239
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contents
6 | THINKING AHEAD 8 | INSTITUTE NEWS
20 | Michael Zampelas (1937-2019) By Theodoros Philippou
ACCOUNTING & AUDIT 34 | Preparing Future Accountants for a New Role in a Changing Profession Professor Petros Lois, Head of the Department of Accounting at the University of Nicosia (UNIC) 36 | Governments and Accrual Reporting By Michalis Lardis 38 | Is there a need for a simplified financial reporting framework in Cyprus? By Gabriel Onisiforou & Eleni Ashioti
Issue 135 june 2019
ECONOMY 40 | A New Business Model for Cyprus and Beyond By Nicos G. Sykas 42 | Taking a More Proactive Approach to the Economy Interview with Michael Antoniades, Chairman, KPMG in Cyprus
TAXATION 64 | The European Mandatory Disclosure Regime By Stavros Karamitros 66 | Cyprus Welcomes New Business By Petros Rialas & Marios Yenagrites
BUSINESS IN CYPRUS
67 | Implications of the Anti-Tax Avoidance Directive By Margarita Liasi
70 | Facing Today’s Insurance Sector Challenges Interview with Maria Fysentzides, Financial Controller, Trust International Insurance Company (Cyprus) Ltd 72 | IFRS 17: A New Era for Insurance Companies By Stavros Violaris
special feature 45 | OFFICE GUIDE/OFFICE TECH 9 companies present details of their products and services
PROFESSIONAL SERVICES 68 | 5th Anti-Money Laundering Directive: What is changing? By Christos Demetriou
ACCOUNTANCY CYPRUS
74 | Vendor Handling: A Difficult Task under GDPR By Zoe Stylianou 76 | Intelligence Augmentation By Constantinos Valanides 78 | Be Yourself By Spyros Yiassemides 80 | Why Cyprus Needs a State-Owned Equity Fund By Savia Orphanidou 81 | Leadership and Emotional Intelligence in the Modern Work Environment By Constantinos Kypriotis
Cover photo by TASHPO
MEET THE CFO 82 | Achilleas Zacharia Interview with the Financial Manager at Iron Mountain Cyprus
FINANCIAL SERVICES 86 | The Emerging Landscape of FinTech Regulation By Demetra Kalogerou
Management 88 | Executive Excellence Interview with Nicos Timotheou and Koralia Timotheou about their new book 90 | How to Create Trust in the Workplace By Andrie Penta
REAL ESTATE 92 | Global Market Forces Driving Investors to Cyprus Yiannis Misirlis at The Economist conference in New York 94 | Affordable Accommodation: Time to Get Real By Antonis Loizou
ICT 96 | Experience, Flexibility, Responsiveness and Commitment to Quality Interview with Christos Tattis, Senior Commercial Manager, NetU Consultants Ltd
ISSN 1450-2380 Editor-in-Chief Ninos Hadjirousos, FCA The Institute Council Demetris Vakis (Chairman) Stavros Pantzaris (Vice-Chairman) Maria Pastellopoulou (Secretary) Members Nicos Chimarides, Odysseas Christodoulou, Pieris Markou, Gabriel Onisiforou, Petros Petrakis, Savvas Poyiadjis, Demetris Shiakallis, Spyros Spyrou, Demetris Taxitaris, Christos Vassiliou, Karlos Zangoulos 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
Managing Director George Michail General Manager Daphne Roditou Tang Media Manager Elena Leondiou In-house Editor-in Chief John Vickers Coordination Pan Charalambous
PROFESSIONAL NEWS 98 | IASB proposes to update Conceptual Framework reference in IFRS 3, Annual improvements to IFRS Standards Proposed
Art Direction Anna Theodosiou Design Alexia Petrou, Marios Kouroufexis Marketing Executive Kevi Chishios
COVER STORY
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A New Image and Presence for ICPAC The Institute’s 58th Annual General Meeting, including an interview with the new President of ICPAC, Demetris Vakis, the address by the President of Accountancy Europe, Florin Toma, highlights from the addresses by President Nicos Anastasiades, House Speaker Demeris Syllouris and the outgoing President of ICPAC, Marios Skandalis, plus photos from the event.
Commercial Manager Neofytos Constantinou Contact us for advertising Pavlos Giorkas pavlos.giorkas@imhbusiness.com Tel: +357 22505555, +357 22505566, Fax: +357 22679820 Address 5 Aigaleo St., Strovolos 2057, Nicosia, Cyprus, P.O.Box 21185, 1503, Nicosia, Cyprus Accountancy Cyprus is published quarterly by the Institute of Certified Public Accountants of Cyprus and is sent 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 for 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.
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THINKING AHEAD
Fresh Image, New Challenges By Kyriakos Iordanou, General Manager, ICPAC
ICPAC held its 58th Annual General Meeting on 28 June 2019. It was addressed, among others, by President Nicos Anastasiades, the Speaker of the House of Representatives, Demetris Syllouris, and the President of Accountancy Europe, Florin Toma, and attended by Government Ministers and other state and business officials and representatives. The AGM took place in the iconic Nicosia Municipal Theatre, newly renovated after many years of silence. The venue was not selected by chance: the theatre was chosen to link its new beginning with ICPAC’s new, fresh image. The highlight of the event was the unveiling of the Institute’s new logo, which, we believe, reflects this new image projected by the Institute through its modern design and specific colours, thus making ICPAC more appealing to its members, students, associates and the public in general, whilst maintaining its dynamism and focus. Refreshing the Institute’s image and appearance is, of course, only one side of the coin; the other includes the many challenges and prospects that
ACCOUNTANCY CYPRUS
ICPAC is keen to address. This new development falls within the scope of the Institute’s strategic planning. The Council and management are working to meet all the strategic objectives that have been set, and a number of activities are already under way, including the further enhancement of the management team in order to better address its regulatory and other responsibilities, the provision of additional services and value to its members, support to the Government and the further enlargement of its network of affiliations and international cooperation with renowned professional bodies in other countries. It is worth noting that the recent AGM was attended by representatives of the professional accountancy bodies of Romania (CAFR), Malta (MIA), Serbia (SRRS) and the UK’s Institute of Directors (IoD). In the context of ICPAC’s commitment to cooperate more closely and strategically with the Government, it recently signed two protocols of cooperation: one with the Ministry of Foreign Affairs on matters relating to
Economic Diplomacy and one with the Cyprus Securities and Exchange Commission.
With a new face and a new image, ICPAC remains true to its core values and principles We remain at the forefront of economic developments in the country and we continue to work for the further advancement of the accountancy profession. This was one of the main messages delivered to the AGM by the outgoing President of the Institute, Marios Skandalis, along with his ten proposals regarding the need for a new masterplan for the economy. So, with a new face and a new image, ICPAC remains true to its core values and principles and ready to achieve its strategic objectives and face new challenges, with the drive and dynamism it draws from you, its members.
THINKING AHEAD
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institute news
9th Nicosia Economic Congress
On 18 April, 2019 ICPAC, in association with GOLD Magazine and IMH, organised the 9th Nicosia Economic Congress at the Hilton Park Hotel, Nicosia.
Harris Georgiades (Minister of Finance)
(l-r) Natasa Pilides (Deputy Minister of Shipping) & Stephen Lillie CMG (British High Commissioner to Cyprus)
Constantinos Herodotou (Central Bank of Cyprus)
Kyriakos Iordanou (ICPAC, Congress Chairman)
Kyriakos Mitsotakis (President, Nea Dimokratia Party) in conversation with John Vickers (GOLD)
Georgios Lakkotrypis (Minister of Energy, Commerce & Industry) Constantinos Ioannou (Minister of Health)
Savvas Perdios (Deputy Minister of Tourism)
Varnavas Theodosiou (Exxonmobil Exploration and Production Cyprus(Offshore))
Gilles Chemla (Imperial College Business School, UK)
ACCOUNTANCY CYPRUS
Marios Μ. Skandalis (ICPAC)
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ICPAC extends its global network Cooperation Agreement with the Association of Accountants and Auditors of Serbia (SRRS)
A
cooperation agreement was signed by Kyriakos iordanou, General Manager of ICPAC and Pero Skobic, General Secretary of SRRS. Both men expressed their satisfaction with the agreement, which, they said, marks the start of an ambitious yet mutually beneficial cooperation. The agreement provides for new opportunities for training and development on a range of technical matters. The two bodies will form an educational and research partnership to support professionals in both countries. Through the protocol, SRRS and ICPAC will collaborate on educational events as well as scientific and technical training activities in the areas of primary interest, such as audit, IFRS, anti-money laundering, corporate reporting, technology and regulatory compliance. Professionals will benefit from knowledge transfer and the sharing of best practices to overcome common challenges. In addition, such collaborations enhance the voices of smaller countries and institutes in international fora.
ACCOUNTANCY CYPRUS
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Cooperation agreement with the Malta Institute of Accountants (MIA)
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n 12 April 2019 a Protocol of Cooperation was signed in Valletta by Kyriakos Iordanou, General Manager of ICPAC, and William Spiteri Bailey, President of the Malta Institute of Accountants (MIA), thereby forging a new strategic alliance that promotes the interests of the two organisations’ members. Like the agreement with SSRS, it provides for new opportunities for training and development on a range of technical matters. The two bodies will form an educational and research partnership to support professionals in both countries and collaborate on educational events and training activities in areas of primary interest.
ACCOUNTANCY CYPRUS
institute news
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institute news
ICPAC’s activities Cooperation Agreement with the Institute of Directors (IoD) The agreement was signed by Kyriakos Iordanou, General Manager of ICPAC, and Anna Daroy, Director-General Operations of the IoD.
T
City Week London 2019 The General Manager of ICPAC, Kyriakos Iordanou, participated as a panellist at the City Week London 2019 conference on 20 May 2019, together with a delegation of the Cyprus Chamber of Commerce and Industry, aimed at promoting Cyprus to the UK business community.
he primary areas of focus of the agreement are corporate governance and business ethics, which are fundamental for the effective functioning of the Boards of Directors of listed as well as non-listed companies. ICPAC and IoD agreed to work side by side towards the establishment of an educational and research partnership in the field of their competence. Both Organisations aim to foster best practices in the adoption and application of corporate governance and improve effectiveness of the member of a board of directors and other corporate officers, especially in public interest entities. Furthermore, the agreement stipulates the encouragement of cross-membership of the two organisations, coupled with the promotion of training and other activities for the advancement of corporate governance within Cyprus. IoD Cyprus Branch will liaise for day-to-day matters relating to the collaboration with ICPAC, on behalf of the IoD.
Memorandum of Cooperation with CySEC A Memorandum of Understanding was signed by Demetra Kalogerou, Chairwoman of the Cyprus Securities and Exchange Commission (CySEC), and Demetris Vakis, President of ICPAC. It establishes a framework and procedures for cooperation, in order to facilitate the exchange of information and, more generally, the provision of mutual assistance for the more effective exercise of the responsibilities and the achievement of the objectives of the two organisations. On the basis of the MoU, the organisations will cooperate on preventing the use of the financial system for money laundering or terrorist financing in the administrative services sector and address issues and violations of existing legislation where there is a common objective, thereby ensuring the compliance of the supervised entities.
ACCOUNTANCY CYPRUS
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ACCOUNTANCY CYPRUS
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Memorandum of Cooperation with the Ministry of Foreign Affairs In June, ICPAC and the Ministry of Foreign Affairs penned an agreement for cooperation on matters relating to economic diplomacy, as well as for the promotion of the country through the diplomatic route. ICPAC participates in the steering committee of the Economic Diplomacy project.
Mentoring Programme ICPAC officially launched its mentoring programme on May 30 and the training of the first mentors took place on 4 and 5 July, with the first 15 mentors being officially certified.
Combating illicit finance A presentation was held on 3 July 2019 in cooperation with the British High Commission in Nicosia and the Ministry of Finance, on the subject of combatting illicit finance. The audience of more than 300 had the opportunity to be informed from the officials of the UK government about this extremely sensitive and important issue.
Moneyval evaluation ICPAC participates in the Moneyval evaluation process and, in May 2019, attended a number of meetings with the evaluators. This is an ongoing project that requires significant time and resources of the Institute and is led by Ms Amalia Hadjimichael, Head of Monitoring and Compliance of ICPAC. The final outcome will be available towards the end of the year.
Other activities ICPAC officials continued their work and encounters with the CyPAOB, the Ministries of Finance, Commerce and Industry, Labour and Foreign Affairs, government officials, Parliamentary committees and other business and economy stakeholders and associates. Particular emphasis was placed on developments regarding Brexit and the possibility of reaching agreement with ACCA and ICAEW for the post-Brexit era.
ACCOUNTANCY CYPRUS
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NEW MEMBERS 5242
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360 Nicosia: A New Generation of Living On Nicosia’s busiest street, overlooking the city and beyond, stands the 360, the capital’s tallest landmark with an impressive height of 135m and 34 floors of unique properties. With breath-taking 360° views that stretch for miles around the city, it cuts elegantly into the sky above Nicosia’s most fashionable, creative and commercial district. In total, 27 floors are dedicated to residential units, promising an upgraded living experience.
their new homes. Each floor is divided into four or six residential apartments, any configuration is – in fact – possible or whole-floor living spaces. This ‘made-to-measure’ approach puts the power of personal creation firmly in the hands of prospective homeowners; The companys interior designers are at hand to individually design apartments. Elegant marbles and warm parquet floors, granite and quartz countertops, modern carpentry are among the offered standard features.
Utilising a unique approach to design that leaves the perimeter of the building largely free from beams and other obstructions, residents can be assured of awe-inspiring, 360-degree views from their apartment’s floor-to-ceiling windows.
In addition, a dedicated 24-hour concierge is available in tending to residents’ every need, from handling deliveries, and supervising safety and security, to looking after common areas. And further enhancing 360 Nicosia is its use of new generation state-of-the-art technology. At the touch of a button via telephone or tablet, all systems may be controlled, whilst access cards, CCTVs, fire and burglar alarms, and more, ensure the safety and security of the building, and all of its residents. The building’s 3 underground lev-
Individualisation meets innovation at 360 Nicosia, with residents invited to personalise
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els are dedicated to the secure parking of the residents’ vehicles. Only authorised vehicles will be able to enter and exit the building using pre-authorised passes. The project carries a Class A certificate with a low carbon footprint achieved through triple-glazed windows, LED lights with movement sensors and dimmers, energy saving features, waste recycling systems, and more. Reserved exclusively for the enjoyment and relaxation of residents is the Residents’ Club. Situated on the double-height 10th floor of the building, it comprises of a swimming pool complete with sundeck, a fully equipped gym, and wellness centre with sauna, and steam bath. The amazing restaurant and club on the top two levels of 360 will become “the talk of the town!” Through the separate lobby on the side of the building the dedicated lift will service the Sky Restaurant and Club on the 33rd and 34th levels only.
Michael Zampelas (1937-2019) An Appreciation By Theodoros Philippou
ACCOUNTANCY CYPRUS
photos by jo michaelides
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M
ichael (‘Michalakis’) Zampelas was born in the village of Palaichori on March 19, 1937, one of the nine children (five boys and four girls) of Herodotos and Maria Zampelas. In September 1950, on the advice of his father, he moved to Nicosia where he completed his secondary education at the Higher Commercial Lyceum. As a student, he met Loukia, the daughter of Christofi Roditis and, on September 7, 1958 they married and would have three daughters - Koula, Maria and Irene. Immediately after getting married, they went together to London where he studied for the professional qualification of the Institute of Chartered Accountants in England and Wales. Shortly after qualifying as a Chartered Accountant in 1966, he and his family returned to Cyprus. Initially employed in the Nicosia office of Price Waterhouse Peat & Co. he became one of the first members of the Institute of Certified Public Accountants of Cyprus (ICPAC). After a short period of service, he moved to join as a partner in the local accounting firm Ioannou Zampelas & Co. in Nicosia. In 1970, together with his associates, Michalakis established Coopers & Lybrand, an international accounting and consulting firm, in Cyprus. Following the international merger of Price Waterhouse with Coopers & Lybrand in 1998, a new firm named PricewaterhouseCoopers (today’s PwC) was formed. He served as Chairman and Chief Executive Officer from its establishment until 2001 and as non-Executive Chairman from 2002 to 2005. Today, PWC in Cyprus employs around
1,000 partners and staff and is the leading professional services firm on the island. Michalakis started from zero and after the ‘tsunami’ created by the Turkish invasion in 1974, he envisioned what appeared to be an inconceivable task: to develop Cyprus as an international business centre, exploiting the only elements that the Turkish invasion had not managed to destroy: the quality and professionalism of its people. To this end he worked tirelessly and with absolute success, making a major contribution to the country’s economy. He can rightly be considered as “the father of international professional services in Cyprus”. He left his mark, not only on the development of the accounting profession but also on the development of an entire sector of the economy, which continues to be a major contributor to Cyprus’ progress. He served as President of the Institute of Certified Public Accountants of Cyprus (1976-1978) and as Chairman of various Institute committees. In 2010 he was honoured by the Council of the Institute for his remarkable contribution to the development of the accounting and audit profession and to the economy of Cyprus. After retirement, his love of Cyprus and of its capital Nicosia, in particular, led him to stand as an independent candidate for the post of Mayor of Nicosia. He won the municipal elections and served as Mayor of Nicosia from 20012006. His contribution to the advancement and cultural development of Nicosia during his term of office was considerable. He loved the city and he believed
in its potential and prospects. He initiated the design and execution of major development projects, including the redevelopment of Eleftheria Square, the construction of the new City Hall and the renovation of the Municipal Theatre. He also had a sincere understanding of, and sensitivity to, the problems of the Municipality and its citizens and he strove with passion to resolve them, working hard and methodically for the city’s progress and modernization. He demonstrated that technocrats can perform excellent work from what are traditionally considered as political positions. In 2007, he was honoured by his successor and the Municipal Council for his services and awarded the Gold Medal of the City of Nicosia. Michalakis and his wife Loukia were great lovers and collectors of art and it was this that prompted them to create the Loukia and Michael Zampelas Art Museum, a not-for-profit private organization, which houses the family’s permanent art collection and organizes temporary exhibitions by artists from Cyprus and overseas. Moreover, other art-related ventures were established under the Zmart brand name: Zmart Education, Zmart Gallery, Zmart Shop, Zmart Café and Zmart Framing. At an extraordinary meeting on May 16, 2019, the Nicosia Municipal Council decided to rename the street in Kaimakli, where his home and Art Museum are located, as Michalakis Zampelas Street. His contribution to the cultural community and the business sector continued to the very end of his life. He served as Chairman of many social institutions, including the Association of Friends
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of the Christou Steliou Ioannou Foundation for children with special needs, the Cyprus Foundation for Muscular Dystrophy Research and the Cyprus Institute of Neurology and Genetics (CING). He has also served as President/Chairman of organizations such as the Cyprus Russian Business Association, the Cyprus Ports Authority and the Cyprus Forest Industries. He was the Honorary Consul of Estonia in Cyprus from 1997 and he contributed to the development of commercial and cultural relations between the two countries and was honoured by the President of Estonia in recognition of this. In every positions and office that he held, Michalakis left the mark of his strong personality and the proof of his contribution. He combined great vision with a passion for creation and, through good organization, systematic work and effectiveness, turned his ideas into projects. He had a unique ability to connect with the people around him, stimulating their full potential. He was an excellent leader and communicator, characterized by a mildness of style and purity of thought. He was a demanding person, setting high standards – first for himself – and always willing to support those who sought his help. He knew how to support and encourage as well as to advise and guide. He listened carefully to others and respected their opinions. In the end, however, he took the decisions and implemented them, gaining the recognition and
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trust of his associates. According to Loukia, Michalakis was an exemplary husband, father, grandfather and brother. His hard work and dedication to duty and his family were the greatest legacy to his children and grandchildren. I was linked personally with Michalakis through a sincere friendship from the age of 12, when we both in the same year at the Higher Commercial Lyceum. Following the merger of Coopers & Lybrand with Price Waterhouse in Cyprus, I also worked with him professionally, the two of us enjoying great mutual appreciation and respect. I would say that Michalakis possessed charismatic talents and exceptional abilities. His life was marked by many important milestones. It was a life based on selflessness, charity and kindness. He was blessed to have an interesting life, full of challenges, achievements and offerings. Throughout his life, Michalakis had the support of Loukia, an exemplary lady who shared the same noble feelings for people, society and art. Loukia, her daughters Koula, Maria and Irene, and her eight grandchildren, can all feel proud of Michalakis. His passing leaves the indelible memory of a great public personality who consistently and unselfishly served his country, society, the cultural scene and the professional and business world. Michael Zampelas passed away on May 15, 2019 at the age of 82 after a short illness.
special feature
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Data Center Solutions for Financial Services Firms CL8.com: The first independent Data Center in Cyprus Written by Peter G. Economides, Chairman and CEO of CL8 Successful financial services and banking organisations must find new ways to compete in an increasingly complex industry. Nowadays, financial services firms rely heavily on IT systems for optimal uptime, security, connectivity and data integrity. Strict regulations and compliance rules within the finance industry make it even more difficult for firms to address security, business continuity and customization. This is why they turn to Data Centers for indisputable security, compliance and efficiency. Financial firms must be able to protect customers sensitive data and proprietary company information. Managing sophisticated applications and IT infrastructure requires scalable, innovative and reliable Data Center solutions. Cyprus is catching up in this respect. A Data Center should offer enhanced security measures, including vulnerability scan-
ning, network and web application firewalls, log management and threat detection, antivirus and anti DDoS services among others. It should also have 24/7/365 onsite personnel and CCTV monitoring. It should, additionally, ensure that security and operational procedures are regularly reviewed and tested by an independent certified auditor. The purpose is to validate that the controls and processes meet stringent criteria regarding security availability, process integrity, privacy and confidentiality. CL8 does all above. Moreover, companies offering financial services manage large volumes of customer and transaction data that customers need to access, at all times. This requires fast and reliable connectivity to support latency, sensitive applications for activities such as payment processing, market data delivery and online trading. These compa-
nies cannot afford any of their systems go down. Being Tier III certified by the Uptime Institute of the USA, guarantees that services offered by CL8 are available 24/7 while the uptime of these services is rated at 99.982%. CL8 is the only Data Center in Cyprus that has this certification offering Hosting, Collocation and Cloud services. The ISO 9001, ISO 27001, and PCI DSS certified Data Center, ensures uninterrupted internet connectivity, providing servers and networking equipment in the form of IaaS and Cloud services, providing solutions to compete successfully in this increasingly complex industry. At last, Cyprus has a state-of-the-art Data Center with highly qualified local professionals to help financial services firms remain agile while, at the same time, meeting the industry’s growing compliance requirements.
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COVER STORY
A New Image and Presence for ICPAC
Harris Georgiades ACCOUNTANCY CYPRUS
Marios Skandalis
Yiorgos Lakkotrypis
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he Institute’s 58th Annual General Meeting, which took place at the Nicosia Municipal Theatre on 26 June was used, among other things, to present ICPAC’s new logo and its rebranding strategy. Outgoing President Marios Skandalis explained that the new, modern logo reflects the changes and new approaches being adopted within the Institute itself. “We would not be consistent and trustworthy in asking for modernisation and reform without first putting our own house in order,” he said, adding that, “Today, we can announce that ICPAC is turning a page. It has implemented significant changes and we aim to create a new image for this new era.” Skandalis clarified that the changes are not merely decorative or a way of “freshening up” ICPAC’s public image. “This renewal is substantial and reflects ICPAC’s diverse and dynamic activity and perspective. The change of logo is part of the Institute’s strategic planning for the period 2019-2021 and is in line with our strategic goals and our clear intention for a more active and dynamic intervention in both the profession and in public affairs” he said. He went on to say that the economy needs a new Master Plan, which should include the following:
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providing incentives in vital sectors of the economy in order to boost business activity and increase private investment. Without the active involvement of the private sector, we cannot look forward long-term growth.”
tive advantages to become a regional services centre. Sectors such as professional services, health, education, research, innovation, shipping and others can contribute to this targeted effort.”
3. Taxation
“The attractiveness and credibility of a business centre are earned with hard work, consistency and excellent behaviour and conduct. In particular, when the business centre is based on the principles of good governance and business ethics. We still have a long way to go to reach the desired levels, which implies a holistic change of our culture as a business community.”
“We believe that the time has come for a serious revision of our tax system so that it better meets current and future conditions and needs.”
4. Attracting Investment and Business “It is necessary to continue and strengthen the effort to attract foreign investment and business to Cyprus. We must properly and effectively promote the country’s comparative advantages.”
5. Enrichment of Services “Cyprus has the potential and compara-
6. Business Centre
7. Research – Innovation – Technology “The 4th Industrial Revolution has forced all economies to focus on the development of research, innovation and
1. Financial Stability “It is necessary not only to continue fiscal stability but also to further restructure the public and wider public sector.”
2. Private Sector “It is necessary to continue the policy of
Marios Skandalis
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NEW COUNCIL the new generation of artificial intelligence technologies. Cyprus, unfortunately, has taken very small steps in this area and is well behind other European states and its competitors. We welcome the Government’s decision to promote a specific national plan for research and technology, but we stress the need to give greater importance to these areas, with more involvement of the private sector and businesses. “
8. Modernization of the structures and operations of the State “We need a general ‘facelift’ to make the State more flexible, more productive and more people-friendly. The changes required are at all levels of the State, otherwise the whole system will not work. All its services need to be modernized and operate uniformly and evenly on a centralized basis.”
9. Energy “The energy sector is increasingly taking a place at the heart of our economy. With the gas discoveries, with the new drillings planned and the many energy infrastructure projects, we believe that the energy sector will give a new impetus and dimension to the Cypriot economy. Dealing with Turkey’s unacceptable and illegal provocations is a one-way street
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for any strategy to exploit our natural resources. With such a development, Cyprus could be transformed into a regional energy centre with huge international economic interests. That is why we need to make timely decisions to extract and commercialise our natural gas and go ahead with the practical promotion of our country’s energy prospects.”
10. Mentality – Culture “Narrow-minded attitudes and perceptions regarding employment, reform and development need to be eliminated. We have an obligation towards the next generation to leave behind distortions and obsessions and to look forward to adopting a new, modern culture.” Skandalis added that Cyprus, as a small and open economy, “is vulnerable to fluctuations or instabilities on the international financial scene, such as Brexit, financial and institutional problems in Europe, the emerging US-China trade war, economic imbalances, day-to-day monetary fluctuations, geostrategic and geopolitical developments and more. Therefore, the country has to be shielded from any shocks from the outside environment.”
A new council was announced on July 1. Marios Skandalis stepped down and Demetris Shiakallis is a new member. The remaining members will remain in office for the period 2019-2020. The new Council is as follows: President: Demetris S. Vakis Vice-President: Pieris Markou Secretary: Maria Pastellopoulou Members: Nicos Chimarides Odysseas Christodoulou Gavriel Onisiforou Stavros Pantzaris Petros Petrakis Savvas Poyiadjis Demetris Shiakallis Spyros Spyrou Demetris Taxitaris Christos Vasiliou Karlos Zangoulos
Expertise Expertise Solutions Solutions Value Value
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www.pwc.com.cy www.pwc.com.cy
© 2019 PricewaterhouseCoopers Ltd. All rights reserved. ACCOUNTANCY CYPRUS
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Government Reform Programme President Nicos Anastasiades spoke at the Institute’s Annual General Meeting and, in addition to praising the past, present and future role of ICPAC, explained the pending reforms that the Government is determined to implement.
P
resident Nicos Anastasiades told the 58th Annual General Meeting of ICPAC that his presence should be seen as tangible proof of his appreciation and recognition of the Institute’s longstanding contribution, which has been of crucial importance to the growth and improvement of the Cyprus economy. “Through its close cooperation with the State and the active involvement of its members, ICPAC has contributed to the increased prosperity of the country, significantly reinforcing local economic activity and job creation,” he said. He described the Institute as “a trusted ambassador of the country”, noting its role in promoting the country as a highquality international services centre and
helping attract considerable investment. The President underlined the fact that ICPAC was the first organisation with which the Government recently signed a cooperation agreement through the Ministry of Foreign Affairs with the aim of conducting effective economic diplomacy. He also praised what he called “the Institute’s particularly important and multifaceted contribution to the efforts made to overcome the recession and to the economic revival and sustainable growth that the country has enjoyed in recent years. President Anastasiades also drew attention to 14 government policies aimed at reform in a number of sectors, and stated his belief that ICPAC will play a key role in their implementation. The policies refer to: 1) Public sector reform. Originally rejected by the House of Representatives, this will be presented in a new bill, with which he hopes to finally rid the public sector of bureaucracy. 2) Full digitization of key services through e-Government, as well as the creation of a Deputy Ministry of Digital Strategy, Research and Innovation 3) National plan for the adoption of Blockchain technology.
4) Drastic reform and modernisation of the justice system. 5) Full implementation of the National Health Scheme. 6) Local government reform. 7) Full implementation of the National Tourism Strategy. 8) Simplification of the licensing processes for major investments. 9) Development of the Investment Funds sector. 10) Implementation of the National Rural Development Plan. 11) Transformation of Cyta into a private company, enabling a strategic investor/partner to play a role; privatisation of the Cyprus Stock Exchange and the National Lottery. 12) Reform to the governance structure of the Central Bank, reinforcement of CySEC and the establishment of a new independent monitoring authority for the Insurance sector and Provident Funds. 13) Overall reform of the education system, including the recruitment process for teachers. 14) Increased productivity through the strengthening of employee skills and the production of innovative, upgraded products.
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COVER STORY
Second Time Around Demetris Vakis was recently elected President of ICPAC for the second time in four years. Here he talks about the Institute’s changing role and objectives as well as the past accomplishments of the Institute. You have just been elected President of ICPAC for a second time. Did you propose yourself for the position? How do you feel about taking on this important role once again? No, fellow Council members proposed my name. In the absence of other nominations, the Council elected me as President. As you rightly pointed out, this is an important role for the profession and I am deeply honoured by the trust shown in me. Naturally, the President of the Institute is seen as the representative of the accountancy profession. As such, the responsibility to act and respond to challenges and changing circumstances is great. Even though I represented the profession in the recent past and gained invaluable experience, current and anticipated challenges will require new ideas. Therefore, I feel that significant time and effort will be invested once again in this important role.
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In my view, the President must be as hands-on as possible in order to be effective and this is what I will strive to do. What do you hope to achieve as President of ICPAC? Are there things that you didn’t get the chance to implement during your first term or do they not really depend on who is President of the Institute? During my previous presidency (2015-2017), ICPAC developed for the first time a mission and a strategy. These were revisited in 2018. One of the outcomes was an internal reorganisation and the establishment of additional functions. Now the Institute is in the process of implementing many of the actions outlined in the strategy. Therefore, one of the priorities is to complete the enhancement of its operational capabilities and its services to its members. Another focus area will be technology – both as it concerns the Institute, but also as it relates to its members and the economy. To this end, we will be reviewing ICPAC’s internal systems and processes with the aim of automating more activities and empowering our members in their dealings with their Institute. We have also established a new Committee – the Committee on Digital Transformation and Technology – which will aim to assist members and enterprises at large in adopting new technologies and improving operations. Other significant aspects which are being addressed include the impact of Brexit on our profession and the future of Cyprus as an international business centre. Relationships and cooperation with local and international stakeholders are always high on the agenda. These include the Ministry of Finance, the Ministry of Energy, Commerce & Industry, the Cyprus
Public Audit Oversight Board (CyPAOB), The Tax Department, CySEC, the Central Bank of Cyprus, the House of Representatives, other Commissions, the Cyprus Bar Association, the Cyprus Stock Exchange, OEB, the CCCI and a host of other professional associations and bodies in Cyprus and abroad. Finally, the Institute has a long-term mission which the Council and Management adhere to. It is also true that the President plays an instrumental role in ensuring that the decisions and actions of ICPAC are appropriate in furthering its objectives and in providing direction during times of change. Besides the new board, ICPAC also presented its new logo during the 58th Annual General Meeting at the Nicosia Municipal Theatre. Does this mean a change of image for ICPAC? What’s the thinking behind it? ICPAC was established 58 years ago and, as its role in the economy changes, the way it presents itself also changes. If I remember correctly, the last change in the logo was effected at its fiftieth anniversary. The Council considered that a refreshed logo was important, as the Institute over the past four years expanded its reach and cooperation locally and overseas and the new logo is considered to be more in tune with current international trends. ICPAC is enjoying an excellent image locally and internationally. The refreshed logo aims to capture and project this renewed and expanding presence.
Cyprus, as an island, now has an immense opportunity to capture global business in excess of its relative physical size How would you describe the importance of ICPAC in the development of the accountancy profession in Cyprus? Has the Institute’s role changed over the years? If so, in what way? ICPAC is the only body of accountants which is recognised by the Council of Ministers. As such, it plays an institutional role,
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in other words it is responsible for the monitoring of its members as they abide by a number of laws and regulations. In addition, through a delegation agreement with the CyPAOB, the Institute monitors the audit profession, other than the auditors of Public Interest Entities (PIEs), who are monitored directly by the CyPAOB (based on EU and Cypriot law). Over the years, ICPAC broadened its support to the profession, by developing specialised committees to address policy and technical matters in order to assist members who offer a wide range of services to, or work in, all segments of the economy. It is the first line of support for the professionals and its depth of expertise in many areas allows the profession to play a leading role in introducing new ideas and practices. How would you assess ICPAC’s broader contribution to the economy and society overall? The Institute has close to 5,000 members and is arguably the biggest and most organised professional association on the island. I believe that ICPAC has transcended the realms of the accountancy profession and acts as the de facto point of reference for new ideas about matters pertaining to the economy, taxation, related legislation and other relevant areas. During the economic crisis and ever since, many institutions, including the Troika, Moneyval, credit rating agencies, EU and US delegations and foreign correspondents, have sought ICPAC’s views on a wide spectrum of topics. Members of the Institute accompany government-led delegations abroad and participate in negotiations for the establishment of Treaties such as those for the Avoidance of Double Taxation; Ministries, government departments and the House of Representatives seek ICPAC’s views on a wide spectrum of issues. Recognising this broader role, ICPAC’s mission has
been enhanced to take into account, where relevant, the wider public interest. What are the main challenges facing the accountancy profession today and how can ICPAC help its members deal with them? The profession has always faced challenges and has adapted to the circumstances. Current challenges include increased regulation and enhanced monitoring, the potential impact of technology on traditional work practices and possible new competitors, changes to European and global regulations concerning taxation and the associated comparative advantage for Cyprus, the elimination of boundaries in the global digital economy and the ability to attract new business to Cyprus and to offer novel value-adding services. For accountants who lead businesses in other sectors of the economy, the challenge of sustainable and profitable development and growth is a major one, having regard to the size of the economy and the present tight capital environment. ICPAC is refocusing its various topicspecific committees to be in a position to address as many of these challenges as possible. In addition to the Digital Transformation and Technology Committee, it is establishing a new Economy Committee, to provide a wider perspective to ICPAC’s assessment of the economic environment. Additional professional staff will be employed to facilitate and support its members and it is extending its training alliances in order to offer opportunities for more in-depth training and development of new skills.As always, the Institute will be active and proactive. What do you see as the main opportunities and
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challenges for the accountancy profession in the next 3-5 years? I outlined above some challenges; there are a number of opportunities which, if the profession succeeds in grasping, they may create benefits in the medium and long term. One example is Brexit: ICPAC may be in a position to provide support and offer a roof to students and members of UK Institutes, enhancing the international standing of Cyprus within the profession. As mentioned before, the global digital economy has transcended physical boundaries. Cyprus, as an island, now has an immense opportunity to capture global business in excess of its relative physical size. This is a huge challenge – and opportunity – for all of us, not just the accountancy profession. The efforts of the past few years and in particular those of CIFA, to develop the Funds and related services industry, offer another major opportunity to employ trained professionals. We need to be able to attract investment; however, this cannot be only in terms of funds – it must include the investment of time by those who want to establish operations here. Therefore, Cyprus must invest in the connectivity of the island with all major business centres in the wider region. This is crucial, not just for tourism, but also for all other service industries. How do you think the founder members of ICPAC would view today’s Institute and the accounting profession in Cyprus? I am certain that they would be – and those who are still with us, are – very proud and possibly surprised by the success of the profession in becoming one of the bedrocks of economic development. What started as an effort to create a forum for managing matters pertaining to professional accountants, blossomed to become the most successful profession in Cyprus. We owe it to those first pioneers that we continue to lead in improving our professionals, our enterprises, the economy and our society. ICPAC understands this well and sees this as its purpose.
Demetris Vakis ACCOUNTANCY CYPRUS
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The Institute’s 58th Annual General Meeting was addressed by the President of Accountancy Europe, Florin Toma, who stressed the need for unity, not only among accounting professionals but among all European citizens, in order to make the most of the changes that are taking place across the EU.
Florin Toma
United We Stand ACCOUNTANCY CYPRUS
“Many of you may not know Accountancy Europe so well, so allow me to share with you more about us. We are the umbrella organisation for the European accountancy profession. In addition to ICPAC, we represent 50 other institutes from 35 countries. But, as accountants, we work for people and people are central to Accountancy Europe’s mission and strategy. Because people count; at the end of the day, this is the message that we want to express, whether it’s to our members or to the EU Institutions. This is also why I would like to thank Kyriakos Iordanou and his team for representing ICPAC at European level; it’s always a pleasure to work with you. Whether it is in our Member Assemblies or our Expert Groups, ICPAC is an integral part of our decision making and we appreciate the perspectives that you bring to our work in Brussels.
Cyprus Ever since ICPAC joined Accountancy Europe, you have been such an active contributor and we greatly appreciate your continuous engagement on the European stage, especially as the accountancy profession in Cyprus is very prestigious. You are well respected for what you do, you are acknowledged as being central to how the economy works and participate in strategic debates. It is good to see that Cyprus values accountants for their strategic and important role affecting society as a whole.
Global focus Your profession is also a very globally focused one, with Cyprus being at the forefront in adopting global standards. Just last month, the EU celebrated the 15th anniversary of Cyprus joining the Union. This was part of a major enlargement that meant closer cooperation across cultures and geographies. In the recent EU elections, Cyprus reaffirmed its commitment to the European Union. In this time of scepticism, it is very important that we stand united, whether as the accountancy profession or as Europeans. We believe that the future is brighter when we work together.
Our priorities Following the recent EU elections, many new EU initiatives will affect the profession in all Member States. We are a single market, which helps the profession operate more effectively. This also means that 80% of the rules that professional accountants deal with on a daily basis come
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from the EU. It is thus important that we are an integral part of informing the EU decision-making process at an early stage; rather than amending what is already proposed, we should be part of the agenda setting. Also, in order to remain relevant in influencing legislation, we need to be an innovative force. We cannot just bring our issues to the table but need to come with solutions to bigger public interest causes. Therefore, we have defined three priorities for the new EU mandate:
We believe that the future is brighter when we work together Whether we like it or not, technology will fundamentally change how the profession works 1. Sustainable finance: We are calling on businesses to redefine success to become sustainable, and the EU to leverage financial markets to transition to a sustainable economy. We are highlighting accountants as essential partners to build a sustainable financial system.
2. SMEs: We believe that SMEs will succeed by embracing technology and looking for new business opportunities. The EU must unleash the potential of SMEs. As accountants, we are SMEs and we are also their key advisors in helping the European economy grow.
3. Tax: We are urging policymakers to modernise taxation to respond to today’s social, environmental and digital challenges. The EU’s tax systems must meet the demands of a resource-constrained, online world. Accountants are crucial in this as they make tax systems work for taxpayers, tax administrations and society. The 4th and 5th strategic priorities for my Presidency relate to corporate reporting and audit and assurance.
4. Audit and assurance: We know we will have our hands full
with the review of the 2014 audit reform in the coming EU mandate. This is another area where a united European profession is more important than ever. The future of audit & assurance and especially of SME audit are also high on our agenda.
5. Corporate reporting: In addition to our regular contributions to shaping IFRS, we need to focus on the importance of non-financial reporting. Accountancy Europe has led the Europewide debate on shaping the future of corporate reporting since 2015.
Future orientation The world is changing around us. Whether we like it or not, technology will fundamentally change how the profession works. We cannot stop this. What we can do, is adapt. New technologies will automate much of the day-to-day work that accountants do. Just as when spreadsheet software became available, many thought that the accountancy profession would become obsolete. Not so. Because it was the expertise, judgment and knowledge that accountants brought to the task that made them valuable. It is the same today. We need to become strategic partners to our clients on financial matters, helping clients to make the right decisions for the sustainable growth of their business. Many of the most advanced firms are not only embracing technology but also expanding into new areas as well. IT audits, sustainability health checks and more. These require new skills and we will see the face of the profession changing as well.
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Demetris Syllouris In his address to the 58th Annual General Meeting of ICPAC, the Speaker of the House of Representatives, Demetris Syllouris, noted that the profession has always contributed excellent advice to the House, enabling it to take the right decisions regarding the future of the economy. He thanked the Institute for its active involvement in the drawing up of the country’s national strategy on Blockchain technology. He also mentioned that, given the speed of technological and digital progress, it is essential to invest in understanding and developing these technologies for the benefit of the economy. He also spoke about Big Data and the use of cutting-edge technology in the audit function and urged the adoption of such technology throughout. He also promised that, in September, he will pursue an initiative to discuss, analyse and resolve all the issues of concern to the profession, including the formation of a strategy that will help change the image of Cyprus abroad.
Stronger together I invite you to join me and Accountancy Europe in looking forward to the challenges and the opportunities which lie ahead – let’s make the best of them by working together. We strive to meet the needs of our members and also encourage them to grow. This is only possible by collaborating closely, as we do with ICPAC. I look forward to celebrating many future successes with you. Thank you very much.”
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ACCOUNTING & AUDIT
Preparing Future Accountants for a New Role in a Changing Profession
Professor Petros Lois, Head of the Department of Accounting at the University of Nicosia (UNIC), explains how students are being taught the traditional and new skills that they will require in future leadership roles and how internships help them convert their academic knowledge into vauable industry skills. Tell us about the wider importance of the field of Accounting in Cyprus and your commitment to this. Cyprus is a global accounting services hub and a perfect location to study Accounting, boasting among the world’s highest per-capita rate of Chartered and Certified Accountants. Correspondingly, our commitment to education in Accounting mirrors the importance of the field to the island. Over the years, we have dedicated ourselves to providing top-quality education in the fields of Accounting, Banking and Finance, with a strong focus on instilling in our students the importance of ethics and ethical behaviour in the profession. Today, we consider ourselves one of the
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top universities for Accounting in the region.
As a ship needs an anchor, a business needs an accountant What advantages does an Accounting degree from the University of Nicosia offer? The UNIC Accounting Programme addresses the individual needs and goals of our students. During their studies, they learn to challenge established thinking, embrace new technologies, develop relevant attitudes and abilities, and continually assess the wider possibilities available in a challenging world. One thing I am certain of is that the future of accounting will continue to be affected by technology. Cloud accounting packages, for example, have made accounting software accessible from anywhere. To that end, Accounting education at UNIC is facilitated through our Accounting Lab, utilising specialised software and offering practical training. Our experienced, professional faculty helps prepare students for leadership roles and for advancement on several exciting career tracks, including accounting services, accounting information systems, taxation, internal and external auditing, corporate management ac-
counting and management advisory. Our accounting graduates are also in an excellent position to pursue professional qualifications (ACCA, ACA, CFA, CIA, ADIT, CMA, ICA) through Globaltraining, our affiliated professional training organization, as well as our Joint Masters Programme in Banking, Accounting and Finance with the Hellenic Open University, and doctoral studies in related fields. Does the University collaborate with any organisations that provide students with internship opportunities? We believe that it is essential for our accounting students to have internship opportunities. This is why we introduced a placement opportunity as a course on our accounting pathway this year, with great success. More generally, students may be employed for a set period of time by local accounting and audit firms with which the University maintains close links. Internships are where higher education meets employment, allowing students to gain experience working in an organisation while studying. This is also enabled through our participation in the ERASMUS+ mobility programme. Students benefit greatly from such internship programmes, having made industry contacts, converting their academic knowledge into industry skills, while gaining an unforgettable life experience in the process.
ACCOUNTING & AUDIT
What are the University’s graduates’ career prospects and the opportunities for further professional qualifications? Our graduates are well-placed to pursue a professional qualification leading to the professional title of Chartered and/or Certified Accountant. I should note here that our Accounting Programme has been assessed by the two major UK professional accountancy bodies (ACCA and ICAEW), and enables graduates to apply for exemptions from the courses offered by these two bodies. The University’s Accounting graduates have very good prospects for their professional careers. They find work within a year of graduating in the accounting profession, governmental and semi-governmental sector, banking and financial
services sector, as well as in the private business sector. How has the accountant’s role changed over the years? In recent decades, the accountancy profession has evolved considerably. Economic and political developments, combined with technological advancements, such as the advent of blockchain, have helped reshape the accountant’s role. Nowadays, accountants take part in the decisionmaking process as an important asset to the business. As a ship needs an anchor, a business needs an accountant. Accounting is completely dependent on technology these days. Much of the manual work previously undertaken by accountants is now fully automated on Cloud-based software. As such, accountants have shifted from being in-
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formation processors to data analysts. In this new landscape, technologies such as Artificial Intelligence and Blockchain have been hailed by ACCA as transformative to the accountancy profession. And, according to ICAEW, using blockchain in the profession provides clarity over ownership of assets and the existence of obligations, dramatically improving efficiency. In today’s world, an accountant analyzes and interprets important information for decision-making, creating added value by utilizing available resources, preparing and communicating the financial results to third parties, while being responsible for the satisfaction of stakeholders’ interests (government, banks, suppliers, clients, etc.), as well as for managing risks and protecting the assets of the company.
Accountants have shifted from being information processors to data analysts Petros Lois
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ACCOUNTING & AUDIT
GOVERNMENTS AND ACCRUAL REPORTING By Michalis Lardis, Senior Manager, KPMG Limited
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ccrual reporting refers to the recording of the economic substance of transactions when they occur, rather than when cash settlement occurs. Many governments have already adopted accrual reporting and many more are on the road to implementation. Taking into account the data collected for 150 governments, we list below the analysis of their reporting status: • 37 governments (25%) reported on accrual in their last set of published financial statements • 68 governments (45%) are transitioning to accrual or already have some element of accrual in their financial statements • 45 governments (30%) still report on a cash basis. Accrual reporting frameworks are developed in various ways, many making use of international standards. Of the 37 governments that currently report on accrual, 19 (51%) are using International Public Sector Accounting Standards (IPSAS), in one of these three ways: • 5 governments have adopted IPSAS directly; implementing without altering any of their requirements • 5 governments apply IPSAS indirectly; implementing through a national endorsement process, adjusting for any specific jurisdictional features • 9 governments use IPSAS to develop their own national standards; they use IPSAS as a guidance source. What is IPSAS? The International Public Sector Accounting Standards Board (IPSASB), an independent standard-setting board,
ACCOUNTANCY CYPRUS
develops IPSAS, a suite of development. Adopting cash and accrual-based accrual-based accounting ADOPTING standards used by govACCRUAL-BASED will improve financial ernments and other ACCOUNTING WILL management and give a public sector entities complete, accuIMPROVE FINANCIAL more around the world rate view of assets and MANAGEMENT AND GIVE liabilities. to prepare generalA MORE COMPLETE, purpose financial ACCURATE VIEW statements. Improved accuracy in OF ASSETS AND Financial and soverreflecting revenues and LIABILITIES eign debt crises have expenses brought to light, as never Accrual-based standards probefore, the need for better fivide a complete, reliable picture nancial reporting by governments worldof a government’s financial and economwide and the need for improvements ic position and performance. in the management of public sector resources. The IPSASB has established Regional status IPSAS to improve the quality, consistThe regions expected to see the greatest ency and transparency of public sector increases in accrual adoption by 2023 financial reporting globally. include: • Latin American and the Caribbean: 21 countries (5 currently) Benefits of IPSAS • Africa: 19 countries (2 currently) • Asia: 21 countries (6 currently) Improved accountability and decision• Europe: accrual adoption predictions making are made more complicated by uncerAdopting accrual-based IPSAS: • improves the quality of general-purpose tainties surrounding the development of European Public Sector Accounting reporting by public sector entities Standards (EPSAS). It is expected that • can lead to better informed assessments the number of governments on accrual of governments’ resource allocation deciwill double to 24 total over the next five sions years. • helps increase transparency and acOf the 98 governments projected to be countability. reporting on accrual by 2023, 72 (73%) will be making use of IPSAS: Improved management of assets and • 31 governments will adopt IPSAS diliabilities rectly Governments reporting on a cash basis • 14 indirectly do not account for significant liabilities, • 27 will use IPSAS in developing their such as pensions, and property or plant national standards. and equipment, such as infrastructure
ACCOUNTING & AUDIT
Government of Cyprus The Government has been maintaining accounts and preparing financial statements using the cash basis of accounting, with certain modifications to financial liabilities in the form of bonds and guarantees. The Treasury of the Republic is responsible for the execution of all accounting activities of the central Government, including the preparation of its annual financial statements. Ιn 2016, the Treasury prepared and adopted an action plan and roadmap to transition from modified cash to accrual basis accounting. Based on the initial plans, if the necessary measures are taken, it is expected that the Government will prepare its first Opening Balance Sheet on 1 January 2020 and its first set of consolidated financial statements that will be in compliance with IPSAS for the
year ending 31 December 2021. The Treasury contracted KPMG Limited in Cyprus, on 16 November 2017, to assist with the provision of training services to the Government in the understanding of IPSAS and the framework for public sector accounting. The IPSAS training sessions started in March 2018 and were completed in April 2019. In Cyprus, the Government is at the first stages of its effort to convert from cash accounting to the accrual basis of accounting for the preparation of its financial statements. This conversion will most probably take place in line with the relevant IPSAS provisions, as the process within the European Union for the issuance of the EPSAS is expected to take time. The aim is to complete the conversion at the central Government’s level within the next two years, while
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the wider government and other public sector entities are expected to follow. Beyond the above-mentioned benefits, the future implementation of IPSAS by both the central and wider Government – and hence uniform accounting policies – will allow the preparation of consolidated financial statements, something that could also be useful in future capital raising in the public sector.
IN CYPRUS, THE GOVERNMENT IS AT THE FIRST STAGES OF ITS EFFORT TO CONVERT FROM CASH ACCOUNTING TO THE ACCRUAL BASIS OF ACCOUNTING FOR THE PREPARATION OF ITS FINANCIAL STATEMENTS
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ACCOUNTING & AUDIT
Is there a need for a simplified financial reporting framework in Cyprus? By Gabriel Onisiforou, Board Member, ICPAC and Ernst & Young Cyprus Ltd
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nternational Financial Reporting Standards (IFRS) have been adopted for all companies in Cyprus since 1981. However, the fact that small and medium-sized entities (SMEs) need to comply with the requirements of full IFRS is burdensome and costly. Considerations need to be made as to whether we should develop a local accounting framework (GAAP) to reduce the financial reporting burden for the preparers of the financial statements and their auditors but also for the users of these financial statements such as banks, tax authorities and regulators as well as suppliers, customers, employees, etc. The European Commission (EC) has adopted the European Accounting Directive (2013/34/EU) which provides the legal framework for single company and consolidated accounts for undertakings based in the EU, which was transposed into the national legislation of each Member State. The Directive recognizes that 90% of companies are SMEs. It also recognises that current accounting rules impose a disproportionate administrative burden on smaller entities and highlights the need for a simplified financial reporting regime. To this effect, the EC requires only EU listed companies in EU regulated markets to prepare their consolidated financial statements in accordance with full IFRS. However, a Member State has the option to require the preparation of financial statements to be in conformity with full IFRS for all companies. Cyprus has chosen this route and is the only country in the EU with a single-tier financial reporting framework; its only GAAP is full IFRS. All other European Member States have either developed
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& Eleni Ashioti, Technical and Professional Matters, ICPAC
a local accounting framework based on the options available in the Directive and/or they have used IFRS for SMEs, developed by the IASB, as a basis with modifications to make it compatible to the Directive (e.g. the UK, Ireland and Malta). The following GAAP regime applies in the UK and Ireland: Under Financial Reporting Standard (FRS) FRS 100, the requirement to use full (EU-adopted) IFRS only applies to the consolidated financial statements of EU entities listed on a regulated market in the EU, or if required by other legislation. FRS 102 is the principal accounting standard in the UK financial reporting regime and is based on the IFRS for SMEs standard. It sets out the financial reporting requirements for entities that are not applying full IFRS, FRS 101 (Reduced Disclosure Framework: Disclosure exemptions from EU-adopted IFRS for qualifying entities) or FRS 105 (The Financial Reporting Standard applicable to the Micro-entities Regime).
It is necessary to moVe towards a simplified financial reporting regime IFRS for SMES As mentioned above, full IFRS applies to consolidated/listed and publicly accountable entities and so the IASB issued the IFRS for SMEs standard in 2009 as an alternative to full IFRS. IFRS for SMEs
is a self-contained accounting and reporting standard but it draws from full IFRS. Compared to full IFRS, it is approximately 250 pages vs approximately 3,000 for full IFRS and requires approximately 10% of full IFRS disclosures. It focuses on the information needs of lenders, creditors and other users of SME financial statements who are interested primarily in information about cash flows, liquidity and solvency. In its preface, the IASB notes that it developed and issued this separate Standard with the intention of applying it to entities that are referred to by a variety of terms, including SMEs, private entities and nonpublicly accountable entities. An entity has public accountability if its debt or equity instruments are traded in a public market or is in the process of being listed (in regulated or unregulated/over-the-counter markets), or it holds assets in a fiduciary capacity for a broad group of outsiders (e.g. banks and credit unions, insurance companies, securities brokers/dealers, mutual funds, investment banks). The IASB also notes that IFRS for SMEs is based on full IFRS with modifications to reflect the needs of users of SMEs’ financial statements and cost-benefit considerations. New IFRS (such as IFRS 9 Financial Instruments, IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases) are currently not reflected in the IFRS for SMEs Standard. Amendments to this standard are normally proposed every three years in an Exposure Draft. It is currently unknown what the outcome will be of the next comprehensive review that started in early 2019. The IASB notes that each new
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Developing our own accounting standard, based on the direction of the Directive, would be an ideal solution
and revised full IFRS Standard should be considered individually on a case-by-case basis to decide if and how its requirements should be incorporated into the IFRS for SMEs Standard.
Non-Endorsement of IFRS for SMES at EU level When the EC considered the adoption of IFRS for SMEs, it concluded that in six areas it was not compatible with EU regulation, mainly because it was still considered complex for European SMEs. This is in accordance with a study ‘Compatibility Analysis IFRS for SMEs and the Council Directives’, conducted in 2011 by the European Financial Reporting Advisory Group (EFRAG), being the advisor to the EC on accounting matters. Nevertheless, the EC notes that Member States can permit or require IFRS for SMEs as their accounting standard for all or some of their unlisted companies, provided that the Directive is fully implemented, and the standard is modified to comply with any accounting requirement of the Directive that departs from IFRS for SMEs.
The Way Forward? The Directive requires Member States to consider the specific conditions and needs of their own markets. Noting that micro and small undertakings have limited resources with which to comply with regulatory requirements, we believe it is necessary to move towards a simplified financial reporting regime. As such, it is our belief that we should
consider the possibility and the practical way to eliminate the obligation of all companies, irrespective of their ownership structures and size, to prepare their financial statements in full IFRS compliance. Considering also the scope of full IFRS, these are not meant to be used by entities that do not have public accountability. Developing our own accounting standard, based on the direction of the Directive, would be an ideal solution as it is based on a ‘‘think small first’’ principle – it starts with the accounting requirements of small undertakings and then adds additional accounting and reporting requirements as undertakings pass the thresholds for medium and large undertakings. However, there should be capacity and proper resources to prepare such a framework and to continually monitor it in the future. Modifying IFRS for SMEs to comply with the Directive could be a more suitable solution for moving away from this complexity, while maintaining a high-quality level of financial statements. Providing a comprehensive set of financial statements is especially important in the case of Cyprus. The country is an international business and financial centre of credible standing and is sensitive to foreign investments, anti-money laundering procedures and transparency. Having an internationally recognised standard, while avoiding disproportionate administrative burdens on small undertak-
ings, seems to meet such concerns. Also, the banks and the tax authorities use the financial statements of an entity for their own purposes, and moving towards a standard which has the same underlying principles as those currently used could, therefore, be more easily comprehended and followed. Lastly, IFRS for SMEs is drawn from full IFRS, and is therefore more easily adopted and understood in Cyprus, making the learning curve for the preparers, auditors and the accounting profession in general much easier. Do you agree with the need to move away from full IFRS for certain companies in Cyprus and introduce a “non-full IFRS GAAP”? How do you envisage this change? We welcome members’ views at info@icpac.org.cy. The views expressed in this article are personal and aim at promoting dialogue among interested parties.
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economy
A New Business Model for Cyprus and Beyond By Nicos G. Sykas, Strategy, Communications and Innovation Consultant
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ations and corporations face multiple, unprecedented challenges in a changing landscape characterized by intensifying competition, fluidity, uncertainty, complexity, interdependencies, volatility, asymmetries and catastrophic risks. You cannot tackle dynamic challenges in 2020 and 2030 with static tools and techniques from 1970 and 1980. Up to 98% of innovations/startups fail. New strategic tools and polyparametric approaches to innovation are needed. The new Innovation Model that I have developed constitutes a step-by-step practical Guide that will helps both the public sector and businesses generate more and better innovation. It is an end-to-end innovation process blueprint, which includes, amongst others, the following creative, strategic, commercialization and sustainability evaluation criteria and success factors: 1. Good product; quality. Most startups fail because they have the wrong product. 2. Value-creating insight. Does it provide a real solution to a real problem, solve a painful problem, meet a need or create customer value? Is there a gap in the market? 3. Supremely consumer-centric: Solve the pain points or facilitate moments of joy in people’s lives. Treat consumers as coproducers of value, encouraging a two-way dialogue. Enhance human experience. 4. Creative excellence: Τhe idea must be original, unique, authentic, singular and impactful. 5. The concept must be distinctive, simple and instantly understandable, contextually relevant and engaging/likeable. 6. Ease of implementation: The concept must be realizable.
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7. Elasticity, adaptability, agility, practicality, efficiency. 8. Customer metrics: The closer you can define your target market and customer profiles, the better you can integrate this data into your sales forecast. 9. Test and validate the ideas with customers. 10. Iterate your way to product/market fit, constantly developing your product and business model to ensure the widest and deepest possible growth in terms of users. 11. Timing: Customer readiness. 12. Differentiated branding and positioning, product/market fit and successful advertising during both launch and growth phases help startups and spinoffs bridge the ‘Valley of Death’. 13. Strategic planning and risk management. Eliminate biases and prediction errors across the different stages of the innovation process in order to improve judgment and decision making. 14. Validate the business plan – realistic and well-documented assumptions; a complete value chain model. 15. Does it provide a sustainable competitive advantage? 16. Value proposition vs competition; danger of being outcompeted. 17. Innovation is inherently uncertain. In a startup we need to increase exploration, randomness and variability. 18. Generate antifragile innovations (resilient, future-proof, get better with time). The design – the structure – of an innovation should be such that it exploits and benefits from volatility, variability, randomness, uncertainty and time by max-
imizing exposure and benefit from positive (favourable) asymmetries and minimizing exposure and harm from negative (unfavourable) asymmetries – more upside than downside from volatility and randomness. 19. Black Swans: The field of innovation is concerned with finding ‘Black Swans’, rare events that capture significant returns. A ‘Black Swan’ is a rare, unpredictable event that has a major effect (large magnitude and consequence) – it carries an extreme impact (positive asymmetries or negative asymmetries). The ‘Black Swan’ and ‘Antifragility’
theories were developed by Professor Nassim Nicholas Taleb, the world’s leading authority on Risk Management. 20. Increase your innovation success rate by ensuring that your business model links market needs with emerging and exponential technologies. This is where positive ‘Black Swans’ can usually be spotted – Business Models that create all three forms of value: Cost Value, Experience Value and Platform Value (Uber, Airbnb, etc.). 21. Strong team. Grow the human re-
economy
sources and decision-making capacity of your firm: Ensure that your talent and governance structures are continually evolving to meet growth requirements. 22. Securing finance – make sure you have the financial resources to grow, either using organic cash flow or external financing; Business Angels, Venture Capital, Crowdfunding, etc. 23. Startups/Spinoffs: Avoid capitalheavy investments (like property); invest in market share and market growth. 24. Business-friendly ecosystem: culture of creativity and innovation. 25. Innovative Governance. Regulatory framework; the role of standardization and standards in promoting innovation. 26. Entrepreneurial Infrastructure – Incubators, Accelerators, Innovation Hubs, Co-working Spaces. 27. Expected results and impacts; direct and indirect, short and long term impact; have potential for longevity. 28. The focus should be on how the Business Model can synergistically produce economic, social and environmental value. 29. Added value – local, regional, European impact. 30. Scalability with a global outlook. 31. Transferability into other policy areas, disciplines and purposes; the use of Metaphors and Analogies as creative mechanisms for transforming and transferring innovative ideas from one context and situation to another. Analogies highlight non-obvious similarities between two things that appear to be dissimilar, and individuals solve novel problems by making analogous connections to other problems they have faced in the past and by adopting and adapting their existing solutions to fit the new problem.
32. Five core values of innovation: Questioning, risk taking, openness, patience and trust. These values are the foundation of innovation. As group, they determine the capacity for change of an individual, organization or nation. The New Innovation Paradigm: a) Combines ideas, concepts, elements, symbols, features or capabilities from the four basic types of innovation: product, process, organizational and marketing. This interactive process creates novel connections, multiple perspectives and diverse combinatorial possibilities. By overseeing the nature of the interconnections amongst the four innovation types, we can zoom into the interface, focus on different aspects, iterate through all possibilities, discern alternatives and increase the probability for breakthrough innovation. b) Fosters innovation at the interface between ‘big data’ analytics and intuition. Leverages artificial intelligence to enhance human creativity; data driven insights. Identifying and acting on insights faster. c) Accelerates Speed to Market. d) Promotes a co-creation approach, bringing together all key stakeholders (central government, local authorities, academia, business, suppliers, customers and civil society) disciplines and units (Engineering, Operations Processes, Information and Communication Technology, Organizational Psychology, Creative Industries, Marketing, Branding). Such a multidisciplinary approach promotes collaboration and interaction and enhances creativity and innovation (cross-fertilization of ideas and disruption of ‘silothinking’). The intersection of different fields, domains, disciplines and networks
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creates new opportunities for growth and innovation. e) Constitutes a cross-cutting tool that can be applied in practically every sector/discipline and at all levels and scales: public sector innovation, positive reform, social innovation, FinTech and RegTech innovation, cost innovation, education, smart cities, startups/spinoffs, small and medium-sized businesses, multinational corporations, risk management, cyclical economy, nation branding, economic diplomacy, political campaigns etc. The dynamic Integrated Innovation System briefly described above can: 1. Align all key stakeholders for faster innovation. 2. Bridge the gap between innovation strategy and execution. 3. Catalyze implementation of a) Cyprus’ National Strategic Framework for Research and Innovation 2019–2023 and b) Horizon Europe 2021–2027, the new EU programme for research and innovation (facilitating cross-disciplinary, cross-sector and cross-actor innovation to achieve multiple, bottom-up solutions). This versatile innovation tool can be: a) Characterized as the Swiss Army Knife for creating a New Business Model for Cyprus and sharpening Europe’s competitive edge and b) Applied with the help of an analytical Innovation Toolkit that I have developed.
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economy
Taking a More Proactive Approach to the Economy State and business stakeholders need to consolidate their efforts to secure, reinforce and fully utilise all the benefits that Cyprus offers as a financial and professional business centre, says Michael Antoniades, Chairman, KPMG in Cyprus.
How would you describe the present state of the Cyprus Economy? Now on a path of solid growth, as acknowledged by the major credit rating agencies in recent years, the economy needs to maintain this positive growth. The major challenges include the reduction of NPEs in the banking sector and the need to speed up structural reforms in the public sector in order to simplify and facilitate foreign investment. The successful introduction of the National Health Scheme will also play an important role in the development of the economy in 2019. What has actually changed in the real economy the past 5 years? The real economy has experienced – but managed to adapt swiftly to – constant disruptions and reforms to the local and international economic environment. These were mainly caused by enhanced international regulation on tax, exchange of information and AML. Organisations acknowledge nowadays that emerging compliance requirements demand that increased control procedures and systems be utilised in order to monitor and improve the quality of services or products offered. Foreign investment in Cyprus continues to be a major source of national income. On the one hand, companies without substance are not an option, and on the other hand, the strategic location of Cyprus offers a unique opportunity to multinational corporations for the establishment of a regional office. The latter enables coordination of operations between the Far
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East in the morning to the West in the afternoon and, in addition, offers passporting options for operations within the European Union. One of the major catalysts that cannot be ignored is technology, which has disrupted the real economy and influenced the way services are offered to clients. I believe that technology lies at the forefront of future developments and plays a key role in organisations’ efforts to enhance their service offering. In terms of professional services, I strongly believe that the introduction of technology will definitely increase the efficiency and quality of service offered to businesses and to society in general.
Cyprus offers a unique opportunity to multinational corporations for the establishment of a regional office
In addition, the real economy is experiencing an evolution of service offerings in all major industries, due to Artificial Intelligence, Data & Analytics, Cybersecurity and Fintech. I believe that these capabilities will enhance
public satisfaction levels and, consequently, the customer experience. Do you believe that Cypriot businesses have been strengthened and improved by the influence of the many international companies that have set up in Cyprus? I believe so, yes, both directly and indirectly. We have seen many international companies choosing Cyprus in order to set up a presence for a number of reasons. These companies not only bring their expertise, their collaboration networks and their best practices with them, but they also seek cooperation with Cypriot businesses. These synergies appear to be successful, having brought about a renewed boost in confidence, an improved economic climate, and good prospects in the real estate, investment fund, shipping, construction, tourism and energy sectors. There is a lot of foreign investment in which the local business world has been involved, including marinas (Paralimni Marina), the banking sector (Bank of Cyprus and Hellenic Bank have foreign shareholders and American funds), the pharmaceutical sector (such as the investment made in Remedica), the energy sector (hydrocarbons in our Exclusive Economic Zone), shopping malls and the tourism sector (several hotels are being renovated and new ones are being built by foreign investors). Do you have any specific proposals that could make Cyprus an even more attractive location for funds and their management?
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A ‘hard’ Brexit will not be good news for the UK or for the other EU member states
Michael Antoniades
First, state and business stakeholders need to consolidate their efforts to secure, reinforce and fully utilise all the benefits that Cyprus offers as a financial and professional business centre. The country must be prepared to serve the continuously changing needs of investors and entrepreneurs by promoting all its competitive advantages, such as the stable and attractive tax system, its geographical location, its large double taxation agreement network, while continuously increasing the large number of vessels on the Cypriot register and the associated services offered to this particular industry. In terms of service offering, particularly relating to Funds, Cyprus is positioning itself as an attractive alternative funds domicile: the local AIF framework provides a flexible vehicle for private equity, infrastructure and real estate fund managers, offering clear op-
portunities for structuring through Cyprus. It is important to note that professional service firms such as ours offer competitive Fund Management and Fund Administration advisory services, while at the same time guiding clients through the challenges and opportunities posed by the evolving external environment and assisting them in identifying optimal and pragmatic solutions for the mutual benefit of the fund manager and the investors. In addition, the local highly skilled workforce is greatly experienced in the issues, trends and risks related to funds and ensures effective compliance with the increasingly varied and complex regulatory requirements. Cyprus has recently implemented a revised, more comprehensive framework for funds. This was the result of a detailed study to ensure that our funds framework meets the latest market requirements in a robust and
agile manner. In addition to constantly monitoring international developments in this area and modernising our funds framework accordingly, at this stage we should be focusing on informing the international funds management industry about the benefits of Cyprus as a funds jurisdiction. Do you think Cyprus will be negatively or positively affected by Brexit? We are still at the stage where no-one knows what kind of Brexit it is going to be. A ‘hard’ Brexit will not be good news for the UK or for the other EU member states. A ‘hard’ Brexit will mean harsh conditions in the labour market, regulated imports and exports of products to and from the EU and, of course, will affect the issue of free movement, which currently enables European companies to operate in the
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economy
UK and UK companies to operate within the EU. However, even though a ‘hard’ Brexit will eventually impede cooperation, it may, under certain conditions, entail opportunities for Cyprus. We have recently seen UK companies, especially those operating in the financial sector, express interest in utilising Cyprus as basis from which to continue their work within the EU. Other countries such as Ireland, Luxembourg and Germany have already taken advantage of Brexit and gained greater benefits than Cyprus. I would say that the private sector is doing quite a lot and, with careful planning, Cyprus can gain a great deal from Brexit. We can do much more, such as regularly informing British entrepreneurs, fund managers and insurance companies about the benefits that Cyprus offers as a financial centre within the EU. We would like to see more action by the Government, such
The country must be prepared to serve the continuously changing needs of investors and entrepreneurs by promoting all its competitive advantages
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as information campaigns on the advantages of Cyprus and even through presentations in the UK itself. Do you believe that more reforms are needed for Cyprus to continue its positive growth? In what areas? The Government and the private sector both need to abandon their traditional approaches and to constantly research the markets and embrace open-mindedness, in order to enhance the competitive advantages that Cyprus has as a business and financial centre but also as a place to be living in. They need to establish synergies to maintain the current positive momentum of the economy and work on resolving major issues such as unemployment and Non-Performing Loans. Looking at the measures adopted by other competitive countries, it is clear that Cyprus needs to offer more in the way of fiscal incentives and naturalisation schemes. These two have already contributed to an increase in demand for property, which is evidenced in the number of sales contracts. Furthermore, new regimes for film, audiovisual and Research & Development are in the pipeline. Alongside the efforts to combat bureaucracy and implement all necessary reforms, the majority of industries must continue doing their best to adhere to enhanced regulation, especially in relation to compliance and exchange of information. The current effort aimed at restructuring the judicial system is very important as entrepreneurs and investors alike wish to have a judicial system that is flexible, fast and efficient. Particular emphasis
should also be given to attracting new forms of tourism (nautical, medical, sport) and extending the tourist season to be year-round. Very promising steps have already been taken, such as the construction of marinas and the eventual operation of the multi-functional integrated casino resort. How successful has the Cyprus Investment Programme (Citizenship by Investment) been? Do you think that it should be extended indefinitely or is there a risk of it leading to a new real estate bubble? Offering incentives through schemes such as the Cyprus Investment Programme boosts foreign investment and revives the economy, especially in times of recession. It is important to note that this is a perfectly legitimate tool, adopted and exploited on a global level by numerous jurisdictions. My assessment is that the Government needs to study the economic impact of the particular scheme carefully and on a regular basis in order to have a clear image of its effects and benefits. Certainly, any bad practices should be immediately identified and tackled vigorously, and corrective measures undertaken. It is imperative that such incentives are evaluated on a regular basis and any remedial action required is implemented in a timely manner in order to avoid potentially negative effects on the real economy. It is important that long-term planning is firmly in place and that decisionmaking is flexible and agile in order for the economy to remain trusted and competitive and to continue to register steady growth.
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Office Guide/ Office Tech
Cyfield group of companies
Capital Gate Limassol avenue Capital Gate is Cyfield’s new state-ofthe-art business centre that is under construction at the entrance of Nicosia. The building is located on Limassol avenue and is adjacent to Athalassa Park to which a panoramic view is afforded from all the floors. It is close to the Mall of Cyprus, the Nicosia General Hospital and the headquarters of most major banks. The building’s strategic location on the entrance to the capital provides easy access to and from the airport, other cities as well as the city centre. The unique design of the building with its terraces
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and roof garden which can also be used for corporate entertaining events offers an exceptional environment to the occupants whilst the 4 basements afford easy parking. Capital Gate is equipped with the latest technology to facilitate the current and the future business requirements. Its two exterior glass elevators provide a panoramic view while traveling through the building. Capital Gate will provide a state-of-the-art working environment with the latest technology systems to facilitate the current and the future office needs. Capital Gate is a modern 7-level office complex with more than 3,000m2 of office space over six floors that include terraces and roof garden. The impressive
lobby leads to the terrace and the contemporary open-plan working areas with their impressive view of the Athalassa Park.
CH-97 Strovolou Avenue On the junction of Strovolos and Athalassis Avenue in Nicosia, Cyfield is constructing another business centre; a modern office complex suitable for professionals who want to accommodate their business in a specially designed space with all modern comforts. On the ground floor there is a large showroom / office with a mezzanine floor. The rest of the building, with a separate entrance, reception and lift, consists of 5 floors with comfortable office spaces, which can be divided according to the space needed by each business. For smaller businesses the first two floors can be divided into two parts. All floors have kitchens and rest rooms as well as a veranda, the working areas can be divided into offices,
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impressive view of the City. The purchase of a business property is an important economic investment that gives prestige and status to a business. Cyfield provides real added value by offering excellent location, quality construction, reliability in delivery and secure title.
TECHNICAL SPECIFICATIONS for all the business buildings:
conference rooms and reception areas. The building is equipped with raised floors suitable for structured cabling and drop ceilings with climate control units. The building is nearing completion.
Metropolitan Spyrou Kyprianou Avenue Metropolitan is Cyfield’s new high-rise state-of-the-art business centre that is under construction at the heart of Nicosia’s commercial district. The high-rise building is located on Spyrou Kyprianou avenue next to the under construction Eurobanks headquarters, in one of the capital’s busiest avenues. It’s strategic location in the centre of Nicosia provides easy access to other business centres, banks and shops. Metro-
politan is a 17-floor high-rise building with a panoramic view from all the floors. It has open-plan office spaces on 13 floors; with a luxurious reception area for staff and customers, a mezzanine, a mechanical floor, a storage floor and 3 spacious parking basements. The building’s roof garden can be used for corporate entertaining events offering an exceptional environment to the occupants. Metropolitan is equipped with the latest technology to facilitate current and future business requirements with ample flexibility to re-arrange the workspaces as required. Metropolitan is a modern 17-level office complex with more than 3.500m2 office space and 306m2 roof garden. The impressive lobby leads to the contemporary open-plan working areas with their
– Thermal and sound insultation – Class A’ Energy performance – Concealed VRV air conditioning – Ventilation systems – Lighting system – Security System – Fire protection and fire extinguishing systems – Double-glazing façade – Structured cabling – Fibre-optic cables – Smart building automations – High quality raised floor – Flexible distribution of services to the working stations – CCTV Security cameras – Access Control System and others
CYFIELD TOWER
, 2015 Nicosia 132 Limassol Avenue fieldgroup.com 8000 5757, sales@cy www.cyfieldgroup.com
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Technology for the Accounting Profession
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ACCOUNTANCY CYPRUS
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Technology for the Accounting Profession
SALTO KS - Keys as a Service
The smartest cloud-based locking solution that fits any type of door Flexible - Multiplatform cloud based system Convenience - 4 different ways of opening From anywhere - Remote access management Compatibility - Seamless API integrations Added value - Gain 24/7 activity insight
GLOSEC SECURITY SOLUTIONS Web: www.glosecdragon.com Tel.: 22517402
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Tel: 22517402
www.glosecdragon.com
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www.saltoks.com ACCOUNTANCY CYPRUS
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Technology for the Accounting Profession
Privacy++Collaboration Collaboration Privacy Simple. Simple.
YEARSOF OFUNSTOPPABLE UNSTOPPABLE INNOVATION YEARS INNOVATION MUSKITA is an innovator in the design and manufacture MUSKITA is an innovator in the design and manufacture of aluminium profiles and architectural systems providing ofsolutions aluminium profiles architectural systems providing for all design and concepts from standard to customized solutions for all design concepts from standard to customized projects. As one of the most technologically advanced projects. Asof one of worldwide the most MUSKITA’s technologically advanced industries its kind systems exceed industries of its kind worldwide MUSKITA’s systems the strictest standards of design, safety and exceed energy the strictest With standards of integrated design, safety and facilities energy efficiency. vertically production efficiency. facilities in CyprusWith and vertically customer integrated satisfactionproduction at core, MUSKITA in ensures Cyprus maximal and customer satisfaction at core, MUSKITA flexibility, immediate deliveries, excellent ensures flexibility, excellent service maximal and quality from rawimmediate materials todeliveries, finished products. service and quality from raw materials to finished products.
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22,000 tonnes 22,000 annualtonnes extrusion annual extrusion production capacity production capacity
Exports to Exports to more than more than 25 countries 25 countries
Over 1000 patents and Over 1000 industrial designs patents and industrial designs
One of the only fullyof integrated One the only aluminium fully integrated exrtuders aluminium worldwide exrtuders worldwide
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www.muskita.com.cy www.muskita.com.cy
3900 3900 OFFICE OFFICE
Experience outstanding sound reduction and design versatility with the ultimate solution for interior partitions Experience outstanding sound reduction and construction design versatility with the ultimate solution for interior partitions that combines modern minimalism with robust and effortless installation. that combines modern minimalism with robust construction and effortless installation. MUSKITA guaranteeing quality for over half a century. MUSKITA guaranteeing quality for over half a century.
CYPRUS A’ Industrial Estate Limassol, Tel.: +357 25 844444, E-mail:ACCOUNTANCY info@muskita.com.cy A’ Industrial Estate Limassol, Tel.: +357 25 844444, E-mail: info@muskita.com.cy
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Office Guide/ Office Tech
officestar
T
he way people and businesses get things done is changing. This is why we also have solutions to keep your teams productive, connected and inspired, wherever and whenever. Whether you know exactly what you need, or you’re looking for tools and inspiration to hit your goals, OfficeStar is here for you as your Office Partner.
OUR TASK IS TO PROVIDE SOLUTIONS WHILE WE INSPIRE WHAT COULD BE AND HELP MAKE IT A REALITY Products It’s not about just ordering supplies anymore but discovering better ways to get the job done. The mentality we carry is to have the right products at the right
time. This saves your business both, time and money while boosting productivity.
us make the most of your spaces and your teams.
We’ll help you find the solutions that are right for you in the categories that matter most: business essentials, technology, facilities, furniture, print and promotional products. Discover new products, thoughtfully designed for the way you work today on our website www.officestar.com.cy.
It takes more than the right products to be successful. There are many aspects in which we can help and to name a few, print and marketing services, furniture and design services, installations, managed print services and secure document destruction.
Expertise
• Quick & Easy Ordering through our well-trained call centre and dedicated account managers • 24/7 Online at www.officestar.com.cy • Constant Product Offers • Free Delivery within 24 hours of Order Approval
The world is changing fast. We’re proud to be part of your team and lend our years of experience which are based on solid foundations in office supplies and equipment, technology, facilities management, space planning and more. Let
Services
How we do it
er. It writes e everyday overachiev th for n pe ate im ult e en proven to Pilot G2 is th rubber grip, and has be le ab ort mf co a s ha e G2 your smoothly, er branded pens. Mak oth of ge era av e th vs r l Ink Pen write longe - Longest Writing Ge ing rit W th oo Sm r pe Go-2 pen! Su Refillable Grip - Retractable & Comfortable Rubber
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y responsible ve and environmentall ati ov inn an is t ain IdeaP rface into a highforms virtually any su ns tra at th int pa ard whitebo ibly cost effective vas. IdeaPaint is incred can se era y dr ce, an perform the other leading s, and outperforms all ard bo ite wh al ion dit . versus tra it is also easy to apply dry erase options while than whiteboards. ce, value and aesthetics an rm rfo pe r tte be s Offer compared to a more writing surface, + 4X to up s ide ov Pr Get More: board. standard 3’ x 4’ white iteboards and ts longer than both wh More durable and las ts. produc competitive dry erase
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ORDER ONLINE: .cy www.officestar.com ORDER BY PHONE: 77772344
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Office Guide/ Office Tech
Silicon blue
Economic printing solutions, tailored to your business needs! With a wide range of business printers and all-in-one, available from our company SiliconBlue, the official representative of Brother in Cyprus and Greece, we can supply you with the appropriate solution to cover your printing needs. Also, we can ensure low cost per print (up to 45% lower than the normal price) using the high capacity consumables that you can benefit through special contract. We can offer you the right solutions by proposing quality machines that have gained international awards. Brother business printers are built to perform for longer and meet the demands of high output work environ-
ments, offering high print and scan speeds. In addition, with the upgraded security, smart wireless connectivity and expandable paper trays, even the most demanding needs can be satisfied. The basic categories of Brother professional printers are the following:
Mono laser printers and all-in-one Intuitive colour touchscreen up to 12.3 cm, Gigabit Ethernet fast network, print speeds up to 50 ppm, impressive printing volume up to 10.000 pages monthly, paper input options with a basic tray of 520 pages and optional trays of 250 pages , 520 pages and 4 x 520 pages, advanced scanning with 80 sheet ADF reaching up to 50 ppm 2 sided scanning
(all-in-one), large memory capacity up to 1GB for simultaneous handling of many documents from various users and toner that can print up to 20.000 pages.
Colour laser printers and all-in-one Touch screen up to 17.6 cm, Gigabit Ethernet fast network, print speeds up to 31 ppm, printing volume up to 6.000 pages monthly, paper input options with basic tray of 250 pages and optional trays of 250 pages, 500 pages and 4 x 520 pages, ADF up to 80 sheets, scan speed up to 50 ppm 2 sided (all-in-one) and toners that print up to 9.000 pages.
Colour inkjet printers and all-in-one (A3) Touch screen up to 9.3 cm, print speed up to 22 ipm mono and 20 ipm colour, print volume up to 2.000 pages monthly, printing up to Α3 size on all models – scan/copy/fax up to Α3 (on selected models), advanced scanning features using ADF with capacity of up to 50 sheets, reaching up to 36 ipm 2 sided scan (all-in-one) with inks that last longer, black up to 6.000 pages and colour up to 5.000 pages.
4 Vitona Str. Area, 2033 Strovolos Industrial Nicosia, Cyprus Tel: +357 22515050 Fax: +357 22514168 .cy www.siliconblue.com .cy info@siliconblue.com ACCOUNTANCY CYPRUS
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3 3
61 * on selected *business on selected models business models
economy economy · reliability reliability · quality quality reliable reliable printers printers with with advanced advanced specifications specifications Brother professional Brother professional printers are durable printers are durable and built to meet and built to meet the demands of high the demands of high output workgroups. output workgroups.
low low printing printing costs costs
Reduce your cost per Reduce your cost per page (up to 45% lower page (up to 45% lower than normal price), using than normal price), using the special high yield the special high yield original consumables original consumables that you can be supplied that you can be supplied through contract. through contract.
www.siliconblue.com.cy www.siliconblue.com.cy
OFFICIAL BROTHER REPRESENTATIVE IN CYPRUS & GREECE OFFICIAL BROTHER REPRESENTATIVE IN CYPRUS & GREECE
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Office Guide/ Office Tech
Titan Office The trusted partner for your business furniture!
A
fter more than 20 years in the office furniture business, Titan Office, the most reliable solution for businesses and entrepreneurs is expanding its solutions and services with new spaces and a new communication platform. The clients of Titan Office can talk to the Titan Experts on the new national number 77772677, on the official page of Titan Office on Facebook: @ TitanOffice and via the new, upgraded website: titan.com.cy, where they can view the entire product catalogue and see all the available customizations in finishes, sizes and materials. Reliability is the biggest advantage of Titan Office as its Logistics & Manufacturing Center in Larnaca, in a space of 5,000 sq.m. includes modern manufacturing units in
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wood, metal and upholsteries as well as an extensive range of spare parts and accessories, which ensure speedy delivery, affordable furniture and unparalleled after sales support. All these factors together with the free consulting services for the internal architecture of the office space and the 3d planning in order to help businesses realize and take advantage of every square meter utilizing the open space concept, have brought Titan to the top.
New store by Titan Office in Athens! Titan Office launched a new store in Athens, in the heart of the business region, located at Kifisias Avenue 312 in Chalandri. The brand-new store boasts of a large showroom, showcasing the
most popular and innovative furniture solutions that Titan Office has to offer. Executive desks, operative chairs and the latest trends in acoustic products that help eliminate unwanted sounds and distractions from the office environment.
An office free from distractions Open Office spaces were popular in the USA during the previous decade, but there are many that are trying to improve the logic behind the open office space, as “giants” like Apple found out that the employees have more things to distract them. One solution came with the improvement on acoustics, as the sound is frequently the number one reason to turn their
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attention elsewhere. These sounds are reduced by the new acoustic products that are placed on the desks or at the wall and eliminate distracting noise. The role of an interior architect is to analyze the possible sources of noise and suggest the appropriate furniture and acoustic solutions to reduce the noises and the distraction. Titan Experts will help realize your vision
and increase the productivity of your office.
Workstations for every need and taste No matter how much offices change over time, desks will always be a mainstay of the workplace. Technology has helped change the way we work, but
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people will always need surfaces to work on. However, the way people use their desks is also changing. In Titan Office, we offer a variety of workstations, depending on your needs, from height adjustable desks to compact workstations, customized with the colour and finish of your choice, from melamine to metal and many more options, all on our website, titan.com.cy.
Locations:
Ave. 131 Nicosia: Athalassas tylou Str. Larnaca: 2 Pentadak s Fylaxeos Ave. Limassol: 238 Ayia enue 312 Athens: Kifisias Av
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taxation
The European Mandatory Disclosure Regime A New Reality for Cypriot Intermediaries, Another Burden on Cypriot Taxpayers?
By Stavros Karamitros, Senior Tax Adviser, International Tax Services, EY Cyprus
M
andatory disclosure rules are nothing for European Union Member States (EU MS). In fact, with the United Kingdom leading the race (from 2004), Ireland (in 2008) and then Portugal (in 2011) were the first and only EU MS to introduce mandatory disclosure rules in their local legislation. However, despite their success in combating aggressive tax planning schemes in advance, especially in the United Kingdom, such rules had differences between them, particularly in terms of design, thus resulting in diverging effects. The aforementioned divergences, along with the need to strengthen certain tax transparency aspects of the existing taxation framework set out by Council Directive 2011/16/EU (DAC1), were the main reasons that led the EU Commission to the Directive Proposal for the sixth amendment of the framework regarding mandatory automatic exchange of information on reportable cross-border arrangements. Considering the above, on 25 May 2018, the Council of the EU formally adopted Directive 2018/822/EU (EU MDR Directive or DAC6) amending DAC1 with the introduction of an EU mandatory disclosure regime (EU MDR) providing for the filing of information related to reportable cross-border arrangements with the tax authorities of the EU MS and for the subsequent automatic exchange of
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such information among the EU MS. The EU MS should transpose the Directive into their domestic legislation by 31 December 2019, whereas the Directive will apply from 1 July 2020. The EU MDR goes beyond the recommendations of Action 12 of the Base Erosion and Profit Shifting (BEPS) Project of the Organisation for Economic Co-operation and Development (OECD)/G20 of 2015 by prescribing a wider range of hallmarks and introducing the automatic exchange of information on reportable cross-border arrangements among the EU MS. The objective is to enable the tax authorities in the EU MS to take early action regarding potentially aggressive tax arrangements, in order to better target their audits or amend their legislation. This could also
The Directive is the first to place the reporting obligation on all actors of aggressive tax planning, tax avoidance, evasion and abuse
act as a deterrent for the promoters and users of aggressive tax planning schemes. All taxes except VAT, customs duties, excise duties and compulsory social security contributions are included in the scope of EU MDR, while all arrangements must also present a crossborder element, i.e. to concern either more than one EU MS or an EU MS and a third country and satisfy an additional set of conditions. Intermediaries which meet certain EU-nexus criteria are required to disclose to the national tax authorities certain cross-border arrangements which contain one or more of a prescribed list of hallmarks (referred to as “reportable cross-border arrangements”). For some of these hallmarks, a gateway criterion needs to be met for them to apply, which is called the ‘main benefit test’ (MBT) and relates to the main tax advantage or one of the main tax advantages that a natural (i.e. an individual) or legal person (i.e. a company), having regard to all relevant facts and circumstances, may reasonably expect to derive from an arrangement. The hallmarks are divided into five thematic headlines: (i) generic hallmarks linked to the MBT, (ii) specific hallmarks linked to the MBT or (iii) related to cross-border transactions, (iv) specific hallmarks concerning automatic exchange of information and beneficial ownership and (v) transfer pricing.
taxation
The Directive is the first among its predecessors (DAC1 on administrative cooperation in the field of taxation, DAC2 on automatic exchange of financial account information, DAC3 on automatic exchange of tax rulings and advance pricing agreements, DAC4 on automatic exchange of country by country reports and DAC5 on access to anti-money-laundering information by tax authorities) to place the reporting obligation on all actors of aggressive tax planning, tax avoidance, evasion and abuse, i.e. both the intermediaries who design, market, organise or manage the implementation of a reportable crossborder arrangement (otherwise called ‘intermediaries-promoters’), as well as those who help or advise on such actions (‘intermediaries-service providers’) and taxpayers as the recipients of such services. Going even further, DAC6 defines and emphasizes, for the first time, the role of ‘intermediaries’, giving them a reporting priority over taxpayers, as the latter are required to report only when no (qualifying) intermediaries are involved in a particular arrangement. In the opposite scenario, EU MDR reporting obligations lie with all intermediaries involved in the same arrangement. Hence, where no intermediaries are involved in an arrangement (i.e. where all intermediaries involved have no EU-nexus or planning is developed “in-house” by the taxpayer) or an EU-
Where no intermediaries are involved in an arrangement, the obligation to disclose shifts to the relevant taxpayer
based intermediary is exempt from disclosing due to legal professional privilege restrictions, the obligation to disclose shifts to the relevant taxpayer. Disclosure includes details of intermediaries and relevant taxpayers, of any associated enterprises of relevant taxpayers and the reportable crossborder arrangement in question. The first disclosures will be filed by 31 August 2020 and communicated by 31 October 2020 but will cover reportable cross-border arrangements, where the first step of implementation takes place between 25 June 2018 and 30 June 2020 (i.e. within the transitional period of the Directive). Nevertheless, as from 1 July 2020, intermediaries and relevant taxpayers will only have 30 days beginning on
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the day after the arrangement is made available or is ready for implementation or when the first step in the implementation of the arrangement has been made, whichever occurs first, to file information that is in their knowledge, possession or control. Likewise, the automatic exchange of information will take place within one month of the end of the quarter in which the information was filed. On 19 March 2019, the Ministry of Finance circulated a draft bill to transpose the Directive into Cypriot legislation, thus amending the existing law on administrative cooperation in the field of taxation. Official guidance is expected to be issued by the Cyprus tax authorities for interpretation purposes, even though the draft bill appears to be fully aligned to the text and minimum requirements of the Directive. For Cyprus, this effectively means that now, as opposed to the past, not only Cypriot taxpayers but also Cypriot ‘intermediaries’ (i.e. tax advisers, accountants, lawyers, banks, professional service providers, etc.) are targeted by an(other) EU directive on administrative cooperation in tax matters (DAC), which may pose a significant risk for their everyday activities, especially in terms of (additional) compliance obligations. Let’s hope that the fruits of EU MDR will outweigh the compliance costs to the benefit of a fairer taxation environment both at CyprusEU and global levels.
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taxation
Cyprus Welcomes New Business Economic Substance requirements in offshore jurisdictions are sending companies our way. By Petros Rialas (Director, Head of International Tax Planning Dept.)
I
n response to the relevant requirements of the EU and the OECD, most traditional offshore jurisdictions have recently enacted into their domestic laws ‘Economic Substance’ requirements that mainly apply to companies. Such jurisdictions currently include the British Virgin Islands (BVI), the Cayman Islands, Bermuda, Guernsey, Jersey, Isle of Man, Seychelles, Mauritius and the Bahamas, with more expected to follow suit in due course. In brief, these new provisions generally require that adequate and relevant economic/ business substance is locally established for each relevant activity that each company claims to be carrying out in that offshore jurisdiction. Failure to do so may lead to economic sanctions and an eventual strikeoff of the company. In practice, the actual establishment of offshore substance is expected to be extremely difficult and/or very costly to implement. Likewise, new banking practices worldwide are viewing such offshore structures with increased scrutiny. In light of the above, an offshore company that becomes subject to these economic substance requirements but, for various reasons, cannot or does not want to establish such offshore substance, must therefore look for alternative options. In such a case, the real consideration now becomes whether it is time to close the company (and perhaps open a new one elsewhere) or whether to move from offshore to onshore. If so, the challenge then becomes to identify a suitable onshore jurisdiction. This is where Cyprus comes into play. In a nutshell, Cyprus offers a fully
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& Marios Yenagrites (Senior Tax Consultant), Totalserve Management Ltd
The island offers attractive corporate, legal and tax regimes, both for corporations and individuals compliant, practical, cost-competitive, controllable and efficient solution. Furthermore, Cyprus allows inward redomiciliations of foreign companies and can easily facilitate any level of needed substance. The practical ways to move an offshore company to the jurisdiction of Cyprus and thus stop it from being subject to the offshore jurisdiction’s substance requirements are the following: • Redomicile and move the tax residency of the offshore company to Cyprus. • Should redomiciliation not be preferred for business or any other reasons, then simply move the tax residency (management and control as well as base of operations) of the offshore company to Cyprus. It is not by coincidence that Cyprus continues to be one of the preferred international business centres from where foreigners often conduct their international activities. The island offers attractive corporate, legal and tax regimes, both for corporations and individuals. Then there is the irrefutable high level of professional services and infrastructure, as well as its convenient geographical location. Last but not least, the beauty of the island and its diverse quality of life make it such a nice place to live and work in. Moreover, Cyprus remains fully compliant with all international guidelines and regulations, whilst at the same time, it has introduced significant tax and other incentives for foreign individuals (whether
key employees or High Net Worth Individuals) to physically move to, live and work on the island. From a corporate tax perspective, Cyprus has one of the most competitive tax rates in the EU, being a uniform rate of 12.5%. Various types of income (such as dividends, capital gains and gains from sale of shares) are completely tax exempt, thus constituting a company engaged in pure holding or share trading activities as completely tax exempt. Other types of income are entitled to certain partial tax exemptions, thus significantly reducing the overall effective Cyprus tax rate. Furthermore, Cyprus has access to benefits from all the relevant EU Directives and a very good network of double tax treaties. The tax treaties that Cyprus has concluded with certain non-EU countries such as Russia, Ukraine, India and South Africa are considered to be the best that these countries have. All of the above, together with the wide and varied choice of exceptional office facilities for all budgets and the significant competitive cost advantage that Cyprus has over other prime EU jurisdictions, makes our sunny European island a preferred choice. To conclude, these new offshore economic substance requirements are unclear, vague and, in most cases, difficult to practically establish but, most importantly, they are untested! The most obvious alternative for a company to continue operating at its best would be to move to a practical, already-tested and efficient onshore jurisdiction like Cyprus. Cyprus has already started welcoming such new business opportunities and is eager and ready for many more.
Implications of the Anti-Tax Avoidance Directive By Margarita Liasi, Principal, KPMG Limited
U
nder the Anti-Tax Avoidance Directive (ATAD – interest limitation rule as transposed into Cyprus Income Tax Law), exceeding borrowing costs shall be deductible in the tax period in which they are incurred only up to 30% of the taxpayer’s earnings before interest, tax, depreciation and amortisation (EBITDA), as adjusted in accordance with the rules concerned. ‘Exceeding borrowing costs’ refers to the amount by which the deductible borrowing costs of a taxpayer exceed taxable interest revenues and other economically equivalent taxable. In essence, they consist of the net interest expense and are defined as “interest expenses on all forms of debt, other costs economically equivalent to interest and expenses incurred in connection with the raising of finance, including, without being limited to, payments under profit participating loans, imputed interest on instruments such as convertible bonds and zero coupon bonds, amounts under alternative financing arrangements, such as Islamic finance, the finance cost element of finance lease payments, capitalised interest included in the balance sheet value of a related asset, or the amortisation of capitalised interest, amounts measured by reference to a funding return under transfer pricing rules where applicable, notional interest amounts under derivative instruments or hedging arrangements related to an entity’s borrowings, foreign exchange gains and losses on borrowings and instruments connected with the raising of finance, guarantee fees for financing arrangements, arrangement fees, as well as similar costs related to the borrowing of funds” that are in excess of any financial income (i.e. interest and interest equivalents).
The legal provisions transposed include optouts in relation to: • a de minimis threshold (exceeding borrowing costs up to €3 million can be deducted). The threshold will concern deductible borrowing costs (i.e. costs that have been incurred wholly and exclusively for the production of income); in the case of exceeding borrowing costs in excess of the threshold, the limitation (i.e. at 30% of tax adjusted EBITDA) will apply only on the excess amount. • a standalone entity exemption (not being part of a group of companies). A company is treated as a standalone entity if it is not part of a consolidated group for financial accounting purposes and has no associated enterprise or permanent establishment. • grandfathering of loans concluded before 17 June 2016. The grandfathering applies to the extent where the terms of the loans in question have not been modified since the cut-off date; i.e. in case of a subsequent modification, grandfathering would not apply to any increase in the amount or duration of the loan, but would be limited to the original terms of the loan. • an exclusion from scope of long-term infrastructure projects which are considered to provide, upgrade, operate and/or maintain a large-scale asset that is in the interests of the general public. Interest limitation rules will also not apply to financial undertakings (credit institutions, insurance/reinsurance companies, occupational retirement pension funds, EU social security pension schemes, Investment Firms, AIFs and AIFMs, UCITs funds and UCITs
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management companies, OTC derivative counterparties (CCPs), central securities depositories (CSDs), and securitisation special purpose entities (SSPEs). The implementing law also provides for a group equity ratio carve-out in that, where the taxpayer is a member of a consolidated group for financial accounting purposes, the taxpayer may be given the right to fully deduct its exceeding borrowing costs if it can demonstrate that the ratio of its equity over its total assets is equal to or higher than the equivalent ratio of the group and subject to the following conditions: i. the ratio of the taxpayer’s equity over its total assets is considered to be equal to the equivalent ratio of the group if the ratio of the taxpayer’s equity over its total assets is lower by up to two percentage points (2%) ii. all assets and liabilities are valued using the same method as in the consolidated financial statements, prepared in accordance with acceptable accounting standards. Taxpayers may carry forward exceeding borrowing costs and unused interest capacity which cannot be deducted in the current tax period, for a maximum of five years. Under the option provided by the Directive, Cyprus has opted to allow the interest limitation rule to apply cumulatively at the level of a Cyprus group, as this is defined for group-relief purposes. In this respect, the results of all the members of the Cyprus group will be assessed cumulatively, i.e. the calculation will consist of (i) the tax-adjusted EBITDA of all the group members cumulatively and (ii) the borrowing costs of all the group companies cumulatively, i.e. the calculation for EBCs will be carried out on the basis of group results and the equity carve-out will also be applied on a group basis with a reallocation of the EBCs to companies. The interest limitation provisions raise a number of questions and key pointers for our clients; in essence, clients should be monitoring their borrowing costs irrespective of whether financing is obtained by related or third parties, the jurisdiction and location of the lender, or even the treatment of the interest income in that jurisdiction.
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Cyprus has opted to allow the interest limitation rule to apply cumulatively at the level of a Cyprus group
taxation
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professional services
5th Anti-Money Laundering Directive: What is changing?
tablish a list of PEPs which will include persons that represent bodies, functions, institutions and organizations of the EU.
Virtual Currencies The extensive usage of virtual currencies has created a need for By Christos Demetriou, Director, APC Audit Tax Advisory Ltd additional measures to be taken Vice-Chairman, Ethics and Institutions Specialised Working Group, ICPAC by exchange service providers in order to mitigate the risk of any potential financial crime. Such n June 2018, the 5th Antiin order for the register to be their maintenance/ongoing pro- measures include enhanced due diligence procedures for potential Money Laundering Direcadequate, accurate and current. cedures and service. clients that receive or exchange tive (AMLD) became law. Beneficial ownership registers virtual currencies services through The new AML Directive must be established by the Senior Managing Officials brings major changes and member states, following the The 5th Anti-Money Laundering an exchange service provider platdevelopments to the previtransposition of the 5th AntiDirective states that, whenever a form. th ous 4 Directive, and the EU Money Laundering Directive senior managing official or an of- Member States must ensure that member states must transpose into national law. The timeficial authorized representative is exchange service providers are those changes and developframe for establishment is as considered to be the responsible licensed, registered and regulated. ments into their national law follows: person under the law for repreBank and Real Estate Register by 10 January 2020. – Corporate and other legal senting an entity or a group of What is changing with the entities: 18 months from the entities, then the same principles In the view of the fight against 5th Anti-Money Laundering enforcement of the 5th AML and procedures as for a beneficial terrorist financing, Member States are required to set up a register Directive? Directive (i.e. 10 January 2020) owner apply to that official (i.e. – Trusts and similar structure identification procedures, record which will allow the competent authorities to retrieve information Professional service providers legal arrangements: 20 months keeping, etc.). such as natural and legal persons’ The 5th Anti-Money Launderfrom the enforcement of the 5th bank accounts, safe deposit boxes ing Directive clarifies that all AML Directive (i.e. 10 March Enhanced Due Diligence professional service providers, 2020) The 5th Anti-Money Laundering ownership and natural and legal including tax advisors - certified The 5th Anti-Money LaunderDirective requires that whenever persons’ ownership of real estate situated in their territory. or uncertified - fall under the ing Directive requires the Euro- a professional accountant in a scope of the legislation. pean Union to interconnect all member state is dealing with Prepaid Cards member states’ beneficial owna high risk third country cliAnonymous prepaid cards are inBeneficial Owners ership registers 32 months after ent, then specific measures to cluded in the scope of the 5th AntiInformation the 5th AML Directive becomes mitigate these risks need to be th Under the 5 Anti-Money law (i.e. 10 March 2021). taken, such as additional infor- Money Laundering Directive, by Laundering Directive, every EU mation for limiting the business introducing stricter measures for member state must establish a Electronic Verification relationship with clients from 3rd payment transactions above the th beneficial ownership register, The 5 Anti-Money Laundercountries and the prohibition of amount of €50. In cases where the payment amount exceeds the which will provide information ing Directive recognizes the professional accountants from €50, customer identification proabout entities, group entities and need for the identification/veriestablishing representing firms cedures apply. trusts and disclose the names of fication process of clients to be in such countries. the beneficial owners and the conducted by electronic means, The changes in the 5th Antisenior management personnel, which must be secure, indePolitical Exposed Persons Money Laundering Directive reresponsible for the management pendent, reliable and regulated (PEPs) quire measures and actions being of the group and/or entity. by the national authorities. The 5th Anti-Money LaunderThe beneficial owners and acThe electronic client verification ing Directive requires that each taken by professional accountants, countants of the entities and process means will facilitate EU member state must establish advisors and regulatory bodies, in order to stay compliant and in line trusts are responsible for and speed up clients’ accepta list with the national PEPs. with the Directive requirements. providing such information ance procedures and In addition, the EU will es-
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Facing Today’s Insurance Sector Challenges Regulation, technology and the implementation of the National Health Scheme are just some of the issues that are having an impact on the local industry, says Maria Fysentzides, Financial Controller, Trust International Insurance Company (Cyprus) Ltd.
What types of service does Trust Insurance International (Cyprus) offer clients? Trust Insurance International (Cyprus) Ltd provides general insurance and reinsurance business. The company was established in 1990 and it provided reinsurance and management services to the Direct Insurance companies of the Nest Group until August 2009, when it entered the local market, offering a full range of personal and corporate general insurance and medical insurance products.
opted from the beginning of its local operations, have contributed positively to its growth. Our philosophy and our vision are “To Lead Through Innovation and Service Excellence”. At the core of everything we do are our customer-centric values, our integrity, our reliability, our accountability and an unparalleled team spirit that allows us to always opt for the best. Failure is never an option. For us, striving for optimum results – both for the Company and our clients – is the only way. Our associates and clients have recognized our focus on, and dedication to, these entrepreneurial values and they have rewarded us with their trust.
Since it began its local operations 10 years ago, Trust has been one of the fastest-growing insurance companies in Cyprus. What is the company’s What are the main challenges curbasic philosophy and how has this rently facing the insurance industry philosophy enabled the business to and how are they being tackled? grow so successfully? I would say that the main challenge is Trust International Insurance (Cythat of increased regulation and comprus) Ltd has, indeed, raced its way pliance, which places a burden on the into the big league of the insurance operational costs of every company. industry and been flirting with IFRS17 – Insurance Contracts the top. For nine consecuwill place an additional Insurance tive years it has been burden on insurance the fastest-growing incompanies because companies can surance company in it will require sigsurvive only if Cyprus and is curnificant investment they have staterently ranked third of-the-art systems, in systems and in the general insurpeople. Continuous which ensure ance sector with a changes to techautomation market share of 9%. nology constitute and maximum The Company belongs another important efficiency to the Nest Group and challenge and, of course, our Group’s expertise and the implementation of the insurance know-how, as well as National Health Scheme will the corporate governance structure adaffect our medical line of business.
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All these challenges are being tackled through strong leadership and versatility, so that our people can embrace the necessary changes to systems and procedures. Insurance is a quite competitive sector. Why should someone or a company come to Trust? What does Trust have/do that other insurance companies don’t? Trust has been built on a robust corporate governance structure, which is also consistent with the Solvency II regime. All the Company’s operations are based on procedures and service level agreements, which aim for consistency, transparency and reliability. The Company has a strong financial position; it is profitable with very high liquidity and a satisfactory solvency ratio. Technology has changed the way many businesses operate, including insurance. How is Trust adapting to this new reality? Technology is one of the pivotal adaptation factors as it increases efficiency and ensures that information used for decision-making is reliable. Trust Cyprus has continuously been upgrading its systems and processes. It has a Business Intelligence system which is used for management reporting and during 2017 it implemented a powerful Finance system (SAP S/4Hana). It is currently developing a new insurance system, based on the latest technology, which is expected to be
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Some companies are very small compared to other and may not be able to sustain the European countries cost of increased and, therefore, in my view the Cyprus compliance and insurance industry technological will steadily grow in developments the coming years.
implemented before the end of 2019. Due to increasing compliance and regulation, I believe that insurance companies can survive only if they have state-of-the-art systems, which ensure automation and maximum efficiency.
Foreign investors have targeted many sectors of the economy over the past few years. Have they had an impact on the insurance industry? Foreign investors are the major shareholders in the largest companies in the insurance market (including our own Company), and, therefore, they have a significant impact on the industry. We expect to see considerable changes in the insurance industry in the coming years, as among the large number of companies, some are very small and may not, therefore, be able to sustain the cost of increased compliance and technological developments.
Now that Cyprus has implemented the National Health Scheme, how do you expect traditional health insurance to be affected? The implementation of the National Health Scheme (NHS) has already started affecting the medical business of insurance companies, as certain employers are removing outpatient cover from their group policies. The impact is expected to be larger upon the implementation of the second phase of the NHS in June 2020, regarding inpatient healthcare. I believe that the private insurance will certainly continue to exist and will address a niche market; certain families/employers will choose to maintain their medical insurance to complement the NHS.
How much does the insurance industry contribute to Cyprus’ GDP? Do you believe that this will increase or decrease in the following years? Insurance makes a major contribution to Europe’s economic growth and development. In Cyprus, insurance premiums (life, accident & health and general business) amount to €0.9 billion which represents almost 4% of the country’s GDP. This is low
What are your goals for Trust Insurance for the next 5 years? My first goal is the effective implementation of our new insurance system, which will increase the Company’s quality of service and efficiency and, at the same time, reduce its operating costs. One of my ongoing
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goals is to design the optimum asset and liability structure, in order to maximize both the solvency and profitability of the Company. The adoption of IFRS17 – Insurance Contracts is a challenging goal as it will require the development of new skills in our Finance Department and elsewhere. Finally, and importantly, we need to develop our people to be ready to face the challenges ahead and, of course, to retain the Company’s talent.
ria s Ma tzide n e s Fy
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IFRS 17: A New Era for Insurance Companies By Stavros Violaris, Senior Manager, Financial Accounting Advisory Services, EY Cyprus
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fter more than 20 years of deliberations, it is expected that the application of the new insurance standard IFRS 17, in 2022, will lead to several important challenges for insurance and reinsurance companies. The requirements of the new standard are significantly different from the existing ones, with a direct impact on the following: – A change in the way profitability is reported – An increase in the complexity of the estimation methods and assumptions used and – An increase in the volume of data required As expected by the market, financial reporting changes are only one part of the challenges posed by the new standard. In a live poll conducted during the recent European Insurance Conference, 56% of participants reported that the biggest challenge will be that of changing their existing processes and systems. The participants expressing their opinions consisted of a wide range of financial sector professionals from insurance groups based in Europe. The magnitude of the challenges was also revealed by the fact that more than 40% of the conference delegates believed that their company will spend more than $20 million on implementing the standard. Another 23% estimated that the total amount will be between $5 million and $20 million. It is generally accepted that multinational companies, and especially those that have more complex long-term business activities, will have higher implementation costs. Given that compliance with IFRS 17
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will be a costly challenge, many insurance companies believe that this is an opportunity for a wider restructuring of their business to achieve additional benefits, by implementing more efficient data systems and producing more upto-date information for decision-making or even an opportunity for a strategic re-positioning of their finances. No specific trend has been established in Cyprus yet, as most insurance companies are still at the primary stages of application of the new standard. It is very clear, however, that IFRS 17 is now high on their agenda. At EY, given the impact of IFRS 17 and the complexity of its integration, we propose six direct actions that can be a starting point for the integration of the new standard: 1. Informative and training sessions for executives regarding the new requirements and their impact 2. Designing the basic methodology, decision making and determining the assumptions that will lead to implementation 3. Analysis of the financial, operational and system impacts 4. Preparation of a budget for costs and required resources 5. Impact assessment on other ongoing or scheduled projects for the next three years 6. Strategic impact assessment and the respective effect on products. The three years that remain until the full implementation of IFRS 17 may seem like a long time but the impact is already being felt by Insurers. For those that have seen the detailed technical requirements, it is clear that IFRS 17
will have an impact not only on insurance companies’ financial reports but on all aspects of the organisation. There are many challenges and planning will thus be the key in order for companies to cope with the technical and practical changes that IFRS 17 will bring. Cypriot insurance companies will need to dedicate time and resources for the integration of the new Standard. During this process, the need to identify suitably qualified individuals will most likely be of great significance in order to successfully implement a standard that will bring insurance companies into a new era.
Many insurance companies believe that this is an opportunity for a wider restructuring of their business
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Vendor Handling: A Difficult Task under GDPR By Zoe Stylianou, Data Privacy Officer, Bank of Cyprus
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he new data privacy regulation that came into effect a year ago, known as GDPR, brought among other obligations and tasks the need of the Controllers to carefully evaluate engagements with vendors, as they will be indirectly responsible for choosing and cooperating with those who do not consider GDPR as an important element in carrying out the services that they have been engaged to provide. The test of Controller to Processor to establish roles is essential to determine the relation between the two parties to each engagement. The establishment of the roles sets down the obligations of each party has towards the other as well as to compliance with the requirements of the Regulation. Controllers should pay special attention when choosing their Processors. They must look out for and choose associates that give great value to data privacy and
have committed resources to complying with the Regulation by enriching their own systems’ privacy and information security, have trained their employees in privacy culture, reviewed internal processes taking GDPR principles into consideration, have prepared the Register of Processing Activities, appointed a DPO, have drafted a privacy notice, introduced processes for the prompt identification of leakages and the immediate updating of the Controller. Processors must not only be ready to carry out the processing they are asked for under the engagement but must also be ready to cooperate with the Controller, if necessary, on the execution of data subject rights and the DPIAs that the Controller will be dealing with. When subcontracting, Processors must pay special attention to the sub-contractors they choose, if they are in Europe or not and
if they exercise due care regarding data privacy matters. If this is not the case, the Controller must be doubly concerned about having to deal not only with the Processor but also the sub-processor. Controllers are usually faced with longstanding engagements with Processors who are not yet ready to proceed with GDPR-related changes and, most of the time, need guidance and advice from the Controllers on privacy matters. This is a very difficult, unavoidable and timeconsuming task for the Controller as, in most cases, replacing a vendor is not an option. This causes increased headaches to Controllers and negotiations and discussions tend to be endless. Thus, Controllers post-GDPR must ensure that they choose their vendors very carefully and do not compromise on privacy obligations. This is the only way to push the market to GDPR maturity.
In most cases, replacing a vendor is not an option
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Intelligence Augmentation The evolution and the future of Artificial Intelligence
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By Constantinos Valanides, Senior Advisor II, KPMG Limited.
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Nowadays, artificial intelligence (AI) has become an integrated part of our everyday life. Personal assistants on mobile phones or autonomous vehicles may prove that AI has managed to reduce human intervention and improve the driving experience respectively and such solutions are undoubtedly simplifying our lives on both a personal and professional level. Human intelligence can potentially be enhanced and supported by AI in the work environment. A subset of AI, Machine Learning (ML), has the capability to consume and analyse huge volumes of data and provide users with useful insights. ML algorithms uncover hidden patterns in the datasets and provide accurate predictions, allowing us to take important and informed decisions quickly. Such algorithms can be a part of automated procedures or embedded within technological solutions. In the near future, autonomous systems will have the ability to learn from the cognitive behaviour of humans and demonstrate approximately the same behaviour under different circumstances and parameters. AI techniques can be better developed in a structured environment, where the necessary information and objectives are well-defined. In such cases, the accuracy of an AI model is significantly higher than before and it can exceed human judgment in specific cases (narrow AI). The classification of e-mails as safe or malicious is an example of this type of AI. On the other hand, if the required information or the business objective is not completely clear, Intelligence Augmentation (IA) comes in to play a key role. Human intelligence can be enhanced by technology through the IA approach. The human has a central role in the interaction with the
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machine. For example, a car collision avoidance system warns the driver to avoid an upcoming car accident with the provision of advanced information to enable proactive action. However, in this case, the driver still acts as the main user of the system by utilising the insights from IA to prevent the accident.
IA can easily recommend actions derived from the results of AI The difference between IA and AI is that IA aims to enhance a human’s level of intelligence so as to take an action or decision, being wiser than before, using similar technologies to AI. On the other hand, AI tries to learn and mimic human cognitive behaviour. As an example, the manager of an organisation’s marketing department can be made aware when there is high probability of a specific group of customers leaving the organisation. At the same time, IA technologies support users by recommending a series of potential actions to prevent this negative event. Furthermore, IA can successfully combine the results of AI algorithms and recommend specific products to a group of customers, considering both the proper timing of such a move and their personal needs. The customer experience is thus enhanced and the customer lifecycle is extended. A large number of financial institutions are already adopting AI technologies to support their operations. In some cases, they use advanced algorithms to identify relationships and trends in the data. This enables
them to move from the descriptive analysis of data to a more predictive and proactive approach. For example, algorithms like these can detect fraudulent transactions based on a large number of parameters and reject them even before their execution. Another use of AI within financial institutions is the estimation of the credit score of their customers to a high degree of accuracy, which can lead to the minimisation of the institution’s operating risk. Furthermore, AI is introducing new channels of communication with customers, such as Chatbots. Chatbots incorporate various Natural Language Processing and Generation algorithms in order to be able to understand and communicate with customers in a similar way to humans, thus saving time and costs. Organisations that adopt a series of AI algorithms may have a number of different results most of the time. It is up to the user to understand and utilise the results and take a decision or an action. IA can easily recommend actions derived from the results of AI. It can also estimate the outcome of an action, giving the user the opportunity to select the one with the most profitable result. These examples demonstrate the important role of AI and IA in financial institutions for both employees and customers. IA has a crucial role to play in the enhancement of human intelligence. Users are provided with combined information derived from different AI models and data sources that were not available before. Based on these new insights enabled by IA, humans have the opportunity to take better informed and, as a result efficient, more profitable decisions. There is no competition between AI and IA but both will have a key role in automation in the near future.
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Be Yourself The art of being interviewed is much simpler than you may think.
By Spyros Yiassemides BA, MSc, FCA, Partner Yiassemides & Co
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hen I was taking my first steps in the world of accounting, many were the times that I found myself in the interviewee’s seat. Being inexperienced with the whole process, I asked the two people on earth that I trusted the most – my mom and pop – for advice on how to best approach my interviews. Their words still echo in my mind, fourteen years after they were first uttered. They said to me, “Son, just go in there and be yourself. Nothing more, nothing less.” And so I did. Like clockwork, I would go into my interviews wearing my best smile, sit opposite the interviewer and answer all the questions that came my way in the sincerest manner. I would find myself relaxed in my seat, and not as stressed as everybody kept telling me that I should be feeling when facing a potential employer. The fact that I wasn’t pressed to project an image, rather than my true self, helped me to concentrate on what was really important to the person asking the questions – honest answers, backed up by solid facts. And, while I didn’t always get the job, what I did get in return, every single time, was the appreciation of the person sitting across from me. For candour always earns you full marks in a conversation, whether it be a casual chat or an interview for a dream job. Some years down the road, I found myself at the other end of the table. Having progressed in my career, I was given the opportunity to screen potential new recruits and ask them certain questions, with a view to contributing to the final
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hiring decision. With a renewed sense of professional purpose, I set out to read all those fresh faces as effectively as possible. This time, I was the one asking all the questions, so I had to make sure that they were the right ones. What I was looking for, though, couldn’t be given to me in the form of spoken words. I was looking for signs of honesty, for those particular clues that attest to one’s genuine character. I was in search of sincerity, and I was successful in some instances, unlucky in others.
Letting prospective employers know that you have done your homework, shows them that you care about the position I have many friends that work in the HR departments of their organizations. This positions them at the forefront of the comings and goings of their firms’ human resources. As one of my friends aptly puts it, “I am the first person they see when they initially come in and the last one when they leave the company.” Talking to them over coffee regarding their role has often revealed some interesting facts. They have told me of candidates who have come into the interview glowing, aced every question, their answers and body language making promises of a bright future
in the firm, and then they discovered some months down the road that these seeming hot shots were nothing more than slackers, looking to take the path of least resistance for a good salary cheque. They have also told me of others who were reluctantly hired as they didn’t tick all the boxes on the interview questionnaire but who then progressed through the ranks to become top performers in their organization. All that glitters is not gold, I guess, and vice versa. If you have an interview coming up, here are seven tips that stem from my friends’ experience in the HR field, to help you make the most of your time in the interviewee’s chair: 1. Keep it simple: When talking to the person sitting across from you, do so in a language that is easy to understand. Stick with vocabulary essentials – no need to use fancy words, with a view to impressing your interviewer. Engage in conversation as you would on any other occasion. Just don’t overdo it by thinking that you are in a coffee session with your best pals and let too much slang slip out! 2. Maintain eye contact (most of the time): Looking your interviewer in the eye tells him/her that you are confident and assertive, while also being friendly and approachable. A balance, though, should be struck between maintaining eye contact and looking away, as too much of the former will give the wrong impression. Brief breaks and reconnections are essential in maintaining communicational chemistry with the person(s) in the room. 3. Dress for the occasion: A nice suit or dress will go a long way in creating that much-needed first impression that
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starts you off on the right foot. Avoid a dress-to-impress mentality – after all, you are going to an interview, not to a beauty contest. Pick blue as your main colour, to appear confident, honest and reliable, and combine it with red as an accent colour, to highlight your assertiveness. 4. Do your homework: Study the particulars of the organization and the position for which you are applying before going in. Learn them inside-out. Go onto the company website and devour its content. You don’t want to be caught off-guard by being asked an inside question to which you have no answer. Letting prospective employers know that you have done your homework, shows them that you care about the position and you really want to be the one that gets the gig. 5. Don’t be late: Apart from being rude, if you arrive late for an interview, it shows people that you don’t really care whether you get the job or not. Prepare for the
unexpected and leave home early, so that you allow enough time for any unforeseen incidents that may come into play. In the worst case scenario, you get there early, and you spend some time in the waiting room, flipping through business magazines on a very comfy sofa! 6. Ask questions back: Wait until the interviewer has no more questions for you, then reverse the roles and start asking him/ her things that are relevant to the position for which you are being interviewed. In this way, you take on a more active role in the whole process which, coupled with your pertinent initiative, will stand you in good stead to be perceived favourably as a candidate exhibiting a genuine interest in his/her potential role. 7. Be sincere in your answers: Whatever you are asked, always give a straight answer. Even if you think that, what you are saying may not be what the interviewer wants to hear, as it may lack spectacle or
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Exaggerations and false claims will backfire every single time gravitas, tell it as it is – do not garnish your answers with anything extra over and above the truth. Exaggerations and false claims will backfire every single time. Going for an interview is always taxing on the nerves. It doesn’t have to be this way, though. Sufficient preparation, coupled with a sincere smile, can take the edge off the impending agony. Employers look for that one candidate who will make promises at the interview and deliver on the job. Nothing more, nothing less, as my parents taught me.
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Why Cyprus Needs a State-Owned Equity Fund By Savia Orphanidou, Economist
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ver the last five years, the use of financial instruments to support the private sector and, specifically, our small-medium enterprises (SMEs), has been widely promoted in Cyprus. It is well-known that, during the financial/banking crisis when access to finance was limited, the financing schemes of the European Investment Bank (EIB), the European Investment Fund and EU Structural and Investment Funds were a key factor in the survival and expansion of many Cypriot enterprises. Access to finance still remains a challenge for many Cypriot enterprises, especially SMEs and start-ups, due to the strict procedures/provisions of traditional bank lending. Although there is now sufficient liquidity in the system, banks remain nevertheless very reluctant to provide loans, in particular to highrisk enterprises. It is for this reason that, during recent years, more and more enterprises are looking for alternative funding sources. In 2017, EIB, in cooperation with PwC, conducted a study on the use of financial instruments in Cyprus, recording the financing gaps for each instrument. One of the interesting results of the study was the recording of a €35 million financing gap in the equity market in Cyprus. This clearly demonstrates that the equity finance market has been gradually maturing in Cyprus and that Cypriot enterprises are more willing now to give part of their equity share in return for financing. Equity finance can be a valuable alternative source to traditional bank lending
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for high-risk enterprises, innovative companies and startups with limited collateral, because it can provide resources and skills to enterprises to grow to their true potential. Today, the Cypriot equity market is among the least developed in Europe and this is, indeed, a significant drawback for the competitiveness of the country’s SMEs. Today’s economic environment favours the establishment of an Equity Fund, which will provide capital funding for SMEs, thus supporting our private sector and further boosting our economy. Due to the new financial conditions, as a result of the crisis, Cypriot enterprises appear more ready and more mature to receive such financing. It all comes down to a matter of changing our business culture and mindset, which can be achieved through gaining knowledge and experience in the field. In this context, the National Economic and Competitiveness Council recently submitted a proposal for the establishment of such a Fund in Cyprus, based on international best practices. As outlined by the Council, the benefits of such a Fund are numerous and noteworthy, such as de-leveraging private debt, strengthening the competitiveness and financial performance of local SMEs, promoting investments in a
broader set of sectors aiming at enhancing sustainable growth, creating new jobs in the private sector, introducing new technologies and new international corporate best practices and stimulating innovation and modernization of Cypriot SMEs. In light of the above, it is imperative to promote the establishment of a stateowned Equity Fund in Cyprus. In order for such a Fund to be successful, the following factors need to be in place: (a) the Fund should operate on the basis of market rules and have the necessary flexibility and transparency; (b) the State should not be involved in investment decision-making but should have a role in monitoring the implementation of the State’s investment strategy; (c) the Fund should operate in a regulated environment, in order to create the right conditions for the attraction of private co-investors; (d) transparent public procurement procedures should be promoted for hiring the Fund Manager, and (e) the Fund Manager, who will implement the state’s investment strategy, should have significant experience and networking in the field. I feel confident that, with political will and prudent planning, we can lay the foundations for the establishment of an Equity Fund in Cyprus to support the private sector and our SMEs.
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Leadership and Emotional Intelligence in the Modern Work Environment By Constantinos Kypriotis, Senior Manager, KPMG Limited
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tephen Covey, one of the most inspiring authors and experts on leadership, has frequently emphasised that leadership should not be confused with management, noting that “Management is efficiency in climbing the ladder of success; leadership determines whether the ladder is leaning against the right wall.” In other words, leadership is not only about the effectiveness of doing things right but doing the right things and in an efficient manner. But why is leadership so important in the current working environment and how is this linked to emotional intelligence? Leadership is a person’s ability to engage in a process of encouragement, inspiration and guidance of others to perform a task. Ideally, the leader acts as the role model for others to follow and is the one who enjoys the team members’ acceptance. Their relationship should not be based on fear or intimidation. Successful leaders and successful companies are those that value and invest in a fruitful cooperation with the rest of the workforce for long periods, while at the same time cultivating trust, transparency and fairness. As Richard Branson notably advised: “Train people well enough so they can leave, treat them well enough so they don’t want to”.
Emotionally Intelligent leaders Emotional intelligence plays a key role in companies and is closely linked to leadership as it reflects someone’s ability to coach others passionately and help them evolve. This can be achieved in a working context where goals are clear and every individual plays an important role in an environment where initiative, motivation, appreciation and mutual trust flourish. Competitive work environments change at laser-fast speed. Especially in settings where teamwork dynamics play an important role, emotional intelligence can be a
Emotional intelligence can be a game changer for success in a company game changer for success in a company. According to Daniel Goleman, emotional intelligence is the ability to recognize, understand and manage our own emotions and to recognize, understand and influence the emotions of others. By doing so, the leader may encourage teams to outperform and exceed themselves, while capitalising on their abilities to the maximum. This relates to the long-term objective of most companies, which is the gradual
increase in revenues and securing the maximum performance from their employees. In the past, emotions in the working environment were treated negatively and often interpreted as signs of weakness or incompetence. The development of new technologies, the need for increased profitability, intense competition and the strict regulatory framework have led modern companies to take a different approach to management, which includes the emotional intelligence factor. Over the years, the business world has come to the conclusion that when emotions are managed effectively, this can lead to exceptional results. This is why companies now emphasise the fact that they consider their human capital to be their most valuable asset. When a team does not feel connected to the leader, it will show unwillingness and refrain from any positive effort. If the workforce is not satisfied, its performance will decline and that will inevitably have a negative effect on the company’s progress. On the contrary, if team members are satisfied and feel that they are an important integral part of the company, they are likely to be more productive. The relevant literature highlights the following five qualities of emotionally intelligent leaders: 1. Self-awareness, which relates to how one’s emotions, strengths
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and weaknesses affect others 2. Self-regulation, a trait in leadership coaching, which outlines the avoidance of believing in stereotypes, without prior knowledge of people, and the avoidance of verbal attacks and a lack of judgement 3. Motivation 4. Empathy and compassion, which includes the ability to recognise a perspective other than one’s own 5. Outstanding communication skills Are Leaders Born or Made? This is a challenging question, often raised by management experts and economists. A charismatic leader followed by a motivated team may be a decisive factor in the success of the company. Over the years, the perception has changed in the direction of the belief that, if someone is provided with the right tools and the proper guidance, leadership can be learned in time. Even the most gifted leaders, without proper training, achieve less than those who invest time and effort in developing and expanding their skills. Effective leadership should be a matter of personal effort for continuous professional development and self-improvement. To sum up, it is clear that leadership at work will always be a unique challenge, as was - and always will be- the art of managing people. The leader of the future is the one who is able to comprehend his/her own and others’ emotions and act accordingly. The leader who shows empathy and compassion to people is awarded with their loyalty. The emotionally intelligent leader activates teamwork, stimulates people to contribute their best and therby increases overall performance.
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meet the cfo
Achilleas Zacharia
ACCOUNTANCY CYPRUS
meet the cfo
Although the Chief Executive Officer (CEO) of a company or organization is the person with ultimate responsibility for ensuring that it functions properly and implements the strategy set out by the Board, the Chief Financial Officer (CFO) is becoming increasingly important and powerful. We spoke Achilleas Zacharia, Financial Manager at Iron Mountain Cyprus.
I am pretty sure that I would have a difficult time going back to manually trying to gather information!
There have been numerous reports over the last 2-3 years which suggest that the role of a company’s Chief Financial Officer (CFO) is changing rapidly. Is this your experience? One of the most critical aspects of staying relevant in any position, is the ability to accept and embrace change. Digital transformation is in everybody’s mind when we talk about rapid changes in the finance department. Our company is proud to be one of the local success stories, when it comes to transforming that department’s operations. In the past four years we have managed to move from a traditional process environment, into a fully digitised and paperless workflow environment. Obviously, it helps that Iron Mountain is the one offering this transformation service but it is indeed something which proved to be easier to roll out than anticipated. Tech advances will definitely continue to force change in more aspects of the finance process environment, and we need to be able to accept this as the new norm. It has been suggested that the CFO is perhaps the one person in an organisation who sees the ‘big picture’. This suggests that the roles of CEO and CFO are growing closer. Would you agree? This is especially true in our case, a company with a modern CEO and a strong management team, where the CFO is close to all Senior Executive positions. The evolution of this relationship with all functions
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is a result of the necessity for instant information exchange among departments. Typically, the CFO has a good picture of both the historical and forward-looking financial performance of each department and of the company as a whole. The CFO is no longer just managing the company’s financial targets but is deeply involved in the strategic planning of the company, with interaction in the targets and performances of business development, innovation, operational and even human resources and compliance. Have you had to develop certain new skills for your position in today’s changing corporate world? Technology is the obvious skill which is pretty much anticipated in this digital era. The ability to accept and work with new technology is essential and when the need arises, usually on a tight timeline, you need to make sure you are not left behind. People skills also need to be applied more and more in my daily work routine and you want to make sure you have the right people and leadership skills for that. Typically, finance functions have not paid attention to that in the past and it has come back to disrupt the department operation as well as the interaction with the rest of the company. My personal experience during the acquisition of Fileminders by Iron Mountain and the ensuing transformation from a local, privately owned company to being part of a global SEC-regulated corporation has also
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meet the cfo
required significant skills-building, both in function know-how as well as in communication with other colleagues on a global basis. Technology is changing business in many ways. Has it had a direct impact on your work as CFO? Iron Mountain is at the forefront of transforming local companies for the past four years with the introduction specialised digital solutions. I am happy to say that the first successful project for our digital team was our finance department, which we have managed to seamlessly transform into a completely integrated, paperless workflow environment. Integration between operations systems, HR tools, ECM and our ERP proved to be the setup to help our Digital Solutions Team establish the template for the successful transformation of many of our customers’ finance departments. More specifically, traditionally tedious monitoring and reporting tasks have been automated and are since managed within the integrated system as reports or dashboards with information from all departments, by directly feeding on real data saving on time and minimising disruption. I am pretty sure that I would have a difficult time going back to manually trying to gather information! How much pressure is placed on the CFO these days due to stricter regulation and compliance requirements? The first thing we need to accept is that compliance and finance-related
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We need to accept is that compliance and finance-related regulation is here to stay and will only increase in the future
regulation is here to stay and will only increase in the future. Obviously, we see a significant impact on our workload, mainly due to the increased requirements of commercial banks but, again, we are utilizing technology to help us with the processing of some aspects of the compliance cycle such as KYCs and, more recently, compliance with the GDPR, which has impacted a lot of the personnel-related activities of the finance function. Moreover, as a subsidiary of a NYSE listed corporation, compliance requirements also rise from SEC regulations and we also need to handle this as part of our routine workload. Building the know-how and skills to manage these requirements has proven a bigger load than one would expect from a nonfinance company. In your personal role at Iron Mountain, are there aspects of the work that are very specific to the company and the sector or is a CFO doing pretty much the same thing in any company or organisation? Typical finance requirements, roles and tasks remain similar to the rest of the market, apart from the particular
case where our finance department is functionally reporting both to the Iron Mountain Cyprus CEO as well as to the regional finance team. Preparing and reviewing rolling monthly forecasts, annual budgets and multiyear plans still form a core part of our routine, as does the identification of departmental and corporate Risks and Opportunities. A CFO has the responsibility to convert numbers into useful information for members of the Senior Executive Team, so the utilisation of technology has assisted our team in streamlining traditional finance tasks and we are always looking to improve and upgrade interaction with the rest of the company. From my interaction with other CFOs in multiple market sectors, it is obvious that the main difference between our company and others is that, in Iron Mountain Cyprus, it is important to be part of the company culture and the move from a traditional hierarchical into a flat management system built on transparency. All members of the team share the same vision and enthusiasm, which is a powerful driver when it comes to managing targets and reaching our goals.
meet the cfo
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FINANCIAL SERVICES
The Emerging Landscape of FinTech Regulation CySEC reports increased interest in the applicability of blockchain technology
By Demetra Kalogerou, Chairwoman, Cyprus Securities and Exchange Commission
I
n recent years, investment in financial innovation has increased, changing the way supervised entities provide services and interact with their clients. The scale and pace of innovation in the FinTech sector present unique regulatory opportunities and challenges. They include striking a balance between the use of the latest technologies and maintaining financial stability and security for consumers and investors. At CySEC, we are committed to promoting innovation and its benefits, while ensuring investor protection. In fact, we believe that appropriate and proportionate regulation can improve the demand for innovative services, by increasing consumer trust and confidence in those services and their providers. Today, CySEC supervises 676 entities, including 247 Investment Firms licensed under the MiFID II regime. More and more investment firms in Cyprus are becoming part of the FinTech revolution, creating a unique financial environment that has already enhanced economic growth and employment. Many firms, especially in the Forex industry, are adapting their business models so as to incorporate new technologies, within a long-term regulatory framework that is designed to enhance investor protection, transparency and productivity. Monitoring financial innovation CySEC looks to actively support new financial technologies – particularly those that can help finance the growth of the real economy – while demonstrating its commitment to investor protection, through a sound and embedded culture of
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good governance. In this regard, CySEC established an Innovation Hub in 2018 aiming to explore FinTech and RegTech developments such as blockchain, virtual currencies, Crypto exchanges and DLT solutions. We have already met with more than 25 FinTech/RegTech companies prior to the launch of their products or services and provided them with our views on the applicability of existing regulations, ensuring the safety and protection of investors. CySEC has also established an in-house Innovation Hub Working Group, that will act as a contact point for providers of emerging financial technologies.
At CySEC, we believe that all crypto-assets and relevant activities should be subject to AML provisions Risks related to FinTech After engaging with the market via the Innovation Hub, CySEC is witnessing increased interest in the applicability of blockchain technologies, one of the biggest areas of FinTech innovation, in modernday trading. What’s more, blockchainbased crypto-assets are especially significant with regard to the future development of the financial markets. On the other hand, crypto-assets have also been associated with risks, mainly because of the volatility of their trading prices. Their extreme price instability constitutes
a significant risk, which could result in investors losing their entire investment. In fact, there have already been numerous incidents of fraud committed through crypto-asset exchange platforms, including incidents of money laundering. At CySEC, we believe that all crypto-assets and relevant activities should be subject to AML provisions. Since launching the Innovation Hub, we have been contacted by entities engaging in crypto-asset activities, a number of which do not appear to fall within the existing regulatory framework. Therefore, CySEC is considering the transposition of the parts of the 5th AML Directive (AMLD5) concerning crypto-asset activities into national law. Taking Financial Action Task Force (FATF) recommendations into consideration, CySEC also advises on gold-plating AMLD5, to bring the following activities under the AML/CFT obligations: a) Exchange between crypto-assets, b) Transfer of virtual assets, and c) Participation in and provision of financial services related to an issuer’s offer and/or sale of a crypto-asset. Such an extension is necessary, as it will address AML risks emanating from cryptoasset activities in a more comprehensive manner. CySEC’s regulatory agenda is based on safeguarding high standards of investor protection and trust, so that the innovative product market grows in a healthy manner. We look forward to the future with great confidence.
Choose your adventure.
Ford EcoSport
€ 16.900 ΑΥΤΟΜΑΤΟ
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Ford Kuga
€ 22.900 2.0 DIESEL ΑΥΤΟΜΑΤΟ
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management
Executive Excellence Nicos Timotheou, a former CEO of Cyta, and Koralia Timotheou, a successful consultant, have just launched their book Executive Excellence – Combine Leadership and Management to Create and Deliver Value, a 400-page guide that covers all aspects of the job and frame of mind of an executive heading an organisation at any level, from team leader to CEO. Here, the authors answer questions from Accountancy Cyprus.
What does research show with regard to business success? It shows that profitability in the free (capitalist) world has been declining continuously during the past decades and that only 60 (12%) of the Fortune 500 companies of 1955 still existed in 2017. The rest had disappeared. What is business success? It is the creation and delivery of value to the organisation’s stakeholders’ satisfaction – ideally, to their delight – with the emphasis on the delivery! So, it isn’t enough to produce value. You need to deliver it. Even then, it isn’t enough to just deliver it. It must satisfy the needs of the stakeholders and ideally delight them! Who are the stakeholders? What value do they expect? There are many: Owners, shareholders, investors or sponsors expect a competitive return, a market value increase of their investment, the satisfaction of beneficiaries and a sustainable competitive operation. Lenders expect to be paid interest and capital within an agreed timeframe. The people of the organisation (executives and operatives – all employees) expect competitive emoluments, a high-quality work environment, a fair pension and competitive perks. Customers, clients, consumers, patients, members, students, citizens, etc. expect value for money, promised and implied quality or functionality, reliability, durability or aesthetics. Suppliers, partners and associates expect the prompt settlement of their invoices and productive and reliable cooperation. Government agencies and regulators expect compliance with all applicable legislation, regula-
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tion and permit terms and the community expects not to suffer adverse effects, but, on the contrary, to benefit through high-quality employment, fair prices for their services, raw or semi-finished products, natural resources and social responsibility projects. What creates and delivers value? The organisation’s enablers – the components of its value streams: This means ethics, governance, culture, processes, data, information and knowledge, nonhuman assets, people (employees) and partners, suppliers and sellers, learning, improvement, creativity & innovation and leadership: the executives – their executive capability: their management and leadership competence and competency, their cultural and team fit and their implementability and their ethics. It’s the executives who get the enablers to create and deliver value and lead the organisation to success or failure. Those in the hierarchy who head organisational entities or projects, from the CEO to the foreman! So, who or what is to blame for the high rate of business failure? The usual answer is: ‘Disruptive change’ but this raises a second question with an obvious reply: Who should have anticipated or promptly identified the disruptive change and how would they have acted? Who else but the executives of the organisation! Additionally, in many cases, it is the Board of Directors and, especially its Chairperson, who, in any case, acts as an executive with regard to the operation of the Board. How is executive success judged? By the degree of satisfaction of the or-
ganisation’s stakeholders when evaluating the value delivered to them. So, which executives are successful? The ones whose organisation or project creates and delivers value to its stakeholders’ satisfaction in a sustainable way. What makes an executive successful? Partly, it is the competence in comprehending profoundly what makes up the organisation of the 21st century. But this is not enough. Successful executives, besides being productive managers and effective leaders, fit into the organisation’s culture, and its executive team, where applicable, and are willing and able to implement their executive capability, performing three executive roles in a balanced way: 1. The Executive as a Technocrat: Building and maintaining a 21st century organization as a holarchical system based on a hierarchy of tightly knit enterprise business architectures and structures. 2. The Executive as a Manager: Executing the management process: planning, budgeting, organising, staffing, directing (issuing instructions), coordinating, reporting, and productively managing: The organisation as a holarchical system, its ethics, governance, policies & compliance, its culture, value streams, architectures, processes and data, its generic business subprocesses, its brand, its products and services lifecycle and value, its customer lifecycle and value, its finances, its improvement, creativity and innovation, information, knowledge and wisdom, relations with its stakeholders, with the Chairperson and the non-executive members of the Board, with the state (regulators, etc.), with its
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partners, suppliers and sellers, its people, its non-human resources, its operations (the execution of its mission) and its strategic projects (the execution of its vision 3. The Executive as Leader: Effectively executing the leadership process: comprehending, conceptualising and communicating to the organisation’s people (architectures, models, mission, processes, vision, strategic projects, knowledge, targets, plans, projects, actual results, deviations…), aligning its people around its values, mission and vision, engaging them to execute its plans, processes and projects, obtaining their commitment to achieve outstanding results, inspiring (extreme) ownership of their mandate, coaching and mentoring them, envisioning improvement and innovation, leading the execution of the mission (its operations) and leading the realisation of its vision (the execution of its strategic projects). What does international research say about executives? Unfortunately, it shows that the majority of executives exhibit significant gaps, especially with regard to their leadership competencies, their organisational competences and their capability to combine leadership and management. A couple of examples: 1. With regard to alignment and open dialogue, research shows that 34% of top executive teams are continually misaligned
with respect to mission, vision and strategy and exhibit stress. Some 66% of top executives admit that they are unable to raise critical issues (33%-66% in the EU & USA, 75% in Japan, 80% in China) and 80% of Boards are out of touch with their organisation’s reality. 2. With regard to engagement, only 29% of employees are fully engaged, while 26% are disengaged. Engagement is hindered by inadequate evidence-based information, open dialogue and willingness to raise critical issues.
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cessful 21st century executive’s world. In Part II, we elaborate on what successful executives do and how they do it as managers and as leaders, while in Part III, we present the successful executive’s competences and competencies and how they can be developed further. The book includes many real-life and it is very practical, in that it poses vital questions at the end of each chapter which help readers assess themselves and their organisation.
How can your book bridge the gap in executive competence and competency? Our book aims at helping executives improve their own and their associates’ competence and competency.
This sounds like a lot of material to digest! Yes! This is exactly the reason we call it a guide. It’s like an ‘instruction manual’ for the successful executive. Our readers will all have different experiences and achievements. Some are just starting out; others are already accomplished executives. We hope that everyone will find something he or she needs in there, something that will change the way they operate. To assist organisations further, we offer workshops upon demand and can be reached at either of these e-mail addresses; nicos.timotheou@strategic-change-consultants.com koralia.timotheou@strategic-change-consultants.com
How would you describe your guide in a nutshell? It is based on our long experience in executive and consultancy jobs, as corroborated by our extensive meta-research. In Part I, we present in a comprehensive manner the suc-
Executive Excellence – Combine Leadership and Management to Create and Deliver Value is now available on Amazon.uk in electronic and printed formats (€24.99) For more information: www.strategicchange-consultants.com
What is the solution to this severe problem? It is obvious that executives need to develop their organizational, management and leadership competences (their know-how) and competencies (their personal qualities and skills).
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management
How to Create Trust in the Workplace By Andrie Penta, Marketer and Corporate Trainer
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n recent years, great emphasis has been placed on the need to create an atmosphere of trust in the workplace, as this has been proven to lead to greater staff input, more creativity and improved performance. Experience has shown that high performers tend to leave a company when they feel disengaged, which is partly a result of a lack of trust in their bosses. When employees don’t trust their leaders, the business tends to suffer. The question is, what should team or business leaders do to ensure that they cultivate trust among their people?
focusing on what their people do badly, they should start focusing on what they do well. After all, every mistake made is a step closer to excellence.
3. Be Transparent Leaders have to be everything and the complete opposite. Being a leader of any sort is hard work. Everybody who has been in the hot seat has made mistakes. Some try to hide them and others try to pass on the blame. Accountability is hard to find nowadays. However, the type of leader who tends to be more respected is open and transparent with his/her people in all areas. In this way, employees feel 1. Eliminate Fear that nothing is kept secret from them Some organizations have cultivated and they understand the reason behind fear among their people, wrongly every action. The more they know about believing that in this the organization’s plans, way, they will be pushed priorities, challenges and Trust can into improving their opportunities, the more in only exist in sync they will be with the performance. However, a fear-free if employees know that leadership team. transparency will get them environment into trouble, they will be 4. Spend Time with scared to share their real Your People emotional state. A good way to start is The C-suite tends to hang out with to openly invite employees to share their those of its kind, which is a big thoughts, experiences and feelings. The mistake. At least half of their time next step is to note them down and start should be spent with staff who don’t identifying the most common issues belong to the top management. In prior to taking action. this way they can establish a deeper connection, involve their people in 2. Acknowledge Success decision-making and let them get to Insecure leaders see their team members know the leader by name rather than as threats, believing that any mistake by title. Trust is built through honesty, will reflect negatively on them. This effective communication, an open-door type of leader acts selfishly, out of fear policy and small gestures of kindness. of being exposed. Trust can only exist Leaders should constantly be asking in a fear-free environment so, instead of their employees how they’re doing,
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what they think and what they’d like to see at work. 5. Be Friends Being a human first and a leader afterwards is what creates strong teams. Focusing on the person, showing empathy, understanding and trying to accommodate any special circumstances can make the difference between a highperformance team and the opposite. Actively listening and trying to assist an employee who might be going through personal difficulties (which can affect work performance), will later foster a deeper level of trust. 6. Show That You Trust Them The most precious thing in this world is trust. It can take years to earn and only a matter of seconds to lose. According to Ernest Hemingway, “The best way to find out if you can trust somebody is to trust them.” Allocate tasks, one step at a time. Trust them to complete each task to the best of their ability. If leaders give the impression that they have them covered, employees will give their 150%. 7. Embrace Flexibility There is a global trend towards employee flexibility, remote working and autonomy. Instead of obsessing on location, leaders should focus on engagement and empowerment. By keeping employees engaged, they are likely to be effective, no matter where their desk is. Performance is rooted in trust, no matter where the work gets done.
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At the end of the day, it’s not what you say, it’s what you do that matters
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real estate
Yiannis Misirlis: Global Market Forces Driving Investors to Cyprus
F
rom the podium of The Economist conference in New York, Yiannis Misirlis, Director of the Imperio Group and Deputy Chairman of the Cyprus Association of Property Developers, spoke extensively about the real estate sector on the island, stressing the fact that it is currently at a stage of recovery, following the crisis of 2013. He noted that, according to the latest stable economic indicators, as well as positive historical data, the country’s real estate sector is, once again, based on very stable and healthy foundations. Speaking about fears of a new recession in the US economy, Misirlis said that the zero yield of European government bonds, such as Germany’s, and the ongoing uncertainty of Britain’s exit from the European Union, are leading risk-averse investors to invest in real estate in Cyprus, which is one of the fastest-growing economies in Europe, currently seeing most of its market indicators in green. “During the decade preceding the global financial
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crisis (1999-2007), the normal size of the market was 13,000 annual transactions, so there is still a long way to go from the 9,200 transactions recorded last year (2018),” Imperio Group’s Director noted, adding that fundamental principles and market forces are at present creating some very exciting opportunities, especially in the real estate market for rent. He also talked about the fact that international and institutional investors are showing great interest in projects related to tourism and student residences in Cyprus. Finally, Yiannis Misirlis referred to Brexit and expressed his confidence that a number of opportunities will arise, as international property investors are driven away from London & the UK and turn their attention to what Cyprus has to offer.
The country’s real estate sector is, once again, based on very stable and healthy foundations
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real estate
Affordable Accommodation: Time to Get Real By Antonis Loizou F.R.I.C.S., Antonis Loizou & Associates Ltd, Real Estate Valuers & Estate Agents
T
he former Irish Minister of the Environment, Alan Kelly, once announced that developers should build affordable accommodation for Ireland’s citizens – “Get Real,” he added, “and build accommodation which is affordable to the citizens”. The Minister realized that the minimum size of apartments set by the regulations was larger than what people could afford. He adopted the following, next to which I have added Cyprus’ version:
space and not in small boxes and, instead of examining what people can afford and, by extension, help solve the housing problem, it chooses to provide our ‘high and mighty’ locals with ample minimum living space, as if all Cypriots are high-earners. Very few countries with planning zones, building density, height regulations, etc., have this additional measure of minimum living space. When one considers that, for residential units, the average sale price is now around €1.500/sq.m. and at the
Existing Regulations(IR)
New Regulations (IR)
Cyprus*
One bedroom 55 sq.m.
45 sq.m.
55 sq.m.
Two bedroom 90 sq.m.
73 sq.m.
90 sq.m.
Three bedroom 100 sq.m.
90 sq.m.
100 sq.m.
Studio (new concept)
40 sq.m.
45 sq.m.
* depending on location
In addition to the reduced sizes, the Minister added relaxations regarding parking requirements, etc., especially in town centres in order to encourage affordable living/rentals in those areas, so that people could be close to their work. The setting of minimum sizes for apartments/residential units is a “red flag” for our company and we have been fighting this nonsense for the last 26 years with no success. The Planning Department has always argued that Cypriots should live in a “decent”
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seaside (near the beach) it is €4.000/ sq.m., you can quickly calculate that that a 5 sq.m. difference in size means a difference in cost of €7,500€20,000. When VAT, transfer fees, etc., are added, the difference can be anything between €10,000 and €30,000. Housing goes in circles. We start in small apartments and, as the family grows and income increases, we move on to bigger accommodation. This means that reduced size units reflect not only their affordability for the
now poorer Cypriots but make the sale of such units more attractive in terms of attracting the foreign market. We have managed several projects over the years and, nowadays, the older ones with a 2-bedroom apartment of 60 sq.m. (built prior to the minimum size measures) are the most marketable, especially for holiday home units. At Ayios Elias (Protaras area), because the project has 60 sq.m. 2-bedroom units, not only are they the most marketable but there is a waiting list of buyers (average sale price €100,000), as opposed to “better” and more spacious accommodation (80 sq.m.) with a €20,000 price difference, for which there is practically no demand. In a project in Larnaca, located 100 metres from the beach, the sale price is €300,000 whereas a 60 sq.m. apartment would cost approximately €170,000. For those who are against these smaller units, we say, “If you can buy a Mercedes, why buy a Mini?” It is, of course, all a matter of price. However, there is no standard set for cars and other products for the ‘blue-blooded’ Cypriots who need to have ‘proper size’ accommodation. We blame the Planning Department, the Cyprus Technical Chamber, the Association of Architects and others for failing to grasp this basic human/economic circumstance of the country. The Developers’ Association seems to have no views on this matter, even though its members would
real estate
be the prime beneficiaries of any change. Ours seems to be the only free voice in the wilderness of nonsense and we feel that such narrow-mindedness should have a penalty. Those who cannot understand the basics of the construction industry should either be sent home (if Government officials) and/or made to pay compensation for the loss that they are causing (financial and human) to the country’s coffers. When one considers that, today, approximately 27%% of buyers are foreign (the figure was 45% in 2008), the local market should not be ignored, bearing in mind the large percentage that it comprises in terms of demand. Recently with the increasing problem of affordable housing and rising rents, various associations, as well as the Government, have woken up to the fact that we have a problem, especially with student housing and rentals. All sorts of ideas are now being thrown onto the table for discussion, including increased building density, tax incentives and the abolition/reduction of minimum sizes. Why it has taken them 26 years to realise this is beyond us. Could we ‘borrow’ Andrew Kelly for a while to examine the nonsensical state of our planning requirements? After all, it took another Irishman (John Hourican) to start fixing Bank of Cyprus!
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Housing goes in circles. We start in small apartments and, as the family grows and income increases, we move on to bigger accommodation.
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ict
Experience, Flexibility, Responsiveness and Commitment to Quality These are the qualities that have made NetU Consultants Ltd. one of the most successful IT solutions and services organizations in the Eastern Mediterranean, as the company’s Senior Commercial Manager, Christos Tattis, explains.
NetU is a leading Information Technology solutions and services organisation in Cyprus and Greece. What is the key to its success? Since its founding, NetU has focused on the software sector, with years of experience and a unique know-how. This specialized know-how, combined with the methodologies we use, our excellent knowledge of the market and the qualified staff we employ are the keys to our success. These factors give us the advantage of being able to really identify customer needs and propose the most appropriate solution to implement within schedule and within budget, while ensuring the highest levels of quality and safety. What services does the company offer to clients? NetU offers specialized solutions and IT services for medium and large organizations in both the private and the public
Business models are expected to change in the next years, driven by digital disruption and the need to get closer to the consumer
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sector. In the private sector, NetU is a leader, having implemented projects for multinational and local companies in industries such as Shipping, Insurance, Automotive, Hospitality, Wholesale Distribution and others. In the public sector, NetU is one of the main suppliers of integrated solutions for the Government and the wider public sector. It has also implemented systems for other governments, such as those of Greece and Croatia. Our solutions and services are divided into four categories: 1. Business Solutions: We implement internationally renowned horizontal and vertical business applications such as Enterprise Resource Planning (ERP), Financial Management (FMS), Customer Relationship Management (CRM), and Human Resource Management (HCM). These applications are based on business solutions from leading business software vendors such as Oracle NetSuite, Salesforce, Incadea and Infor. 2. Technological Solutions: We offer state-of-the-art technology solutions utilizing products from major technology manufacturers such as Oracle, Microsoft, Red Hat, ESRI, Hewlett Packard Enterprise, Cisco and others. 3. Professional Services: We provide a wide range of specialized IT services including project management, software development, implementation, consulting services, technical services, training, maintenance and support. 4. Systems Integration: We offer complete solutions, covering all of an organization’s IT needs by combining Professional Services with Business and / or Technology Solutions.
How do your clients benefit from these services? Our clients benefit from the consultative approach that we adopt to implement our solutions, by applying proven methodologies to ensure success. This approach leads to continuous optimization, which translates into faster delivery, lower costs and increased productivity. Furthermore, to ensure that our clients can maximize the value of their investment, NetU provides comprehensive maintenance and support services for all the solutions we offer. Through a permanently staffed helpdesk, we reassure our customers that our commitment to them does not end when their system goes live. Our services include expert technical assistance and advice, problem solving and monitoring, operational health checks, trainings and on-site visits. The close relationship with our industry partners provides us with online access to knowledge databases and to a dedicated pool of support consultants overseas, to quickly and efficiently resolve any problems. Our experience, flexibility and responsiveness assure our clients that they can rely on us not just when solutions are first implemented but throughout their system’s lifetime. Last but not least, NetU places great emphasis on quality and has developed a Quality Assurance methodology based on proven methodologies, standards and best practices to ensure the provision of advanced technological solutions of the highest quality. Our commitment to quality is evidenced by the fact that all our activities have been certified to meet the requirements of ISO 9001: 2015. NetU is also ISO 27001: 2013 certified, ensuring the highest level of security and protection of sensitive customer information.
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How important is it for businesses to make the necessary digital transformation and invest in modern technology? Organisations have no choice but to digitally transform. The aim of Digital Transformation is to use technology to transform a service into something significantly better. The evidence for companies leveraging digital technology to advance their business strategy shows many expected benefits, such as reduced costs, improved customer satisfaction, consolidated operations, better analytics and increased agility and innovation. With Digital Transformation taking place in every field, it is crucial for organizations to invest in new technologies that will help them follow the rapid growth of the market and satisfy their customers at every step of the journey. Business models are expected to change in the next years, driven by digital disruption and the need to get closer to the consumer. Therefore, digital transformation will become a continuous journey to stay competitive rather than a one-off project. What are the new trends in the area of IT that businesses should be looking out for? The future of every Cypriot business lies in its ability to utilise technology to transform the customer value equation and drive its competitive advantage. Artificial Intelligence and the Cloud are the two main technologies that are expected to have the most significant transformational impact on every business by 2020. Although the Cloud industry has matured rapidly during the past decade, it is one that’s constantly
evolving and innovating. Cloud industry leaders such as Salesforce and Oracle NetSuite use their advancements in technology to focus on innovation, bringing new features and functionalities that are capable of changing an organization’s productivity and efficiency, and, ultimately, driving the customer experience. Combined with AI, Cloud computing can not only change the way businesses operate but it can also innovate in the way customers interact with them and vice-versa. How do you view the future of the digital business and what role is NetU playing in that future? NetU recognises that the future of enterprise software is in the Cloud. For this reason, we have entered into agreements with leading Cloud application providers such as Salesforce and Oracle NetSuite, offering customers a full range of Cloud applications such as ERP, CRM, HCM, Financial Management, e-Commerce, etc. to meet their unique and highly demanding needs. Cloud applications reduce implementation time, increase efficiency, help improve cash flow and offer the flexibility, cooperation and security that every Cypriot business needs. Salesforce is recognized as the top customer relationship management solution (CRM) and is used by more than 100,000 organizations. Oracle NetSuite is a leading provider of enterprise resource management (ERP) and financial management Cloud solutions. It is considered to be the most rapidly evolving Cloud ERP solution and is used by more than 40,000 organizations. NetU’s expertise in
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The future of every Cypriot business lies in its ability to utilise technology to transform the customer value equation and drive its competitive advantage Cloud solutions has recently been acknowledged by CIOReview magazine, and our company was named as one of the 20 most promising Oracle NetSuite solutions providers worldwide for 2019. What are NetU’s plans for the next 3-4 years? For the next few years we have a strong commitment to lead the way in Cloud applications adoption, aiming to become a regional solution provider. At the same time, we will engage in all necessary activities towards strengthening our longtime expertise in large-scale integration projects in the public sector and exporting this expertise to other countries. We intend to further establish our position as a leading and recognized IT solution provider in Cyprus and abroad. NetU plans to be a leading contributor to digital transformation by helping organizations distinguish themselves among the competition in this way.
ACCOUNTANCY CYPRUS
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professional news
IASB proposes to update Conceptual Framework reference in IFRS 3 The International Accounting Standards Board has published for public consultation proposed narrow-scope amendments to IFRS 3 Business Combinations. The amendments would update a reference to the Conceptual Framework for Financial Reporting without changing the accounting requirements for business combinations. IFRS 3 specifies how a company should account for the assets and liabilities it acquires when it obtains control of a business. It refers companies to the Board’s Conceptual Framework to determine what constitutes an asset or a liability. IFRS 3 refers to an old version of the Conceptual Framework. The Board proposes to update IFRS 3 so it refers instead to the latest version, issued in March 2018. Updating the reference without making any other changes to IFRS 3 could change the accounting requirements for business combinations because the liability definition in the 2018 Conceptual Framework is broader than that in previous versions. Companies would need to record provisions and contingent liabilities when they acquire a business they would not record in other circumstances. To avoid this, the Board also proposes that for provisions and contingent liabilities, companies refer to IAS 37 Provisions, Contingent Liabilities and Contingent Assets instead of the Conceptual Framework to determine what constitutes a liability. This change is proposed to stand until the Board decides whether and how to amend IAS 37 to align it with the 2018 Conceptual Framework.
Annual improvements to IFRS Standards Proposed The International Accounting Standards Board has also published proposed narrow-scope amendments to four IFRS Standards as part of its maintenance and improvements of the Standards. Annual improvements are limited to changes that either clarify the wording in an IFRS Standard or correct relatively minor unintended consequences, oversights or conflicts between requirements in the Standards. Matters dealt with through annual improvements often arise from questions submitted to the IFRS Interpretations Committee. The four proposed amendments included in this year’s annual improvements consultation document are:
Standard
Proposed amendment
IFRS 1 First-time Adoption of International Financial Reporting Standards
Simplify the application of IFRS 1 by a subsidiary that becomes a first-time adopter of IFRS Standards after its parent company has already adopted them. The proposed amendment relates to the measurement of cumulative translation differences.
IFRS 9 Financial Instruments
Clarify the fees a company includes in assessing the terms of a new or modified financial liability to determine whether to derecognise a financial liability.
Illustrative Examples accompanying IFRS 16 Leases
Remove the potential for confusion regarding lease incentives by amending an Illustrative Example accompanying IFRS 16.
IAS 41 Agriculture
Align the fair value measurement requirements in IAS 41 with those in other IFRS Standards.
ACCOUNTANCY CYPRUS
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