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NO. 136 / APRIL 2021

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THEΣΥΝ∆ΕΣΜΟΣ INSTITUTE OF ΕΓΚΕΚΡΙΜΕΝΩΝ CERTIFIED PUBLIC ΛΟΓΙΣΤΩΝ ACCOUNTANTS OFΚΥΠΡΟΥ CYPRUS

ACCOUNTANCY CYPRUS

YEARS

1961 - 2021

NATASA PILIDES

The economy will recover with the government’s support The plans on energy, commerce and investments

Minister of Energy, Commerce and Industry

DEMETRIS VAKIS

ICPAC is ready to contribute to the tax system modernisation reform ICPAC President

DISTRICT POST OFFICE CY-1901 NICOSIA, CYPRUS POSTAGE PAID LICENCE no.33 SEALED UNDER PERMIT no. 133 ΠΕΡΙΟΔΙΚΟ ΤΑΧΥΔΟΡΜΙΚΟ ΚΛΕΙΣΤΟ ΕΝΤΥΠΟ ΤΕΛΟΣ ΠΛΗΡΩΜΕΝΟ ΑΔΕΙΑ ΑΡ. 133 ΑΔΕΙΑ ΑΡ.239

EDITORIAL

fter a break, “Accountancy Cyprus” is eventually back. ICPAC’s long standing and unique publication continues its over 35 years legacy. Returning in a refreshed, modernized and more reader friendly outlook. Adapting to the progress of the times and onboarding the members’ preference as expressed in a dedicated survey, “Accountancy Cyprus” magazine will be published and circulated in electronic format which will be available from ICPAC’s website and social media accounts. There also be a novel printed version, available upon request and for distribution to state and business officials, as well as to decision makers, academia and libraries. The Council’s decision for this transition is aligned with ICPAC’s goals for environmental preservation and consciousness, coupled by the potential given for a wider outreach to readers, beyond professional accountants. It also

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falls within ICPAC’s strategy for digital transformation and a closer approach towards the younger generations, who are more and more e-versatile. “Accountancy Cyprus” magazine is open to host articles from members, firms and any other author that would provide information both on specialized issues of the accountancy profession as well as any other economy related topic. This new beginning is supported for the graphic design and printing services by FMW Ltd, whom we thank. Banking on the 60th anniversary of the Institute of Certified Public Accountants of Cyprus celebrated this year, “Accountancy Cyprus” turns its pages to the future.

ACCOUNTANCYCYPRUS | APRIL 2021 |

1961 - 2021

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YEARS

THE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS OF CYPRUS

confidence, credibility, value!

ACCOUNTANCYCYPRUS ISSN 1450-2380 The Institute Council Demetris Vakis (Chairman) Pieris Markou (Vice-Chairman) Maria Pastellopoulou (Secretary) Members Nicos Chimarides, Odysseas Christodoulou, Stavros Pantzaris, Gabriel Onisiforou, Petros Petrakis, Savvas Poyiatzis, Demetris Shiacallis, Spyros Spyrou, Demetris Taxitaris, Christos Vasiliou, Karios 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 FMW Financial Media Way 23B Armenias Street, Office 101 Strovolos, 2003, Nicosia Tel.: 22342005 Fax: 22342006 e-mail: info@fmw.com.cy www.fmw.com.cy Design and Pagination: Christiana Loizou Accountancy Cyprus is published quarterly by the Institute of Certified Public Accountants of Cyprus and is send free to all members of the Institute as well as to a large number of other persons, companies and organisations. The Institute can accept no responsibility fot the accuracy of contributed statements or articles appearing in this publication and any views or opinions expressed are not necessarily endorsed by the Institute, its Council or by the Editors.

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08 FORWARD THOUGHTS 10 ICPAC NEWS By Kyriakos Iordanou

• • • • •

Council, Management and Committees activities ICPAC’s management team Broadening Cooperation Technology and Digitalisation SAVE THE DATE: 24 June 2021, ICPAC’s Annual General Meeting

12 COVER STORY NATASA PILIDES

The economy will recover with the government’s support Minister of Energy, Commerce and Industry for “Accountancy Cyprus”

16 INTERVIEW

DEMETRIS VAKIS ICPAC is ready to contribute to the tax system modernisation reform ICPAC President

18 INTERVIEW

MARIOS M. SKANDALIS

The need for transparency in the era of covid-19 pandemic Chairman of the Board of Directors Cyprus Integrity Forum

22 INTERVIEW

SOFOCLES TYMVIOS

ICPAC Mentor Programme Member of the CFO Committee of ICPAC and coordinator of the Mentor Programme

24 AML COMPLIANCE

• The pandemic is not an excuse for poor AML/CFT controls • The role and responsibilities of the antimoney laundering officer

28 AUDIT & ACCOUNTING • • • •

Are Accounts Maps? Remote Project Management: is it here to stay? Opting for a review engagement as an alternative to audit for very small entities IBOR transition - Transfer Pricing implications and considerations

34 BUSINESS & ECONOMY • • • • •

Changes in the working environment The Rising Popularity of Trusts Provisional application of the EU– UK Trade and Co-operation Agreement: the institutional background and way forward Harnessing the Power of Story The legislation which governs the PEP pothen esches* is beyond repair and must be rebuilt from scratch • Industries most impacted by the pandemic and when to expect recovery • In need of a new educational system

48 C-SUITE CORNER 50 ECONOMIC CRIME & FRAUD 52 FINANCIAL SERVICES

• Meeting George Hatjineophytou Chief Operation Officer of Global Dots

• How an organisation’s culture can affect occupational fraud

• Reflecting on Gender equality in the Insurance Sector • Cyprus Fund industry: An evolving and dynamic powerhouse • What investors learned (again) in 2020

57 ICT 58 TAXATION

• Blockchain technology and the audit profession

• Opening address to the 4th Cyprus International Tax Conference • Address at the 4th Cyprus International Tax Conference • An historical note on the taxation system in Cyprus

67 IFAC NEWS • IFAC Latest Activity

ACCOUNTANCYCYPRUS | APRIL 2021 |

| Forward thoughts By the General Manager

At 60, we get stronger! Dear colleagues and friends

Kyriakos Iordanou General Manager

It gives me great pleasure to welcome you back to “Accountancy Cyprus” magazine after the break we had. Our magazine returns in a refreshed look and field format, aligned with the requests of the members for a digital edition. Hence, “Accountancy Magazine” will be delivered in electronic format, in a reader friendly edition, whilst a much lesser number of printed copies will be circulated to dedicated recipients, aligning thus with the sustainability and environmental goals. The return of the magazine coincides with the “birthday anniversary” of ICPAC. 2021 is a pivotal year for the Institute of Certified Public Accountants of Cyprus, as it turns 60. It completes 6 proud decades of contribution to the Cyprus economy and society, with active presence in all major developments and happenings in the economic development and prosperity of the country. In April 1961, 21 pioneer young professionals laid the initial foundations of our Institute for what it evolved into ICPAC we know today. At that moment, the founders of ICPAC might have not foreseen its trajectory to become one of the prime stakeholders of the economy, registering more than 5.200 active members, 3.500 students and affiliates, expanding into a multi-faceted organization with activities domestically and abroad, as well as serving as a competent authority pursuant to empowerment given to it by the State and the Law. ICPAC celebrates its platinum jubilee in a less flamboyant and in a more conservative and contained way, as a result of the prevailing conditions of the spread of the Covid19 virus predicament. Modest festive activities have been rescheduled, with their escalation being skewed towards Autumn, placing hope that the conditions then will allow it. Save the covid pandemic and all the problems and disruption it caused, ICPAC celebrates amid various pressing challenges. Given the restrictions and new way of living and working imposed by the pandemic, everybody had to reassess its modus operandi. This adaptation driven by the new digital reality essentially accelerated the digital and systems transformation targets. The pandemic set new rules for the business and social lives, introducing many cultural and habitual changes. As if technology was not enough by itself as the primary game changer, we are currently experiencing a number of other crucial game

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changing factors, which have an imminent effect both on the accountancy profession, ICPAC itself and the country as a whole. These factors include, but are not restricted to, the much-increased regulation which introduces greater transparency, compliance and reporting, tax compliance and wider harmonization, Brexit and its consequences, the Environmental – Social – Governance factors and the Green Economy initiatives, technology and digitalization. In addition, governments are expected to increase the competition between counties in the pursuit of coveted Foreign Direct Investments, tax revenues, capital and resources. All of the above tend to alter and harden the environment for international business, rendering it therefore, essential to Reset the Cyprus Economy. In simple terms, this requires all of us to roll up our sleeves and go back to the drawing board for a new set of blueprints. Resetting entails to start all over again, to thoroughly Revise, Rethink, Reforming, Adapt, Innovate and Improvise, Challenge the status quo, Reassess the business and geopolitical environment and Foresee what will be coming up soon. It also entails a detailed and frank position audit of the current situation in order to identify strengths and rectify mistakes and shortcomings. A major factor is of course the preservation and enhancement of the competitiveness and attractiveness of Cyprus as a credible international business jurisdiction. Sustainability and sustainable growth become more and more vital! With so many changes and challenges around, ICPAC is navigating its way into the future. The current crisis was not wasted, expediting decisions for acquiring new and relevant resources, both human and technological. Capitalising on its 4 R’s principle, ICPAC works in a structured manner adhering to its strategic plan to widen its Relevance in the economy and society, to foster its Reputation, to expand its Recognition, without fearing to take on any new institutional Responsibility. At 60, ICPAC does not grow older, it simply gets stronger; remaining, at the same time, committed to its vision statement: “A model professional body, recognized by the state and the society as the primary stakeholder for the accountancy profession and the economy in general, instilling confidence, credibility and value.” We promise to continue doing it for the next 60 years!!!

Advertising Order Form

YEAR 2021

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

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2021 Fixed price per issue

Any inside page:

€

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1000

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900

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500

April July Oct

Thank you in advanced. For more info:22870030 Special Prices More than one advert in the same issue you will be entitled with 10% discount Name: ..................................................... Position: DIRECTOR ..................................... Company: ........................................................................................................................ Adress: ............................................................................................................................ ......................................................................................................................................... E-mail: ............................................................................................................................ Telephone: ............................................. Fax: .............................................................. ..Signiture: .............................................. Date: ............................................................ 1 Please mark with an X any quarter as appropriate 2 The above amounts do not include VAT Contact Person Constantina Achilleos

ICPAC FORM (April 2021)

THE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS OF CYPRUS 11 Byron Avenue, 1096 Nicosia P.O.Box 24935, 1355 Nicosia, Cyprus Telephone: +357 22 870030, Fax: +357 22 766360 info@icpac.org.cy www.icpac.org.cy 1961 - 2021

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ΧΡΟΝΙΑ

ΣΥΝ∆ΕΣΜΟΣ ΕΓΚΕΚΡΙΜΕΝΩΝ ΛΟΓΙΣΤΩΝ ΚΥΠΡΟΥ

εµπιστοσύνη, αξιοπιστία, αξία!

ACCOUNTANCYCYPRUS | APRIL 2021 |

| ICPAC NEWS The Institute of Certified Public Accountants celebrates its Platinum Jubilee in 2021. Turning 60, reflects its parallel course with the Republic of Cyprus, the development of the economy and the contribution to the society. It is also a landmark milestone of the progress and diversity of the accountancy profession in Cyprus, rendering ICPAC a critical stakeholder in the economic ecosystem of the country. The 60th anniversary coincides with the unprecedented phenomenon of the Covid 19 pandemic, which turned upside down not only Cyprus but the whole world. Taking this predicament as a given, ICPAC continued its operations in an adaptive and adjusting manner, to the extent allowed by the circumstances, trying to convert the challenge into an opportunity. The major activities of ICPAC during the previous period can be summarized below:

1. COUNCIL, MANAGEMENT AND COMMITTEES ACTIVITIES The Council of the Institute held a series of meeting during 2020 and 2021, aiming to be on top all major developments and challenges. One of the primary concerns and pool of efforts was the management of the Covid 19 pandemic and sustainable servicing of the members and the economy in general. ICPAC was involved in nearly all the principal items in the country’s agenda, such as: • Covid 19 consequences and keeping the economy alive, with extensive contribution and cooperation with the Government, the most relevant Ministries and departments, the Parliament, other regulatory authorities and economy stakeholders. • Brexit and the impact on the accountancy profession. • International assessments and evaluations for compliance and AML matters • The new Delegation Agreement with the Cyprus Public Audit Oversight Board pursuant to the Auditors Law of 2017. • Suggestions for the restart of the economy, tax proposals and other administrative recommendations. • Closer support and updating towards members, turning the training provided into online courses and webinars. • Enhancement of the internal operational structure and upgrading of systems.

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2. ICPAC’S MANAGEMENT TEAM Despite the overall situation faced over the last year, ICPAC remained consistent to its strategic plan, by filling in the vacancies in its organization chart, so as to better meet its obligations and goals. The number of members of the management staff reached 20, with the newest additions being: Ms Efi Marcou Head of Learning and Development Mr Marios Kyriacou Head of Admissions and Licensing Ms Constantina Achilleos Communications Officer Ms Alexia Kythreotou Admissions and Licensing Officer

Cyprus Investment Funds Association (CIFA)

3. BROADENING COOPERATION ICPAC concluded and signed two Protocols of Cooperation with the Cyprus Investment Funds Association (CIFA) and STEP Cyprus, respectively.

STEP Cyprus

4. TECHNOLOGY AND DIGITALISATION Aligning itself to the strategic goal of digital transformation, ICPAC invests in the automation and • The Accountancy Cyprus magazine is released in electronic format • Upgrading of operational and security systems, as well as implementation of a remote working facility for all ICPAC staff • Application of blockchain technologies to authenticate the certificates issued by ICPAC • Introduction of a new workflow in order to process all incoming applications from new members, new and renew practicing certificates holders for individuals and firms, training and cpd matters. Gradual release, starting with the applications for new members. • Holding the Annual General Meeting and the voting for election of Council members in electronic means via specially designed e-platforms. • E-learning platform for training and online seminars and courses. • Presence in social media for enhanced communication and transparency of activities

5. SAVE THE DATE: 24 JUNE 2021, ICPAC’S ANNUAL GENERAL MEETING ICPAC’s 60th Annual General Meeting will be held on 24June 2021. The whole event will be held via electronics means and participation will be possible through a dedicated electronic platform. Voting for the election of members to the Council will also be done through a specifically designed electronic platform. Live streaming will be available from ICPAC’s social media accounts.

ACCOUNTANCYCYPRUS | APRIL 2021 |

| COVER STORY

The economy will recover with the government’s support The plans on energy, commerce and investments

Ms Natasa Pilides Minister of Energy, Commerce and Industry

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An exclusive interview of the Minister of Energy, Commerce and Industry Ms Natasa Pilides to ICPAC magazine “Accountancy Cyprus”. In her interview she expresses her optimism that the measures taken by the government to support businesses and households will help the economy recover. She also talks about recent developments in the fields of energy, commerce and investments.

hen should we expect the drilling programme in the Cypriot Exclusive Economic Zone to restart? It is unfortunate that the pandemic, which has had such a big impact on all of our lives, has also affected adversely the global oil and gas industry. Covid-19 has led to shrinking demand of all energy sources, including natural gas, and this, in turn, has resulted in a crash in prices, placing the global oil and liquefied natural gas (LNG) market in a period of surplus. Most major companies have been forced to drastically cut spending on new projects or postpone research activities and in this new environment of restrictions on movement, closed borders and the need to mitigate health risks to personnel, it was very unlikely that the Exclusive Economic Zone (EEZ) of the Republic of Cyprus would be the exception. Indeed, our licensees Total, Eni, ExxonMobil and Qatar Petroleum, have rescheduled their drilling programmes (exploration and appraisal) for the 2nd half of 2021, but even so, we are fortunate in that, unlike other countries, we have not had any project cancelations or abandonment of our EEZ by any company. On the contrary, we are working closely with all our licensees, assessing different scenarios

based on the pandemic’s progress, to ensure that all processes are in place for their programmes to recommence in a safe way in 2021. Do you think that our country could become a hub of natural gas in the area? Cyprus’ strategic location in the Eastern Mediterranean, at a close proximity to the Suez Canal, make it ideally suited to become an important energy player in the region, both for electricity interconnections and for natural gas. Already, the oil and gas industry in Cyprus also includes support companies servicing hydrocarbon activities in the wider East Med region. Of course, for Cyprus to become a natural gas hub, additional gas discoveries have to be made in our EEZ and in the region as a whole, essential for ensuring the viability of multibillion euro export projects such as the EastMed Pipeline, an EU Project of Common Interest supported by Cyprus, Greece and Israel, as well as the planned onshore LNG terminal at the Vasilikos area. The key, therefore, is an aggressive exploration programme in our EEZ, which, as I have explained earlier, will restart in the 2nd half of 2021. Currently, Cyprus has three natural gas discoveries in its EEZ: “Aphrodite” at 4.5 Tcf, “Glaucus” at 5-8 Tcf and “Calypso” that is still under appraisal. “Aphrodite” gas, according to the field’s development plan, will be send, via an underwater pipeline, to the Idku LNG plant, in Egypt, for exports to European and global markets. What is your estimation about the economy in 2021, with the consequences of the pandemic? With the global health crisis affecting almost all areas of economic activity, including tourism, trade, and professional services, our Government’s immediate priority has been to mitigate adverse effects as much as possible, by implementing targeted fiscal measures intended to protect vulnerable groups of the population, businesses, jobs and incomes. Hopefully, as mass vaccination campaigns begin in Cyprus and the rest of the world, at the start of 2021, restrictions within countries and at external borders, will be gradually lifted, thus allowing for a return to normality. According to recent forecasts by the Ministry of Finance, 2020 will close with a -5,5% GDP growth rate, which considering initial estimates is relatively contained. Unless the pandemic endures, 2021 is expected to mark the start of our economy’s recovery, with a 4,5% growth rate. 2022 and 2023 are expected to follow suit, with 3,5% and 2,8% GDP growth rates, respectively. To assist in our recovery efforts, the Ministry of Energy, Commerce and Industry has proposed Funding Programmes for businesses and households, of around €400 million, for the new Programming

ACCOUNTANCYCYPRUS | APRIL 2021 |

| COVER STORY

Period of 2021-27, with emphasis on greening and digitising the economy. An estimated €90 million will become available within 2021, as we intend to open in the first half of the year, our programmes for SMEs’ in the Manufacturing Sector, the energy upgrade of households and the funding of new businesses and wineries. In the second half of 2021 we will be opening our programmes for the manufacture and trading of agricultural products, as well as the digital upgrade of enterprises. What are the Ministry’s expectations in the fields of Commerce and Industry for the upcoming years? The Covid-19 crisis, with its devastating effect on tourism, has amply demonstrated that Cyprus needs to invest in its industry, which still represents 8% of GDP. As such, we have intensified our efforts to enhance both our trade and industry sectors, with measures aimed at providing support, streamlining our processes and boosting our competitiveness. Our goal is to make the transition to a circular economy and resource efficient growth, in line with both the UN’s Sustainable Development Goals, as well the EU’s Green Deal and our shared 2050 decarbonisation goal. To this end, we are currently in the process of modernising Cypriot industry, based on the guidelines set out in the new and cohesive National Industrial Policy 2030 developed by our Ministry. According to the Policy, the sector’s productivity, innovation and exports should increase in the next 10 years, through digitisation, development of new infrastructure and skills, the upgrading of existing competencies, improvement of the business environment and enhancement of access to finance and markets. At the same time, we are also working to strengthen the brand of Cyprus’ products and services and to upgrade our specialised Export Helpdesk, which brings together Cypriot exporters and potential buyers, by utilising the Republic’s 14 Trade Centres abroad (these cover 34 different countries). How could the government attract investors and in which fields should we focus? Given the positive outlook for Cyprus’ economy, as described earlier, there are excellent investment opportunities in both new and existing areas, notably in energy, tourism and hospitality, headquartering, shipping, innovation and start-ups, education and investment funds. With its business-friendly environment and multilingual, highly qualified human talent, in recent years Cyprus has been successful in attracting many foreign businesses to set up offices on the island, thus creating new jobs, adding value to the economy and enhancing know-how and expertise.

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An important part of this business service centre is the new Fast Track Business Activation Mechanism, which we have been operating at the Ministry of Energy, Commerce and Industry since October Cypriot lawyers, accountants, auditors and other specialists, with their high level of experience and qualifications, continue to provide value-for-money, top quality services, to these businesses. The Cyprus Government is committed to further enhancing the business environment, inter alia by facilitating large investment projects and recently establishing a dedicated business service centre, intended to facilitate the process of setting up and scaling in Cyprus, through the provision of expedited, one-stop services, as well as personalised guidance and information on available funding tools. An important part of this business service centre is the new Fast Track Business Activation Mechanism, which we have been operating at the Ministry of Energy, Commerce and Industry since October. As its name suggests, the Mechanism aims at helping companies of foreign interests to set up in Cyprus by completing all necessary registrations and licensing within 7 working days, as well as facilitating the issuance of residence and work permits (4-6 weeks). In addition, our Ministry is also making headway with the upgrade of services offered to businesses by the Registrar of Companies, e.g. by awarding soon a €14 million project for the upgrade of the Department’s digital platform.

| INTERVIEW

ICPAC is ready to contribute to the tax system modernisation reform

yprus tax system requires a fundamental change. The Tax Department needs to give an impetus to digitalisation, while tax evasion can only be combated through counterincentives and awareness raising among taxpayers. These are among the points raised by ICPAC President Demetris Vakis. He also points out that the Institute and its members are available for any kind of assistance the government may need with regard to tax related issues. According to Mr. Vakis, a modern tax system should take into account the current financial situation, the new trends on global Demetris Vakis Interview in nomisma magazine market, as well as the social reality with ICPAC President in Cyprus. As far as the delays of the Tax Department are concerned, Mr. Vakis highlights the need to introduce modern technology, which will facilitate the procedures and will relieve taxpayers from the inconvenience currently caused by the long delays. With regard to tax evasion, Mr. Vakis asserts that the most efficient way to deal with this matter is through implementing further counterincentives and through informing the public more rigorously.

You can read Mr. Vakis’ complete interview here: How does the ICPAC respond to the recent termination of the Cyprus Investment Program and what do you suggest in relation to attracting foreign investment on the island? The ICPAC has repeatedly pointed out that Cyprus needs to have a specific policy on investments. Both the ICPAC and its members, as well as other organisations (e.g. the CCCI, OEB, etc.) and professionals have been making intensive efforts to promote Cyprus abroad for many years. These efforts should not be wasted. We cannot stress out more that the Cyprus Investment Program should be reliable, transparent and in line with the EU directives. Therefore, we consider that the termination of the program should alarm us, as it has a negative effect on the influx of investments to Cyprus, with severe impact on the island’s development. The reasons of the termination of the program are clear. Yet, we should set our focus on how to modify, modernise and adjust our strategy to the new reality, in order to avoid any further negative developments that harm our country’s reputation in the international markets. We believe that Cyprus should re-adjust its investment scheme and start presenting it to foreign organisations in order for it to

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 Tax evasion can only be tackled with counterincentives and awareness raising There is urgent need for further digitalisation of the Tax Department

make its comeback to the stage of international economy. Can Cyprus gain its credibility as an investment destination after the latest developments with its naturalisation process? Cyprus has numerous competitive advantages which attract foreign investors. Hence, if we focus our attention to creating a new, modern, flexible and reliable investment program and present it to foreign investors, along with our country’s benefits, we can definitely change Cyprus’ image abroad. It is a fact that the latest developments have caused great harm to the country’s profile abroad. Nevertheless, with the right moves, a targeted campaign and justified arguments, we can regain the trust of foreign investors. ICPAC and its members are willing to contribute to this effort in various ways, as they have always been doing. In the same context, ICPAC cooperates with the Ministry of Foreign Affairs to promote financial diplomacy, which aims at attracting foreign investment on the island. What does ICPAC suggest in relation to improving the tax system of Cyprus? Do we need a new tax reform? ICPAC has always put forward the need for modernising Cyprus tax system. Taking into consideration that the last tax reform was made 20 years ago, and that vast economic and social changes have occurred since then, the need for a tax reform is more than urgent. The tax system should take into account the new developments and economic trends; it should be in line with the social situation, as well as the European context. Although the current tax system has several positive aspects, there are certain legislations that should be abolished or amended. A new approach is required to bring the necessary changes and adaptations. ICPAC has specific recommendations on this matter, which we have already been submitted to the government. How should the government deal with tax evasion, according to ICPAC? Tax evasion has always been an issue, not only in Cyprus but on a global scale, and like other countries, Cyprus has taken several penalising measures against it. We believe that making the punishments stricter will not prevent tax evasion.

What is needed is to think of and implement substantial counterincentives against tax evasion, while promoting a more effective public awareness raising. I am confident that if we focus on these two pillars, the results will be significantly better. ICPAC is at Tax Department’s service to discuss various suggestions that may contribute to the effective combating of tax evasion. How does ICPAC suggest responding to the EU intention to set a Common Corporate Tax Base? ICPAC believes that if this decision goes through, more problems will be created than solved. As we all know, every EU country has its own features, conditions and targets. Imposing a fixed corporate tax rate to all the countries may facilitate certain administrative tasks for Brussels, but at the same time it will cause severe problems to member states. The practical implementation of such a measure is almost unfeasible and this is something that member states understand, hence there is no agreement among them on this matter. We, as ICPAC, express our strong disagreement to this intention since it will have a negative impact on our corporate tax environment. The government shares our opinion and it has already expressed Cyprus’ opposition to this measure to the EU. What else should be done by the Tax Department in order to accelerate tax investigations and avoid the usual delays? The first step should be to introduce more technology in all procedures and on all levels of the Tax Department. This will definitely reduce bureaucracy, time consuming procedures and all kinds of unnecessary delays. Nevertheless, we should acknowledge the substantial progress that was made in the recent years, which have actually made the procedures faster than before. Yet, more should be done to this direction. Interview in nomisma magazine

ACCOUNTANCYCYPRUS | APRIL 2021 |

| INTERVIEW

The need for transparency in the era of covid-19 pandemic Marios M. Skandalis Chairman of the Board of Directors Cyprus Integrity Forum

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The Covid 19 pandemic is not exclusively a major health challenge for the whole world, but at the same time, an opportunity for all governments and partners to try their effective will to manage the various parallel losses created primarily by the economy. It is precisely this global challenge that will highlight the true honesty and transparency of what is often said by all governments around the world.

he will and policy pursued to date by the Government of Cyprus to manage this virus has proved to be quite successful, ranking our Cyprus as one of the safest countries in the world, leaving behind countries such as the United Kingdom, Germany, Italy, France. Spain. What we are expected to show now is our effective will for rationalization and full transparency, management of these damages caused by this pandemic, especially in the economic sector. Easy solutions are many, but really transparent and timeless fixed solutions very few which are not prone to various forms of corruption and will not perpetuate the stigma of social inequality and lack of real integrity. These few solutions also need the appropriate political courage and morality to implement them. This is an excellent opportunity to highlight our new Cyprus. We expect that the government’s moves and various partners will be commensurate with the effective steps taken since the first day to manage the virus. As Cyprus Integrity Forum we will support such effective measures. However at the same time, we will remain strict judges in case of promotion of opportunistic or ineffective measures that will jeopardize the prestige and reputation of our country and perpetuate the accusations of previous years in based on a lack of transparency, sustainability, timeless stability and ethics. The COVID-19 pandemic requires rapid global action. While written currently, 212 countries and regions around the world have been affected, while 3.58 million confirmed cases and a number of deaths 252 000 people have been reported. Many countries have imposed restrictions on public life to reduce the pandemic, setting

limits on unnecessary activities such as travel and social gatherings, and closing schools, offices, universities and leisure facilities. According to Transparency International: “During crises like the outbreak of a deadly virus, the risk of corruption in healthcare is exacerbated by dramatically increased pressure on the system. Disruption, uncertainty and distraction contribute to an environment in which corrupt actors can take advantage of the crisis for their own benefit” . It is essential to maintain and expand transparency, openness and integrity throughout the health sector. Several critical measures can be taken against corruption, including the open publication of research on vaccines and treatments, the protection of whistleblowers in health systems, and the provision of equal access to life-saving therapy1. However, the need for transparency and accountability goes beyond health systems themselves. What does corruption mean and what is the relation between corruption and health sector: Corruption is the abuse of power for private gain. The World Health Organisation defines corruption in relation to global health as: “misappropriation of authority, resources, trust or power for private or institutional gain that has adverse effects on regional, local or international health systems and/or that negatively impacts individual patient and/or population health outcomes.2” The exact economic cost of corruption affecting the health sector is unknown. The World Health Organization (WHO) estimates that of the $ 5.7 trillion spent on health worldwide in 2008, $ 415 billion (7.3%) was lost to fraud and healthcare abuse. One study, using data collected from 33 organizations in 7 countries,estimates that global average losses from fraud and healthcare abuse in 2013 were 6.19% ($ 455 billion of US $ 7.35 trillion in global healthcare spending). It is noted that these occur in periods outside the pandemic. The GRECO Guidelines2 The Council of Europe’s Anti-Corruption Group (GRECO) has published guidelines aimed at 50 member states to prevent corruption in the context of the health emergency caused by the COVID-19 pandemic. Guidelines issued by GRECO President Marin MrČela emphasize that the pandemic increases the risks of corruption. The healthcare sector is particularly exposed, particularly due to the growing need for emergency medical supplies and the simplification of procurement rules, the need to find facilities, and overloaded medical staff. The president of GRECO stated that “decisions related to measures by central, regional and local authorities to face the pandemic must be transparent and subject to

ACCOUNTANCYCYPRUS | APRIL 2021 |

| INTERVIEW oversight and accountability. Whistleblowers in the health sector must be protected”. Transparency in the public sector is one of the most important means of preventing corruption, regardless of form. “The need for regular and reliable information from public institutions is crucial in times of emergency. This concerns the spread and risks of the pandemic as such, but also emergency measures taken in response to them. We should not allow COVID-19 to compromise our values and our standards, including transparency and accountability. Digital information platforms, such as dedicated transparency portals, are valuable corruptionprevention tools and instrumental in protecting the rule of law”. Corruption practices can affect the public or private sector and be linked to the procurement system, bribery in medical services and corruption in research and development of new products, including conflicts of interest and the role of interest groups. There is also the risk of fraud involving the marketing of counterfeit medical products, which in turn poses serious risks to public health3. Lessons learned from COVID-19 for the future and the CIF contribution As Cyprus Integrity Forum, we would like to point out that corruption develops even more in times of crisis, especially when institutions and control systems are weak and public confidence is low. Before they occur, identifying corruption risks can help strengthen the global response and provide health care to those who need it most. Given the guidelines, reports and announcements of the global bodies involved, it is important to pay close attention: • In the supply of medicines and medical equipment • In price control. Due to shortages of medicines and other goods and services, there is increased pressure and demand, and the risk increases for suppliers to demand higher prices. • In the exchange of information on deficiencies. Without transparent information on medicines that may be deficient, health systems have no way of preparing other solutions, such as finding alternative manufacturers. • Funding for the treatment and development of vaccines. With substantial outflows of money,

•

governments should work to monitor funds to ensure that they are not used to manage personal interests with substantial outflows of money. Transparency of clinical trial data. The development of antiviral medicines and vaccines must be a transparent effort, rather than a secret competition between private companies or even national governments. To prevent general misinformation and protect complaints. There are serious concerns about the spread of misinformation and the threats that some may face in order not to talk about irregularities that may occur. The establishment and strengthening of the system for the protection of public interest witnesses play a key role in the transparent process followed in the management of the period of pandemic and crisis in general. The risks of bribery. In some countries, medical providers face very difficult decisions about which patients should be treated based on who needs the most care. This creates fertile ground for bribery. To the various charitable organizations created due to the pandemic of fundraising that is finally available to fund terrorist organizations. In the various techniques of Social Engineering that are created with the widespread use of technology to collect personal or corporate information that will eventually be used by fraudsters.

1 Transparency International. (2020). In Times Like These, Transparency Matters More Than Ever, available on https://www.transparency.org/news/ feature/in_times_like_these_transparency_matters_ more_than_ever?utm_medium=email&utm_ campaign=The%20week%20in%20corruption%20 20%20March%202020&utm_content=The%20week%20 in%20corruption%2020%20March%202020+CID_ d047cad7b46c9b00b3ea13dedb122cc9&utm_ source=Email%20marketing%20software&utm_ term=In%20times%20like%20these%20transparency%20 matters%20more%20than%20ever 2 The Guidelines are available on: https://rm.coe.int/ corruption-risks-and-useful-legal-references-in-thecontext-of-covid-1/16809e33e1 3 Source: https://www.coe.int/en/web/portal/-/covid-19pandemic-greco-warns-of-corruption-risks

CONCLUSION: The existence of open and transparent contracting procedures and the implementation of effective controls help reduce risks. Helping and implementing more effective procedures to help citizens, and especially the most vulnerable groups during a pandemic, should in no way be confused and misinterpreted, with the withdrawal of control measures and substantial due diligence. Governments must act in an open and transparent manner in order to build and maintain public confidence. As the COVID-19 pandemic continues to spread, we need to have open and honest discussions about the vulnerabilities of health systems that make them more vulnerable to corruption. As Cyprus Integrity Forum, we remain at the forefront of making sure that transparency remains the most important front and beginning in the rational approach to any challenge, even this serious pandemic. We are ready to provide any assistance and guidance to both citizens and the business world of Cyprus in this direction.

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| INTERVIEW

ICPAC Mentor Programme The CFO Committee identified a need for personal development of younger members, so and to prepare themselves for a career in the industry as finance professionals. Hence, mentoring was considered as the most effective way to meet this need and prepare the younger professionals for a promising vocational course in time. The Council of the Institute approved the suggestion of the CFO Committee which led to the creation of ICPAC’s Mentoring Programme, which falls within its strategic objective for corporate social responsibility and closer care for members. ICPAC sponsors the cost for the training and the consultants, whilst Mentors voluntarily and pro bono offer their knowledge, expertise, and time to the mentees. The programme was inaugurated in 2019 and covered the initial training of 15 mentors and the respective support of 15 mentees. The first round of the mentoring programme was successfully concluded during 2020, amid the peculiar period of the covid 19 pandemic. Capitalizing on the initial success and demand, ICPAC shall proudly continue the program for a second year, aiming to increase the number of Mentors and Mentees to 25, respectively. Depending on the development of the conditions and the restrictions imposed, ICPAC is ready proceed with the training of the new Mentors and selection of the new Mentees. This is an open call to anyone who would be interested in participating in the programme. ICPAC officers are ready to provide any information or clarifications needed. Mr Sofocles Tymvios, past chairman of the CFO Committee and coordinator of ICPAC Mentoring Programme, provides a useful insight on the scope, concept, and benefits of the programme. When and how did ICPAC Mentor Programme start? The ICPAC Mentor Program was launched in May 2019 by its CFO Committee. It is addressed to ICPAC members that work in the Industry or are considering a career outside the profession. The program was designed and supported by ICPAC in collaboration with a Company specializing in this field. The program was first presented to the ICPAC members in May 2019, who expressed their interest to participate either as mentors or mentees. These were then selected using strict criteria and both groups had to undergo training before they were matched into couples. Sessions begun in November 2019 and run until May 2020 (even through Covid).

Sofocles Tymvios member of the CFO Committee of ICPAC and coordinator of the Mentor Programme

What was the main drive behind this initiative? What drove the CFO Committee to launch this program was the realization that the accountant working outside the profession does not have a network around them to support and advise them on how to develop themselves, progress in their career and fulfil the full potential. ICPAC’s and the CFO Committee’s philosophy and role is to offer support to its members and this program is an excellent example of this. The program is fully financed by ICPAC and the mentors offer their services voluntarily and pro bono. What is Mentoring and what is the main purpose of the programme and what it entails?

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Mentoring is the informal transfer of knowledge, ideas and support from one member (mentor) to a more junior member (mentee) relevant to the career and professional development of the latter. It is quite old and started in ancient Greece where Socrates was the mentor of Plato! It involves the more senior person sharing his experience and the learnings from his journey with a more junior person, offering support, providing advice and motivation, discussing possible options and goals and agreeing on an action plan so that the junior member navigate through his career in the most effective manner and fulfil their potential The first application of the programme started in 2019 and spanned to 2020. What was the feedback from this initial experience? We started with sessions involving physical presence but our program, like everything else, then fell victim to the Covid pandemic. We persevered though and continued with virtual meetings. The program involved 6 monthly meetings, and these were completed in May 2020. The feedback from the mentees was more than promising. This quote from a mentee that participated is indicative: “Each and every session was amazing, I was learning many things on how to build a team, how to develop myself and eventually find out my WHY. I had a chance to develop my leadership skills by

observing my mentor. She would always create a circle of safety between the two of us, thus I could trust her and share my thoughts with her both on a personal and on a professional level. She would always tell me the truth in her own unique way. She was inspiring action by teaching me to think out of the box and getting out of my comfort zone. All mentoring sessions had a huge impact on me.” Is ICPAC preparing for a second phase of Mentoring activities? Are there new Mentors and Mentees? The first phase that started in 2019 was a pilot phase and involved 15 couples. Following its unmitigated success, we are now ready to continue with phase B which will involve 25 couples. Covid permitting, training is expected to take place in June 2021 with the sessions starting a couple of months later. What are the desired outcomes of this programme for ICPAC, the Mentors and the Mentees? Please indicate the benefits and values obtained? There are clear benefits for both the mentors and the mentees. Mentees will benefit from improved performance in their work and possible faster career advancement. Their job satisfaction increases and usually they are able to work with less stress. In effect they have an accountability partner that will not only support and advise them but also push them to achieve more. Mentors gain as much. Mentoring involves selfdevelopment for the mentor as well. It is very satisfying to advise and support colleagues. It increases the mentor’s self-esteem and in many cases re-energizes their own careers. How can someone participate either as a mentor or a mentee? For phase B there are no mentor places left. There are still very few places for mentees. If someone is interested to participate either as a mentor (for future phases) or as a mentee they should send an email to mentorprogram@ icpac.org.cy with their details and the program administrators will contact them with more information.

ACCOUNTANCYCYPRUS | APRIL 2021 |

| AML COMPLIANCE

The pandemic is not an excuse for poor AML/CFT controls

he battle to prevent money laundering and terrorist financing has arguably never been more important. First, we face a global recession which renders sound, fair capital markets critical to economic recovery. Second, the unprecedented acceleration in digital transactions means we rarely see our customers face-to-face anymore, leaving systems and processes ripe for both productive innovation, but also potential abuse. Thirdly, as IT legacy infrastructure has been hastily upgraded to cope with increasing demand, the world’s financial system has seen a lamentable rise in nefarious actors seeking to exploit vulnerable institutions or networks for their own gain. The rise in financial crime is creating new sources of proceeds for illicit market participants, making it harder to spot suspicious transactions. Clamping down on illicit flows of money is a global project. It is one that does not work unless every component in the financial ecosystem holds itself and its processes to the highest standards of compliance and accountability. It is therefore a timely opportunity to ensure companies in Cyprus are no exception, and remind businesses of the importance of enhancing customer due diligence, record keeping, and risk profiling through these uncertain times. In Cyprus, as across the EU, risk management for the suppression of money laundering and terrorist financing must be a constant process. It starts before a business relationship is even established. Companies must collect sufficient information about a business applying to be a customer - and the individuals that

Demetra Kalogerou Chairwoman Cyprus Securities and Exchange Commission

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run it - during a due diligence phase before ever entering a business arrangement. The information collected must meet strict criteria, so that companies can take an informed, holistic view on the economic profile of their customer, and make an assessment they pose to the integrity of the customer’s own business relations, the firm providing the investment service and the capital market at large. One of the most important data sets concerns the origin of incoming funds and expected destination of outgoing payments that match a clear description of business activities. This information helps the firm form a full understanding of normal and reasonable activity for their customers; making it easier to identify irregular or illegitimate transactions. In forming the risk assessment, the factors taken

Clamping down on illicit flows of money is a global project into consideration include the customer’s background, the type and nature of its business activities, its country of origin, the services and the financial instruments applied for, and the anticipated level and nature of business transactions. Collecting the data is only the first step. All the information on a customer must be run through a verification process – made more difficult with the challenges of remote working and social distancing as a result of COVID-19. The verification stage should also take place before a business relationship is established. If this cannot take place, there are stringent restrictions on what business can be done until such a critical check is completed. The firm has only two weeks to complete the verification before the business relationship must be terminated. There are several options of third party services a firm can use to run the required verification. The third piece of the puzzle is that the data collected and relied upon during due diligence

cannot be static. Records of what is normal activity for a customer, noting changes in a customer’s legal status, and even a change in corporate trading name must be captured. Firms must appoint a qualified compliance officer to create and implement processes to ensure this information (and accordingly the customer’s risk assessment) is up to date, accurate and complete. The compliance officer is responsible for setting measures and controls, and must be part of senior management to ensure the agenda is set from the top. The most important part of the risk management process is having a smooth, well-understood system of reporting and escalating suspicious transactions or behaviour. Mistakes do happen. What is important is that there is a robust process to capture them before harm is done. This is where most value is added. A record of reporting is essential, so that the compliance officer can evaluate and manage the potential

risk sufficiently, and escalate the incident to MOKAS if necessary. Given illegitimate transitions are not a one-way street, the web of connections from a suspicious account must also be closely monitored, which in turn builds data sets and improves the information on which the risk profile of a firm’s customers is based. Overall, the internal audit department of the firm needs to evaluate the appropriateness, effectiveness and adequacy of the processes and controls for the prevention of money laundering. This overarching review needs to take place on an annual basis at least. The findings are reviewed by the Board of Directors, who ultimately determine the general policy principles of how the firm approaches the prevention of money laundering and terrorist financing. The Board must approve the risk management procedures designed by the compliance officer, and help identify potential weaknesses and deficiencies – bringing the process full circle. I urge Cypriot companies to reflect on their business risk management policies. Where necessary, action must be taken to ensure they, their partners and customers are adequately complying with their obligations we have to protect investors. The market dislocation caused by COVID-19 is not an excuse for poor practices. Only by working together can we supress money laundering and terrorist financing, and ensure that Cyprus remains a safe, desirable destination in which to conduct business.

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| AML & COMPLIANCE

The role and responsibilities of the anti-money laundering officer By Lazaros Ioannou Director of Advisory Services, APC Audit Tax Advisory Ltd

The need for prevention and suppression of Money Laundering and Terrorist Financing has led Authorities at both the national and international level to adopt Regulations and Legislation to address these phenomena. The complexity of the Anti-Money Laundering and Counter Terrorism Financing requirements and the everchanging landscape of AML make it necessary to adapt and enhance the internal procedures of the obliged regulated persons to comply with regulatory and legislative changes. Thus, it is now, more than ever, that the Anti-Money Laundering Compliance Officer function within a firm has become very important for its proper and compliant operation. The Anti-Money Laundering Compliance Officer is the person who designs and manages the Anti-Money Laundering programs which includes the policies and procedures of the firm in order to fulfil its AML/CTF obligations. As per the Directive issued by ICPAC on Anti-Money Laundering and Combating Terrorist Financing Activities, all firms should appoint a Compliance Officer. The person appointed as Compliance Officer should be sufficiently senior employee, with sufficient skills, experience and knowledge in AML/CTF and Compliance areas as well as knowledge of the firm, its service lines and its clients. The Compliance Officer must also have the necessary authority to fulfil his duties which may include taking decisions affecting the risk exposure of the firm and the handling of Internal and External STRs and communication with MOKAS and the Institute.

Even though it is not defined in the EU and Cyprus Law, the role of the Compliance Officer has traditionally included the responsibility for internal controls and risk management around money laundering and terrorist financing subjects, in accordance with guidance issued by the regulator. Amongst other, the main duties and responsibilities of a Compliance Officer include the following: • The creation of the firms’ risk-based approach for the prevention of Money Laundering and Terrorist Financing including the client risk assessment process; • The development of the Client Due Diligence (CDD) policies and procedures; • The provision of support, advice and guidance to the management and the employees of the firm on money laundering and terrorist financing matters; • The development and implementation of the firm’s anti-money laundering counter terrorist financing training program; • The examination of the information received by the firm’s employees regarding any matter that creates suspicions of Money Laundering and Terrorist Financing. Based on the circumstances, the Compliance Officer may decide to notify MOKAS through the filing of a Suspicious Transaction Report; • To act as the first point of contact with

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MOKAS, upon commencement of and during an investigation as a result of filing an STR. The Compliance Officer should also provide all the supplementary information requested and ensure the firm’s full cooperation with MOKAS; • The Compliance Officer is primarily responsible, in consultation with the firm’s senior management and Internal Audit Department (if applicable), towards the Institute in implementing the various Directives issued by ICPAC under the Law as well as all other instructions/ recommendations/circulars issued by the Institute, from time to time, on the prevention of the criminal use of services offered by firms for the purpose of money laundering or terrorist financing; • The preparation and submission to the Institute of the Annual Compliance Officer report and AML Questionnaire; Lastly, it is important that the Compliance Officer remains up to date with best practices, recent trends, ICPAC circulars and technical alerts including the use of national and international findings like the various National and Supranational Risk Assessments, the EU Commission, FATF, Moneyval, and other international organizations to improve the firm’s internal procedures for recognising and reporting money-laundering and terrorist financing suspicions.

| AUDIT & ACCOUNTING

Are Accounts Maps?

O Michel Antoniades Chairman, KPMG Limited, 22 209 000, mantoniades@kpmg.com

Financial Statements are intended to provide key messages about the historical financial performance of an entity or a group. They represent a financial mirroring of the performance of an organisation

ur profession has an impact on our clients, the economy and our society. We are expected to provide quality to those that expect and depend on our reports. Failing to do that not only may be a discredit to the profession but also may result in financial losses to the users of our work and of course to ourselves! Many times I get the question whether the historical financial statements prepared under the IFRS framework do transparently provide the key messages of the reporting organisation. This becomes particularly important in challenging economic times like the induced by COVID-19 worldwide situation. We may view this as a question on whether such financial statements represent an accurate map navigating the reader to the true financial performance of the entity. Financial Statements are intended to provide key messages about the historical financial performance of an entity or a group. They represent a financial mirroring of the performance of an organisation. The question is do they achieve that? An effective way to answer this question is to view the financial statements as maps. By only taking a snapshot of a specific number or a fraction within the financial statements, you cannot normally get the correct messages. When navigating on a map, you have a starting point and an end point. In order to get there you follow a road network within a city or a motorway, or a country road with a logical sequence for your route evolution to your destination. Maps show the elevation of your position and landmarks of nearby places, assisting you to reconfirm your position on an ongoing basis. GPS navigation may have reduced the level of mental monitoring and interpreting of information, but the underlying basics of map interpretation remain unchanged. How about the financial statements? The key messages that a reader maybe looking at are profitability, gearing and overall capital base - and finally its liquidity. The primary statements in a set of financial statements provide summarised information for all of

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these key performance indicators. The first primary statement is the Statement of Profit and Loss and Other Comprehensive Income. In this statement, a reader can find information about the level and nature of revenue, the gross profitability resulting from trading, administrative and other operating costs, income and cost of finance, and finally the net profit or loss for the corresponding period. Items classified as other comprehensive income or expenses are added to the profit or loss, resulting to the total comprehensive income attributable to the owners. Secondly, we have the Statement of Financial Position that lists the assets and liabilities of the organisation, in most times dividing them into current and non-current, highlighting in this way the order of liquidity. The same Statement also analyses the type and nature of equity, which is the residual of assets minus liabilities. The Statement of Changes in Equity provides further details of the changes of specific elements of equity, providing further clarity of the underlying movements during the period. Finally, the last primary Statement of Cashflows provides details of cash inflows and outflows that are derived from trading and operation in general, investment and financing activities ending with a summary of the movement, and available cashflows at the beginning and end of the period. Is the above information enough for the reader to understand and draw conclusions? The answer is NO! In order to obtain a comprehensive understanding, the reader

must also read and understand the basis of preparation that includes the assessment on going concern and judgements and estimates adopted, plus the accounting policies that provide the framework of preparation of all of the financial statements, including the corresponding captions found in the primary statements. In addition, the reader must refer to the notes of the financial statements that provide detailed analysis to the captions included in the primary statements, including important items like related party transactions. In addition, the notes provide additional information that may not be captured in the corresponding primary statements like guarantees, contingent liabilities and risk management policies adopted and followed by management. Map reading is generally easy. A map includes basic information that is easily understood by a layperson and she/he can easily navigate to a destination. To the contrary, Financial Statements are complex, require professional knowledge to be able to understand them, as well as experience and professional judgement for drawing conclusions. Map reading has been generally easy and became even simpler with GPS navigation. Why do Financial Statements need to be so complex? In my view, the answer is the attempt and debate over decades targeting to present a ‘True and Fair (T&F)’ view of the historical financial performance of an organisation. When I started my training to become a Chartered Accountant, the fundamental accounting concept was prudence and historical cost prevailing in a set of Financial Statements. As the years have

passed and the profession has evolved, it was assessed that to be able to truly present a T&F view, we should be moving from historical cost to fair values and from prudence to a balanced approach towards estimates. That implies the use of complex modelling looking forward into the future and making assumptions at the point of preparation of the financial statements (that are assessed as reasonable and applicable at the reporting point of time). The nature and complexity of such an exercise requires the use of specialists that have professional knowledge and experience in the underlying areas. Not having such knowledge makes it difficult to understand financial statements. In saying this, the use of technology has improved the way information is presented in the financial statements, which facilitates to a certain extent the understanding by users. A good map will take you from your current location to your destination. So the next question is, whether this balanced approach towards reporting does actually meet the T&F concept. Is the current financial reporting framework a good map? Looking at certain stakeholders’ expectations, it is arguable that T&F is met. Regulators generally require a more prudent approach towards reporting and thus there is an expectation gap between a prudent versus a balanced approach. Corporate failures heavily criticise the quality of our profession and we have no option but to respond. This becomes particularly important, given the financial challenges created by COVID-19. Discussion with stakeholders and particularly regulators is of primary importance to better understand

their reporting needs. Perhaps having a different reporting framework for regulators could be a way to bridge the gap; we have seen this happening in certain regulated industries. Exogenous factors during a trip may not be identified and/or foreseen within a map. So following precisely our map towards our destination provides no guarantee that we will get there and on time! Road closures, or road works and/or traffic may delay our trip or even may cause a necessity to reroute to our destination, with of course a corresponding delay. The major exogenous development during the year 2020 is COVID-19 and its corresponding effect on the worldwide economy, the economy of Cyprus and of course to each reporting entity. The measures taken to protect our health had a major decrease in the national income that will slowly and unavoidably have a multiplier effect to the economy as a whole. Looking at the micro economic level, we do expect to see companies exhausting their liquidity, stretching their operating performance and perhaps necessitating an increase in their capital base. Does our reporting framework capture the information required by stakeholders to derive representative conclusions of historical financial performance for each organisation? The answer is that it does, but this is where knowledge, experience and judgement will have a primary role! Companies are required to make a COVID-19 impact assessment, which includes but is not limited to, potential impact on the going concern assumption, impact assessment on the valuation of assets, impact assessment on the completeness and accuracy of liabilities, and enhanced disclosures in relation to affected areas. Considering that the impact assessments are forward looking, professional scepticism and judgement is required for deriving meaningful conclusions. Failing to do that may result in an ineffective impact assessment and disclosures with corresponding negative criticism to our profession, therefore, particular attention and emphasis should be placed for mitigating such potential exposure! Maps and Accounts have a lot of similarities. They are intended to navigate users to targeted destinations, however, exogenous factors, do impose a necessity to make assessments. For accounts this is where knowledge, experience and professional judgment play a critical role! Failing to do that may result in failure of the profession as a whole, with the corresponding criticism coming from stakeholders and particularly regulators! As professionals we have an impact to all stakeholders, to our people and the society as a whole, thus we need to be effective and every effort should be made in meeting this target.

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| AUDIT & ACCOUNTING

Sina Zavertha, Manager Management Consulting KPMG Limited, 22 209 000 szavertha@kpmg.com

Remote Project Management: is it here to stay? With the outbreak of the pandemic and the partial or universal lockdowns, remote working is becoming widely accepted, with a growing number of companies adopting it as a compensatory measure. Statistics support this, with a recent survey conducted by Gartner Inc. showing that 88% of organizations all over the world made it mandatory or encouraged their employees to work from home, as the spread of the coronavirus accelerated. While working from home is quite feasible for many professions, concerns arise as to whether Project Management can be as effective without direct contact between the Project Manager, the team members and the rest of the stakeholders. Communication is widely known as one of the key success factors of a project. Working remotely surely makes more difficult to monitor the progress, as well as maintaining the team’s engagement. Especially in project environments, it is common to have the most constructive dialogues outside the meeting room during a break or in a corridor, where a thought or phrase can be the stimulus for further discussion, which can lead to identification of risks and even to the prevention of an error or failure. In addition to communication, an equally important component of Project Management is leadership. Although these two concepts are not identical, a successful Project Manager must be a great and responsible leader. Yet another, non-negligible concern arising from the new reality, is the possible undermining of Project Manager’s ability to make the right choices, take initiatives, promote new skills and effectively distribute roles and responsibilities. Lacking to have the full picture of the capabilities of each member of the team, the Project Manager may resort to tested solutions that can work in one hand but will not be the optimum solution on the other. Also, by working remotely, the Project Manager may have difficulty in adequately perceiving the vulnerabilities of the team, making it challenging to undertake appropriate action in order to prevent an impending crisis. Although technology has undoubtedly helped to improve communication problems with the variety of applications that are now available, teleconferencing and “instant messages” are not a panacea. In matters of effective communication and leadership style, the experience of the Project Manager, the interpersonal skills she/he has and their continuous development, as well as the “leading by example” principle will play a vital role. In order to ensure that the team maintains its pace and momentum, the existence of powerful communication channels is a necessity for now and for the future. The Project Manager should be the first to use the smart tools and technologies, should be “visible” and available, communicate proactively with the team and participate actively and timely in conversations, demonstrating that way constant commitment. The Project Manager should show trust in the team members, so that they act more autonomously while in parallel following the policies and procedures and their defined roles. At the same time the Project Manager should allow proper and accurate monitoring of the result, and adjustment of tactics where needed. Although the unprecedented facts of our time have greatly impacted the delivery of projects around the world, they provide concurrently an opportunity for both businesses and individuals to innovate and revise their future strategy. Thus, technology does make remote Project Management feasible, but on an individual level, is not enough. Project Managers will have to keep up and invest in upskilling, adopt “hybrid” approaches based on each situation and put more effort in maintaining team’s motivation and engagement, so that they not only survive the crisis, but thrive.

The Project Manager should be the first to use the smart tools and technologies, should be “visible” and available, communicate proactively with the team and participate actively and timely in conversations, demonstrating that way constant commitment

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Opting for a review engagement as an alternative to audit for very small entities Cyprus is the only country1 in the European Union that requires the submission of financial statements of all companies, regardless of size, in an independent audit based on international auditing standards. This practice is applied over time and serves specific purposes which include the transparency and verifiability of financial data as well as the prevention and suppression of money laundering activities and financing of terrorism. Although the driver of the audit requirement served its purpose in the context of the international evaluations submitted by the country, nevertheless the Institute of Certified Public Accountants of Cyprus (ICPAC) chose to evaluate the current state in terms of its operational and financial dimension, taking into account the relevant European Directive (Accounting Directive (2013/34/EU, thereafter ‘ Accounting Directive’). According to the Accounting Directive, Member States can exempt small-sized entities from any audit requirements. The Accounting Directive defines small undertakings as those which, on their balance sheet date for two consecutive years, do not exceed the limits of at least two of the three following criteria: a) balance sheet total: EUR 4,000,000 b) net turnover: EUR 8,000,000 c) average number of employees during the financial year: 50 When transposing the Directive into domestic law, Cyprus elected to continue requiring small companies to be subject to statutory audit and included the same requirement to apply to dormant companies. The definition of ‘micro’ companies provided in the Directive was not embedded in the national law. Following surveys conducted by ICPAC, it became clear that the vast majority of companies registered in Cyprus are much smaller when compared to the definition of a ‘small’ company provided in the Directive and are also smaller in comparison to the definition of a ‘micro’ company. As a result, these companies seem to be required to comply with obligations that may be either excessive or asymmetric.Practice has shown that it is burdensome and costly to conduct an audit for very small entities. As such, ICPAC has prepared a proposal for an alternative assurance framework for very small companies to serve as the starting point for consultation between all relevant bodies, both public and private. ICPAC proposes that the various parties should consider the following criteria and determine the thresholds from the range shown below for an entity to be able to voluntarily opt out of audit: Net turnover - not less than €100.000 – not

more than €150.000 Total gross assets - not less than €100.000 – not more than 150.000 Certain other clauses are proposed, including for example a change in the definition of net turnover as stated in the Companies Law, Cap.113 to additionally include rental income, interest, royalties, dividends, realised/unrealised gains/losses. In addition, ICPAC, after thorough study, has concluded that the International Standard on Review Engagements (ISRE) 2400 (Revised), Engagement to Review Historical Financial Statements, a globally accepted framework, is the best alternative to audit that best meets the needs of smaller entities. This Standard is designed not only to provide an effective and consistent level of limited assurance on financial statements but also to allow for efficient delivery of the service proportionate to the complexity of the financial statements reviewed. There are benefits for all parties involved in a review engagement. Auditors/Audit firms will obtain the knowledge base to enable them to add value to their clients’ businesses while

Eleni Ashioti Head of Technical and Professional Matters, The Institute of Certified Public Accountants of Cyprus

expressing the assurance conclusions needed on annual financial statements in accordance with an applicable financial reporting framework (e.g., International Financial Reporting Standards (IFRSs). Clients and other financial statements users such as tax authorities, banks, regulators will have the comfort of a meaningful level of limited assurance provided by an objective and independent professional accountant (licensed auditor or audit firm) who follows the International Code of Ethics for Professional Accountants (including international independence standards). At the same time, the entities that opt for a review engagement instead of an audit will continue to be subject to the requirements of the Prevention and Suppression of Money Laundering Activities Law. It is in the public interest to have high quality of services that give confidence and trust to the economy while at the same time endeavor to reduce the administrative burden on companies. Except for Malta which has no audit exemption for tax purposes.

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| AUDIT & ACCOUNTING

IBOR transition - Transfer Pricing implications and considerations By the end of 2021, it is expected that the transition of multiple Interbank Lending Rates (“IBORs”), including the London Interbank Offer Rate (“LIBOR”), will take place. These IBORs are expected to be replaced, to an extent, by Alternative Reference Rates (“ARRs”). There are multiple implications in the financial systems that may arise as a result of these transitions. The potential impacts on the Transfer Pricing practice will be examined below.

aking into account the timeframe for the transition from the IBORs to the ARRs, it is important to identify and analyze the impact of the transition to risk-free rates (‘RFRs’) to lenders and borrowers alike.

Overview In the United Kingdom (‘UK’), the Bank of England has been working to ensure a transition from LIBOR to the Sterling Overnight Index Average (‘SONIA’), a rate produced by the Bank of England. SONIA reflects the average of the interest rates that banks pay to borrow sterling overnight from other financial institutions and other institutional investors. Moreover, in the Euro area, there is a drive to replace both the EURO LIBOR and Euro Interbank Offered Rate (‘EURIBOR’) by the Euro short-term rate (‘€STR’), which is calculated on the wholesale euro unsecured overnight borrowing costs of euro area banks. In addition, in the US, the Alternative Reference Rates Committee (ARRC), convened by the US Federal Reserve, has published its Recommended Best Practices for Completing the Transition from LIBOR. The Secured Overnight Financing Rate (‘SOFR’) is the recommended ARR for replacing the USD LIBOR. SOFR represents a broad measure of the cost of borrowing cash overnight collateralized by U.S. Treasury securities.

Charalambos Palaontas Director | Transfer Pricing Services

General differences There are a number of differences between IBORs and ARRs. The first main difference between them is that IBORs represent the rate at which banks believe they are able to lend to and from one another

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Timotheos Ioannou Senior | Transfer Pricing Services

in the interbank market over a specified time period, whereas ARRs typically refer to overnight transactions. Another main difference is that IBORs typically include an element of risk in the form of a credit spread, where RFRs are effectively nearly risk-free rates. General Transfer Pricing considerations Immediate focus should be given to intragroup financing transactions considering that IBORs have often been used as underlying rates for intragroup financing arrangements. Considering that for tax purposes transactions entered between related parties (including financial instruments) should be concluded on arm’s length terms, such arm’s length price may have been specified by reference to IBORs (e.g. LIBOR plus a margin). Following the replacement of the IBORs by ARRs, the terms of both intra-group financing arrangements may need to be reassessed and

such terms are expected to be on at arm’s length as at the reassessment date. Based on the above, taxpayers should determine whether a financial instrument that is amended as a result of the benchmark reform constitutes a variation or rescission of the original financial instrument. This should also be considered in the light of fallback provisions if applicable in the initial loan/facility agreement. By way of example, the discontinuation of an IBOR referenced in a loan facility and its replacement by an agreed alternative benchmark may result in changes to the amount payable under the facility. It is unclear how the increase in the loan amount will be treated for tax purposes. In addition, the appropriate ARR should be selected for each financial instrument (i.e. in line with guidance from relevant associations, tax authorities etc.). Another implication that should be considered is the potential adoption of

timing differences between jurisdictions as well as differing views on the acceptability of each ARR. Such deviations may result to a mismatch of acceptable rates and/or their treatment from a tax perspective in each jurisdiction. Depending on the circumstances, the transfer pricing documentation of such financial instruments may need to be updated in order to reflect the change from IBORs to ARRs and/or new documentation should be prepared in order to support the financial agreements to be entered into from an arm’s length perspective. More specifically, considering the Transfer Pricing Circular issued by the Cypriot tax authorities applicable as of 1 July 2017, where for example, a third-party financing institution is involved in the provision of variable interest rate financing (with an IBOR used as the floater) to a Cypriot financing entity that uses the loaned funds to grant variable interest rate financing (with that same IBOR used as the floater) to related parties, the intragroup use of IBOR may need to be investigated. The financing institution may amend the respective ARR based on a fallback provision included in the existing agreement, effectively exposing the group’s financing vehicle to additional risks due to the floater rate mismatch. The impact of the transition is not restricted to typical lending transactions, but it has a wider impact. For example, currency derivatives will also be affected (the ISDA Benchmarks Supplement may be incorporated in derivatives transactions). Finally, consideration should be given in cases where a taxpayer has obtained advanced pricing agreements (‘APA’) or rulings regarding specific intragroup transactions, as the applicability and/or validity of an APA or ruling may be challenged due to the discontinuation of the relevant IBOR or lack of acceptability of the underlying IBOR.

TAKEAWAY POINTS There still remains a high degree of uncertainty around LIBOR transition. The transition could have a number of impacts on market participants. These impacts include possible changes to contractual documentation, adaption of operational processes/IT systems, changes to the value of products or the possibility of products no longer serving the purpose for which they were intended. Interesting parties should contact their professional advisors on the possible implications of the changes such as financial, legal, accountancy or tax consequences. With the progress of Artificial Intelligence (AI) and Bots, jobs will continue to diminish, and new skills will be required. Leaders will need to sharpen their coaching and development skills.

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| BUSINESS & ECONOMY

Changes in the working environment

n 2019 most articles related to 2020 trends in leadership, included themes such as working remotely, flexible time, accountability, ethical behaviour, culture development and new skills. Little did we know that by the first quarter of the year a large proportion of the world population (at least in the developed countries) would have no choice but to work remotely. As the coronavirus pandemic spread in most countries, governments have taken progressively stricter measures of quarantine and everyone who could work from home was obliged to do so. Change occurred at an unprecedented rate and leaders needed to step up and take control and prompt actions. Some companies quickly responded and adapted to providing remote access to their workers, others were less well prepared and had to revisit their business continuity plans in a rapidly changing environment. As the wheels of business grind to a halt, managers face new problems as well as old problems from a new angle.

Working Remotely The recent cataclysmic events worldwide have brought about a shift in work arrangements which may turn out to be permanent. Traditionally IT companies have hired for remote jobs but the phenomenon expanded to other fields according to a Business insider report (legal, marketing, project management, real estate, insurance, non-profits) and more recently because of the crisis, schools, banks, the government etc.). Technology has been moving at a fast pace.

Eleftheria Koumouli B.Sc. (Hons.), MBA (Acct), ACIB Manager Governance & Markets Compliance Dept, Compliance Division Bank of Cyprus PCL

Employers will be investing in technology that helps support productivity from whenever their employees are working. As 3D imaging and holographic technologies develop, telecom starts replacing a lot of work-related travel. The workspace is becoming virtual or a mix of virtual and physical spaces as people choose to work remotely. Some of the benefits of remote working include reduced commute time for employees and reduced costs for employers (less office space needed, reduced electricity bills etc.) Additionally, in some cases it is observed that commute time saved is translated into working hours for employees, which actually is an extra benefit to the employers. Flexible Time Remote work options and flexible leave have created workplaces where employees don’t have to conform to the 9 to 5 schedule. Working from anywhere at any time, does not translate into being on call 24/7. Employees have begun to embrace better work-life balance. A recent study showed that 90% of employees said flexible arrangements would increase morale. In 2019, Microsoft Japan tested out a 4-day workweek which resulted in employees being happier and significantly more productive (performance was improved by 40%). The shortened weeks led to more efficient meetings and happier workers. In addition to the increased productivity, employees took 25% less time off and electricity use was down 23% in the office. Employees printed 59% fewer pages of paper during the trial. Another experiment

NEW SKILLS Millennials now comprise around 50% of the workforce. Such workforce thrives and is inspired by companies that invest in their training and development. Nearly 30% of millennials hold managerial-level roles. Surveys indicate that millennial managers value learning and growth experiences more than previous generations. However, they expect training and development delivered in a new way. They expect mobile access to learning opportunities, anytime, anywhere. Korn Ferry Institute research shows millennials learn more through online development than time spent in the classroom.With the progress of Artificial Intelligence (AI) and Bots, jobs will continue to diminish, and new skills will be required. Leaders will need to sharpen their coaching and development skills.

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LEADERSHIP

published by the Harvard Business Review showed that shorter work-days (from an 8 hour to a 6 hour day) increased productivity. Leaders are challenged in both finding the means and tools to ensure their employees are fully utilised and at the same time they are kept motivated , productive and happy. Accountability At the same time, flexibility and remote work increase the need for personal accountability in both employees and managers. There are challenges to leading remote workers. Managers need to develop new strategies to ensure commitment and productivity. They will need to spend a lot of time on creating a culture of accountability. The ability to navigate transformations successfully is key and organisations will cherish the leaders who can make changes happen. Leaders can use technology to ensure teams interact, share ideas and bond. Initiatives to support empathy, trust, listening will be encouraged. The new generation of employees expect frequent face-to-face talks with their managers, plenty of flexibility for telecommuting, and opportunities to make the world a better place through their work. Human Resources Principles of corporate governance are constantly evolving. In order to succeed in the long-term, companies need to build and maintain successful relationships with a wide range of stakeholders. These relationships will be successful and enduring if they are based on respect, trust and mutual benefit. Companies are finally seen as part of the larger community and their interaction with other stakeholders is under examination and review. There is a call for increased pressure on board oversight of culture and Human Capital management as top talent is actively being sought and intangible assets now account on average for more than half of most companies’ market value. Boards should further prepare for digital transformation and should challenge management for an assessment of where they are on digital transformation and tech

enablement. They should understand where their company is in terms of a complaintsfree customer journey when transacting on the web, to reducing the cost of the supply chain using AI and Machine Learning (ML) insights. HR professionals will become more strategic and important in organisations. They will play a major role in business decisions and making organisation more authentic and human. People will become the only sustainable competitive advantage. Great teams working seamlessly together will be key to success. The well-being of employees will become critical. Physical and mental health will be essential. Coaching will become a standard part of every manager’s experience. Multi-dimensional thinking and cognitive flexibility are now key skillsets to develop. Welcoming multiple perspectives is also essential. A global study of women in management by Catalyst in 2019 indicated that 29% of senior management roles are held by women. A report from the Peterson institute for International Economics found a direct correlation between female leadership and profitability. A profitable firm at which 30% of leaders are women could expect to add more than 1 percentage point to its net margin compared with an otherwise similar firm with no female leaders. Women are effective and productive in leadership roles. The challenge to HR departments is helping develop their leadership skills so they can promote women leaders from within. Diversity of gender, age, race, cultures etc will continue to increase with globalisation. Diversity of thought will become more important. Dissenting voices will become more important in understanding unique perspectives. As training options become smarter and skill gaps become easier to navigate, leaders must focus less on what employees and potential employees already know and focus more on how much potential for growth they demonstrate. Linked named creativity as its top soft skill for 2020 and emotional intelligence made the list for the first time. Understanding and prioritising these soft skills will be key for leaders to hire qualified talent.

Leaders in 2020 will need to modify their communication strategies to keep up with teams working remotely. With so much ambiguity in the rapidly changing environment, executive leaders can’t afford to hoard critical information from employees. It will be difficult for one person to be aware of everything and take credit for success. Transparency will now become critical. The new trend will be high performing teams instead of individuals. Leaders would need to promote collective decision making. Multiple teams will be taking the driver’s seat for specific areas. Leaders would need to avoid becoming bottlenecks in their organisation. Data analytics tools are accessible to assess situations and make predictions. However, change is constant and picking up pace and leaders may not have the luxury to wait for clarity to emerge. They would need to embrace ambiguity and make decisions while setting up smaller milestones and adjusting plans as new information emerges. Increased access to information means employees of all ages are now in a better position to judge their leaders. Leaders should know what employees expect and how to deliver on those expectations in ways that benefit both the employees and businesses where they work.Leaders would need to keep on learning to gain new perspectives. So far leadership development has been approached as a once off experience. Many programs take new managers push them through an organisation’s academy, then send them out into the world. They are checked sporadically, perhaps with a 360 or engagement survey. But little attention is paid to sustaining knowledge in the long-term. Learning needs to be consistently applied otherwise 40 to 80% of what they encountered in learning and development programs will be lost. People join a company, but they leave their boss. Changing managerial behaviors is the best way forward. To promote employee engagement, the first obvious step is training and coaching managers in how to apply behaviors that unlock emotional commitment. Each organisation is different but, in general, managers need to learn specific behaviours such as using a coach approach to develop team members, giving effective timely feedback, providing strategic recognition, building trust and fostering belonging. Currently the only certainty is that the world of business will be a difference place after the crisis. People have been forced to adapt to new situations that may turn out to work better for them and their employers. Employers must pick up the pace and embrace change in a way beneficial to them and their employees.

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The Rising Popularity of Trusts Nicky Xenofontos Board Member STEP Cyprus

cross the globe, there are a number of attractive jurisdictions for trusts. Among them, is undoubtedly, Cyprus. More and more, wealthy families are including Cyprus situs trusts in their wealth planning structures. Several factors, including investment opportunities, wealth preservation, tax planning, and good laws—are motivating individuals to use the Cyprus International Trust as the preferred structuring vehicle for both their family and business matters.

USES OF TRUSTS

Succession Planning Succession planning is perhaps of one of the most well-known uses of trusts. It is the overarching use of trusts that and is an option available to all, whether a high net worth individual or a parent who wishes to safeguard his/ her assets for future generations.

Education Privately, families are also using trusts to manage their children’s educational future. Parents can allocate money in specific education trusts, which their children can only use for educational purposes, safeguarding it against being dissipated.

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Property Acquisition

Marriage and Divorce

There are several ways in which trusts support a wide variety of people’s home ownership aspirations. First, parents (or grandparents) can set up a trust to provide their child (or grandchild) with funds that can be used as a deposit for a home or provide a loan or other financial support so that their children/ grandchildren will, in the future, to be able to afford their own home.

Across the globe, more and more people are part of ‘non-traditional’ families, e.g., divorced children, second marriages, single parents or same-sex couples. Children are more and more likely to experience a variety of family arrangements because of increases in divorce rates, cohabitation, remarriage. Given these trends, families can use trusts to set assets aside for the future and protect their wider family’s interests. Trusts can also be used as a tool to provide certainty during a divorce settlement.

FINAL COMMENTS

Building a Business

Protecting the vulnerable

Charitable Trusts

A very common purpose of trust is setting one up for the purposes of carrying on a family business. Where trusts are used as a way of creating companies, they are also used to plan for succession of family businesses. A trust can facilitate the transition and focus control in the business driver or lead, yet provide for other family members.

Trusts are widely used to set aside funds to ensure the care of someone vulnerable. The generally acceptable legal definition of vulnerable is that of a person who is physically or mentally disabled or a minor and is unable to look after themselves or their finances.

Charitable trusts are a well-known way for people to support causes that they care about and are one of the most wellknown forms of trust structures.

As can be seen, trusts can have an overarching positive influence at every stage and every day of someone’s life from beginning to end, from education to buying a home, from marriage to succession planning. Internationally they are a common basis on which to incorporate companies, ensure the smooth succession of family businesses, support those who would not be able to afford higher education, and manage estates in a timely and costeffective manner.

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| BUSINESS & ECONOMY

Provisional application of the EU– UK Trade and Co-operation Agreement: the institutional background and way forward

uring the 26th December 2020, amidst a critical point of the global Covid – 19 pandemic emergency, the text of the Trade and Cooperation Agreement between the European Union and the European Atomic Energy Community, of the One 1 Part , and the United Kingdom of Great Britain and Northern Ireland, of the Other Part (the TCA) was brought to the attention of the public via the online publication at the EU Commission dedicate website, with the subsequent publication of the updated TCA text in the Official Journal of the European Union on the 3st December 20202.

Pantelis Christofides Advocate – Director Head EU and Regulatory Law Department

As per the EU Commission’s Press Release dated 24th December 2020, the TCA constitutes the result of the EU Commission and UK negotiation process, and constitutes a fair and balanced agreement with the UK, which will protect our European interests, ensure fair competition, whilst, going well beyond traditional free trade agreements, it provides a solid basis for preserving the EU – UK longstanding friendship and cooperation and safeguards the integrity of the Single Market and the indivisibility of the Four Freedoms, that being in relation to People, Goods, Services and Capital. Further, the EU Commission aptly noted that, whilst TCA reflects the fact that the UK is leaving the EU’s ecosystem of common rules, supervision and enforcement mechanisms, and can therefore no longer enjoy the benefits of EU membership or the Single Market, it provides a solid basis for preserving the EU – UK longstanding

On the basis of the above, it is evident, that, as a result of the common will to preserve the longstanding EU – UK co-operation, UK was afforded a special status as amongst Third Countries, those being Countries that are not EU Member States, in relation to free trade agreements with the said Third Countries, such as Canada, Japan and Singapore

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friendship and cooperation.3 On the basis of the above, it is evident, that, as a result of the common will to preserve the longstanding EU – UK co-operation, UK was afforded a special status as amongst Third Countries, those being Countries that are not EU Member States, in relation to free trade agreements with the said Third Countries, such as Canada, Japan and Singapore.4 That had been a purposeful decision of the EU acting within the EU exclusive competence5. This echoes the Court of Justice of the European Union (then European Court of Justice) position in Opinion 2/15 dated 16th May 2017 regarding the Request for an Opinion by the European Commission as to the Free Trade Agreement between the European Union and the Republic of Singapore, where it was, amongst other, noted that6: a. the EU has exclusive competence in the

area of the common commercial policy, b. the specific commitments relating to market access contained in that Free Trade Agreement Chapter are, furthermore, such as to have direct and immediate effects on trade in services between the EU and the Republic of Singapore. Contrary to the assertions of some of the EU Member States which have submitted observations to the Court, this finding applies to all the specific articles of that Free Trade Agreement Chapter, including those relating to financial services and to the mutual recognition of professional qualifications, c. since it seeks thereby to open up the market of each of the Parties, Chapter 7 is also such as to have a direct and immediate effect on trade in goods and services between the EU and the Republic of Singapore in this sector, and consequently falls within the exclusive competence of the EU pursuant to Article 3(1)(e) of the Treaty on the Functioning of the European Union (TFEU), d. as per the CJEU case – law, when the EU adopts provisions laying down common rules, whatever form these may take, the Member States no longer have the right, acting individually or even collectively, to undertake obligations with third States which affect those rules, e. in line with that case-law, Article 216 TFEU grants to the EU competence to conclude, inter alia, any international agreement which ‘is likely to affect

common rules or alter their scope’, and f. under Article 3(2) TFEU, the competence of the EU to conclude such an agreement is exclusive. The unified approach as between all EU Member States which are collectively mentioned as the first Party to the TCA is confirmed by the reference not only in the TCA Title and Preamble, but also by the fact that the primary body responsible for the TCA operation, that being the Partnership Council, is stated to be comprised of representatives of the EU and the UK, and not of individual Member States7. A further example of the said unified approach application can be witnessed in the text of Article SERVIN.5.13 regarding Professional qualifications at the Paragraph 1 Footnote 238 and Paragraph 3 Footnote 249 thereof. The Partnership Council, currently cochaired by Mr. Maroš Šefčovič, Vice – President of the EU Commission, representing the EU, and Lord David Frost, Minister of State in the Cabinet Office, representing the UK, has been entrusted by the two Parties to oversee the attainment of the objectives of the TCA and any supplementing agreement, supervising and facilitating the implementation and application thereof, with each of the EU and UK enjoying the discretion of referring to the Partnership Council any issue relating to the implementation, application and interpretation of this Agreement or of any supplementing agreement10. The work of the Partnership Council is aided by:

a. the Committees11. which include, amongst other, the Trade Partnership Committee, the Trade Specialised Committee on Customs Cooperation and Rules of Origin, the Trade Specialised Committee on Services, Investment and Digital Trade, the Trade Specialised Committee on Regulatory Cooperation and the Trade Specialised Committee on Administrative Cooperation in VAT and Recovery of Taxes and Duties, with the said Committees having, inter alia, the role of adopting decisions or make recommendations as provided for in the TCA or any supplementing agreement or where such power has been delegated to it by the Partnership Council12, and b. the Working Groups on Organic Products, Motor Vehicles and Parts, Medicinal Products, and Social Security Coordination, which will act, under the supervision of the Committees, so to assist the Committees in the performance of their tasks by preparing the work thereof and carry out any task assigned to them by the Committees. Lastly, the TCA, via Article INST.5 on Parliamentary Cooperation, provides that the European Parliament and the Parliament of the United Kingdom may establish a Parliamentary Partnership Assembly consisting of Members of the European Parliament and of Members of the Parliament of the United Kingdom, as a forum to exchange views on the partnership. The Parliamentary Partnership Assembly,

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once established: a. may request relevant information regarding the implementation of this Agreement and any supplementing agreement from the Partnership Council, which shall then supply that Assembly with the requested information; b. shall be informed of the decisions and recommendations of the Partnership Council; and c. may make recommendations to the Partnership Council. In light of the pivotal role of the European Commission and the European Parliament under the TCA, it would be prudent for any organisation that wishes to provide the views thereof and to be consulted by the said Bodies in the performance of their TCA related tasks, to be registered in advance with the Joint Transparency Registry of the EU Parliament and EU Commission13. Conclusively, it could be argued that, after the end of the TCA provisional application period, that being the 30th April 202114. pending the European Parliament’s TCA related debate, the organisations of both EU and UK may look forward to co-operate within the delineated by TCA parameters, by following the relevant process before the TCA Institutional Bodies, so as to materialise the words of the President of the European Commission Ms. Ursula von der Leyen to the effect that ‘finally, we can leave Brexit behind us and look to the future. Europe is now moving on.’15

1 That being the complete TCA title. Regarding the initial 26th December 2020 TCA text publication, see https://ec.europa.eu/info/publications/draft-eu-uk-trade-and-cooperation-agreement-accompanyingacts_en. 2 The TCA text, as published, amongst other, in Greek and English, in the Official Gazette of the European Union is accessible at https://eur-lex.europa.eu/legal-content/EN/ TXT/?uri=uriserv%3AOJ.L_.2020.444.01.0014.01.ENG. 3 See to that effect the Press Release of the EU Commission dated 24th December 2020 accessible at https://ec.europa.eu/commission/presscorner/detail/en/ip_20_2531. 4 See to that effect https://ec.europa.eu/trade/policy/in-focus/ceta/, http://trade.ec.europa.eu/doclib/press/ index.cfm?id=1684 and https://ec.europa.eu/trade/policy/in-focus/eu-singapore-agreement/. 5 See to that effect the EU Commission reference, within the ambit of the Questions & Answers: EU-UK Trade and Cooperation Agreement dated 24th December 2020 (publicly accessible at https://ec.europa.eu/ commission/presscorner/detail/en/qanda_20_2532 ) where it was, inter alia, noted that ‘The Commission is of the view that the Agreement with the UK can be concluded as an EU-only agreement since it covers only areas under Union competence, be it exclusive or shared with the Member States. The Commission has chosen Article 217 TFEU as the legal basis for the conclusion of the Agreement.’ 6 See to that effect Opinion 2/15 Recitals (Paragraphs) no. 33, 53, 74, 170, 171 and 172. 7 See to that effect TCA Article INST.1 paragraph 1. 8 See to that effect TCA Article SERVIN.5.13 paragraph 1 and footnote 23 thereof providing that ‘Nothing in this Article shall prevent a Party from requiring that natural persons possess the necessary professional qualifications specified in the territory where the activity is performed, for the sector of activity concerned. 23. For greater certainty, this Article shall not be construed to prevent the negotiation and conclusion of one or more agreements between the Parties on the recognition of professional qualifications on conditions and requirements different from those provided for in this Article.’ (emphasis added). 9 See to that effect TCA Article SERVIN.5.13 paragraph 3 footnote 24 providing that ‘On receipt of a joint recommendation, the Partnership Council shall review its consistency with this Title within a reasonable period of time. The Partnership Council may, following such review, develop and adopt an arrangement on the conditions for the recognition of professional qualifications by decision as an annex to this Agreement, which shall be considered to form an integral part of this Title. 24 For greater certainty, such arrangements shall not lead to the automatic recognition of qualifications but shall set, in the mutual interest of both Parties, the conditions for the competent authorities granting recognition.’ (emphasis added). 10 See to that effect TCA Article INST.1 paragraph 2. 11 See to that effect TCA Article INST.2 paragraph 1. 12 See to that effect TCA Article INST.2 paragraph 2. 13 See to that effect https://ec.europa.eu/transparencyregister/public/homePage.do?redir=false&locale=en. 14 See to that effect Decision no. 1/2021 of the Partnership Council dated 23rd February 2021 accessible at https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv%3AOJ.L_.2021.068.01.0227.01. ENG&toc=OJ%3AL%3A2021%3A068%3ATOC. 15 See to that effect the above – mentioned Press Release of the EU Commission dated 24th December 2020 accessible at https://ec.europa.eu/commission/presscorner/detail/en/ip_20_2531.

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Harnessing the Power of Story Philippos Aristotelous Business Strategist, Trainer, Speaker

Now here’s the thing: Despite the compelling visual integrity and cinematic nostalgia, Blaine was actually strapped onto an impressive blend of cutting edge technology and robust aviation mechanics ingeniously hidden amidst the colorful bunch of balloons that took more than a year and a team of nearly one hundred experts to design, plan and execute. Ask anyone however and the way they will describe the stunt is by way of a very simple story without reference to any intricate details of how it was actually pulled off:He grabbed a bunch of balloons and floated up in the sky! Human beings are natural born novelists. We tend to weave simple stories to create meaning and make sense of the world around us. When we think about other people’s day to day actions, we rarely consume ourselves trying to fully understand the big picture, the intricate details behind their intentions, idiosyncrasy or overall life philosophy. As a professional, if I meet a potential client for the first time and my behavior exudes indifference, stress and carelessness, little does she care that the night before I had a quarrel with my spouse; that my dog got sick; or that my appraisal meeting is due the next day causing me great stress. The story she will possibly weave about me is a simple one: that I don’t care thus she won’t want to do business with me. Good luck to me trying to rebut that overwhelmingly negative story about me! First impressions last and last impressions count, as they say. Stories can make or break us; they can propel us into the direction of our dreams or tear and bring us down; stories can get

On 2 September 2020 celebrated illusionist and daredevil David Blaine achieved the impossible: He grabbed a bunch of helium filled balloons, and floated up to 25,000 feet (7,600 meters) in the sky! people queue for hours to buy something from us or send them on a crazy run away from us. What simple story do you think your clients, prospects, or colleagues tell when asked to give their opinion about you? That you are dependable, experienced, knowledgeable and trustworthy? Or careless, indifferent, unprofessional, unstable or even unethical? Whether we like or choose it or not, somewhere there is always a simple story being told by someone about us. The good news? Instead of leaving it to fate, we can choose the story others get to tell about us. The process goes a bit like this: 1. Choose the story Say you would like the story to be: “Philippos is very dependable” 2. Work backwards from the story and calibrate your actions

Take a step back to assess what behaviors you need to change to promote such story. For example, dependability requires that I: (a) become more attentive to calls and emails (b) increase my turnaround time (c) under-promise and over-deliver (not vice versa) 3. Be consistent Consistency and congruence will help promote the story you choose for yourself. At the end of the day, it is much better for us to be intentional, deliberate and proactive and put in the effort so as to control the stories others tell about us than leave it to fate. Are you ready to weave your very own personal success story?

The feat, livestreamed on Youtube and titled Ascension was a brilliantly designed, painstakingly constructed and impeccably executed combination of stunt and magic. Here is the video with the key moments of the stunt: https://www.youtube.com/watch?v=PBOzG_wvWfI

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The legislation which governs the PEP pothen esches* is beyond repair and must be rebuilt from scratch

e are two retired certified public accountants, members of the Institute of Certified Accountants of Cyprus, who, together with one internationally recognised and widely respected compatriot of ours, Professor of Economics at the LSE and the University of Cyprus, Sir Christopher Pissarides, have looked into the causes of the failure of the “pothen esches” system (as it applies to the politically exposed persons) to function properly over the past 17 years. Our findings have confirmed the generally acknowledged failure of the system to contain corruption and collusion and to establish a climate of transparency and accountability. This glaring failure has been caused by multiple problems, which must be urgently tackled. Our conclusion is that the system of compiling and filing statements of wealth by the politically exposed persons and the “bridging” (reconciliation) of the changes in the reported net wealth in a given period of time with the declared family income, the family living expenses and any other “sources” or “uses” of wealth in that period, is unworkable, it cannot be repaired and must be rebuilt from scratch, if it is going to have a

Authored by

The executive, the legislative and judicial arms of the state must show respect for the civil society from which they draw their empowerment

Christos P. Panayiotides

Nicos G. Syrimis

reasonable chance of delivering what it promises to deliver. A comprehensive and documented proposal Our findings led to the shaping of a comprehensive and documented proposal for the setting up of a new “pothen esches” system, capable of making a significant contribution towards the resolution of the problem of corruption and collusion that plaques society and has embarrassed our

42 | ACCOUNTANCYCYPRUS | APRIL 2021

Sir Christopher A. Pissarides country on an international scale.VOur work was not confined to the general framework of the system but has been extended to cover the detailed design of this new tool, including the design of the necessary wealth declaration form in a computerisation-ready format, so that it can be readily transformed into a fully computerised input document that would render the input-form userfriendly and easily subjectible to mechanistic checks and cross-checks to other sources of information. We then proceeded to the

compilation of an Appendix to the White Paper, under the title of “The Controversial Issues”, where we summarise, explain and document the approach we have taken on numerous controversial issues. The inability of splitting the family wealth into three independent components One of the obstacles which the existing pothen esches system came up against resulted from the rulings of the Supreme Court of Cyprus, which concluded that the personal wealth of the PEP could be publicly disclosed but publishing the remaining elements of the wealth of the PEP’s spouse and underage children would constitute a violation of the constitution. These rulings were based on the separation of the family wealth of the PEP into 3 distinct “baskets”: (a) the wealth of the PEP himself/herself, (b) the wealth of his/her spouse and (c) the wealth of their underage children. This separation ignored a basic truth, namely that the family wealth is invariably found in “intracommunicating vessels” and, therefore, it is impossible to separate it into 3 independent and stand-alone segments. The point of reference was Article 15 of the Constitution which explicitly provides - as a sufficient reason for publicly disclosing otherwise protected personal data - “the serving of the interests of transparency in public life or for the purposes of combating corruption in public life”. The self-exclusion of the judges from the “pothen esches” discipline The other important issue on which the judiciary has taken a firm stand is their position that the Supreme Court is a “self-regulated” authority and, therefore, it cannot be obliged by law to be subjected to procedures, such as the requirement to compile and submit statements of wealth, because such a course of action constitutes an intervention of the other two arms of the state on the judiciary and is contrary to the independence of justice that is stipulated in the constitution. We beg to disagree with this position for the following reasons: (a) In a properly run state, nobody is above the law, which is formulated by the executive arm of the state, it is enacted by the legislative arm of the state and may be overturned by the judiciary, if it is in conflict with the ultimate law embodied in the constitution. (b) There are numerous laws, which impose obligations on the members of the

judiciary, who are generally obliged to respect the laws of the land, irrespective of the fact that they had no involvement in the formulation or the adoption of these laws. (c) In particular, when it comes to issues of corruption and collusion, our logic says that the judiciary must be treated on the same basis on which the executive and the legislative arms are treated and not on the basis of a presumption that they are “incorruptible under any circumstances”. (d) A generally accepted principle of law is that the judges and the judged cannot coincide in the same persons or in groups of persons who share the same characteristics. A unified supervisory board of “pothen esches” It is with these thoughts in mind that we have come to the conclusion that it is highly desirable to subject all three arms of the state to identical tests that will confirm the presence of the desired level of transparency and the absence of conflicting interests. These tests must be applied to all those who are called upon to serve the public interest. This is the rationale behind our proposal for setting up a “pothen esches” Supervisory Board, which will be jointly appointed by the 3 branches of the state, thus ensuring that the proper functioning of the system will not involve the interference of one authority in the affairs of the other two authorities.

objections is the inclusion in the statements of wealth and the related “pothen esches” of trusts. Unfortunately, those supporting this view do not seem to understand that in those cases where the setting up of a trust is intended to disguise wealth, such “black wealth” is effectively rendered unusable and that its “laundering” invariably entails considerable costs and substantial risks. Clearly, a politically exposed person cannot be held responsible for not declaring a trust in which he/she or a close member of his/ her family is named as the beneficiary, if, unknown to him/her, the trust has been set up by a third party, possibly to frame the PEP. Study our proposals and submit your comments In addition to the issues enumerated above, there is a plethora of seemingly “minor” imperfections, ambiguities, contradictions, conflicts and legislative gaps, which have rendered the existing system totally ineffective and incapable of generating any added value. You will find our detailed proposals in our web page at www.pothenesches-cyprus.com, in Greek as well as in English. Please read our proposals and send your comments and suggestions, using the special purpose form you will find there. We have already responded to certain comments and suggestions received. The responses have been grouped and are set out in the Appendix to the White Paper, which has also been uploaded to our web page.

The treatment of trusts One issue which meets strong resistance and

(*) An explanatory note on “Pothen Esches” “ Pothen Esches” is a Greek phrase, which - literally translated - means “where has it (the wealth) come from?” It is a short term used to describe the process of “bridging” two consecutive statements of wealth. This is the process of explaining, justifying and documenting the changes noted in the net worth of a person’s wealth between two consecutive points in time.

ACCOUNTANCYCYPRUS | APRIL 2021 |

| BUSINESS & ECONOMY

Industries most impacted by the pandemic and when to expect recovery

Styliana Charalambous (ACCA, BA) Head of Investments & Market research at Pure Market broker

he economic impact of COVID-19 is being felt on a global level, and with specific sectors more severely affected, some industries may see a quicker bounce back than others once the crisis is over. Every industry in the world have been influenced in one way or another, since most businesses have had to cope with shifting their entire staff to remote work and many companies have had to close their doors altogether, which has left millions of people out of work. Although we can argue that the coronavirus contraction could end up being the shortest U.S. recession ever, there are several industries that are still heavily impacted by the consequences of the pandemic and their recovery will probably be slower than expected. While the beginning of 2021 looks to continue to be rough, with Q1 being another lost quarter for many industries, the rest of the year looks promising for a huge resurgence. Nearly all industries are likely to see a bounceback in 2021 from a massive 2020 falloff. However, we will focus on four industries that seem poised for massive rebounds.

44 | ACCOUNTANCYCYPRUS | APRIL 2021

Airlines and transportation • Businesses Affected: airlines, car rental companies, coach services, tour services. • Jobs Affected: airport workers, drivers, pilots, flight attendants, tour guides, travel agents. Airlines and transportation industry is undoubtedly one of the most negatively affected industry by the pandemic, since for a significant period of time people were not allowed to travel from one country to another in order to restrict the virus spread. Even during the first months of 2021, there are still travel restrictions and requirements in place

that have made travelling experience less convenient. The revenues of airlines and transportation companies collapsed as passengers cancelled trips and countries imposed travel bans and as a result the stocks plunged in early March based on bankruptcy fears. Thanks to the government bailouts and private financing, airlines made it through the initial liquidity crunch. On the other hand, what we know for sure is that, when the pandemic ends, people would be looking to travel again but it may take years to return to pre-crisis levels, especially if companies conduct more business virtually for cost-savings and to protect employee’s health,

Hotels and accommodation

Booking Holdings Inc. (BKNG)

✩

NasdaqGS - NasdaqGS Real Time Price, Currency in USD

2.426.89 +67.52 (+2.86%)

As of 24 12:47PM EST. Market open  Indicators   Comparisson  Events  Date Range 1D 5D 1M 3M 6M YTD 1Y 2Y 5Y MAX 

Interval 1W ν

BKNG 2119.23 |

Area ν ✎ Draw

S

yahoo/finance

2293.05 2,250.50

• Businesses Affected: hotels, resorts, bed and breakfasts, hostels, • Jobs Affected: hotel workers, resort staff, AirBnB renters, cruise staff. The hotel industry has been severely affected by the COVID-19 pandemic and its resulting travel and dining restrictions, and other social-distancing rules. Shutdowns prompted by the COVID-19 pandemic continue to devastate workers in the hospitality industry, as slower-than-expected vaccine distribution and new variants raise concerns about when American life will return to normal. According to a jobs report released by the Bureau of Labor Statistics last month, the sector has already suffered staggering damage. It cut nearly half a million jobs in December and saw a total loss of 3.9 million positions since February 2020. People are going to want to travel again. The world is suffering from a near-universal case of cabin fever and the best solution for that is to get out of town. People will likely be traveling in record numbers once it is safe to do so. While many hotels and other accommodations were forced to shut their doors for good during the pandemic, those that make it through should find an abundance of riches on the other side. Irina Novoselsky, CEO of the online recruitment website CareerBuilder mentioned that companies in the sector plan to bring back jobs ‘really quickly’, she has also commented that hospitality companies are preparing for a “V-shaped” recovery triggered by widespread vaccination that unleashes pent-up demand for travel. As soon as people get vaccinated, there’s an expectation that people are going to hit the hospitality sector pretty quickly, wanting to travel; wanting to get out there because they’ve been cooped up for several months.” In the case of the hotel industry, there seems to be a positive sentiment in the market since Booking Holdings Inc not only recovered it’s March losses, but the price is currently at all- time high levels. 2,000.00

1,750.00

1,500.00

1,250.00 1.20M

Mar May Jul Sep Nov 2020 Mar May Jul Sep Nov 2021

Why it may be time to buy airline stocks

American Airlines Group Inc. (AAL)

✩

NasdaqGS - NasdaqGS Real Time Price, Currency in USD

21.64 +0.98 (+4.72%)

As of February 24 10:40AM EST. Market open  Indicators   Comparisson  Events  Date Range 1D 5D 1M 3M 6M YTD 1Y 2Y 5Y MAX 

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AAL 21.62 |

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yahoo/finance

35.00 32.50 30.00

Oil and Gas WTI&BRENT

Crude Oil Apr 21 (CL=F)

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NY Mercantile - NY Mercantile Delayed Price, Currency in USD

63.15 +1.48 (+2.40%)

As of February 24 1:45AM EST. Market open  Indicators   Comparisson  Date Range 1D 5D 1M 3M 6M YTD 1Y 2Y 5Y MAX  |CL=52.36

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yahoo/finance

60.00 55.00

27.50 25.00 22.50 20.00

According to some wall street analysts it may be the time to add airline companies to your portfolio since now it appears they have weathered the worst of the coronavirus pandemic. American Airlines Chief Revenue Officer Vasu Raja commented in Yahoo finance that “It’s a matter of letting the vaccine distribution play out, demand is currently at between 40% to 45% of its 2019 levels, our revenues trail that may be about 30%. But every day is a little bit better.” Raja also said that American Airlines sees the recovery building in real time with increased bookings to leisure destinations but he cautions that there is still a long way to go. American (AAL) stock is up 30% year-to-date and up 67% over the past six months. At Delta (DAL) shares are up 20% year-to-date and 75% over the past six months. United (UAL) is up 15% and 51% for the same time periods while Southwest (LUV) is up 22% and 61%. In the following diagram you can see an example of the market reaction on American Airlines Group Inc. stock. The stock price has dramatically fallen on early March, when the stock market crush occurred. Shares have surged recently and are headed towards profit-taking range. But AAL stock is still below pre-pandemic levels. The relative strength line for American has spiked, and the 50-day line is trending upward.

17.50 15.00 12.50

Mar May Jul

Sep Nov 2020 Mar May Jul

Sep Nov 2021

63.58

50.00

This pandemic will be remembered as the first time in history when oil prices actually fell below $0. Covid-19 forced lockdowns around the world that destroyed demand for oil products like gasoline and jet fuel. Moreover, as tracked by West Texas Intermediate, the negative oil prices only lasted for 24 hours. According to Reuters, Oil prices have extended gains for a fourth session on Thursday to reach the highest levels in more than 13 months, underpinned by an assurance that U.S. interest rates will stay low, and a sharp drop in U.S. crude output last week due to the storm in Texas. Barclays said it is seeing staying power in the recent oil price rally on a weaker-than-expected supply response by U.S. tight oil operators to higher prices. U.S. West Texas Intermediate crude for April was at $63.54 a barrel, up 32 cents, 0.5% while Brent crude futures for April gained 37 cents, 0.6%, to $67.41 a barrel by 0718 GMT. Jeffrey Halley, senior market analyst for Asia Pacific at OANDA commented that combined with a dovish Jerome Powell and an already tight physical market, oil prices exploded higher.

45.00 40.00 35.00 30.00 25.00 1.69M

Mar May Jul Sep Nov 2020 Mar May Jul Sep Nov 2021

ACCOUNTANCYCYPRUS | APRIL 2021 |

| BUSINESS & ECONOMY

In need of a new educational system E

ducational reform, changes in curricula, modernization in education. The truth is that they were, are, and will be on the political agenda and will become more relevant before each election.

For Cyprus, the transformation of education is not just a policy choice. The competitive advantage of Cyprus can not be other than its human capital. Research and innovation are key pillars for the development of a new sustainable, non-opportunistic economic model

Menelaos A. Menelaou Head of Academic Affairs and Student Welfare University of Cyprus

But we must recognize the urgency of the moment and the fact that our educational model is at a crossroads. This is because now the data, not only in education but in all aspects of our lives are changing at an unprecedentedly fast and revolutionary pace. Mankind naturally experienced revolutions again.

46 | ACCOUNTANCYCYPRUS | APRIL 2021

They preceded, for example, the revolution of knowledge, science, industry. But they took many more years to develop and affect people's lives. If a Spanish villager, writes Juval Harari, slept in 1000 AD and woke up 500 years later, watching the ships of Columbus prepare for their long voyage, he would not notice much change around him. Now think of the same villager, in a second siesta of 500 years, waking up to the sound of a "smart" telephone, in 2000 AD. Now just imagine the schoolroom not of 2500 AD but 2050. There are many scenarios. Quantum computing speeds and networks, virtual and augmented reality, artificial intelligence, robotics, Internet of Things etc, can drastically change the image and content of today's education. What we need to do immediately is to envision the educational model we want. A model that will inspire us, utilize and integrate new technologies, that will individualize the learning experience and prepare all our young men and women for a world that is constantly changing. A

model that will create and support a culture of lifelong learning. In practice, we must decide whether, to achieve this model, we must adapt the existing system with immediate but gradual changes, whether we will pursue it with a more radical approach concerning people, places, technology in education, or whether we will balance somewhere in between. What is certain is that we need to reimagine education. The spaces where it will take place, not just by replacing desks with round tables and colorful chairs, but by using multiple physical and digital spaces, inside and outside the school. Use of technology for

personalized content and pedagogical approach. Flexible curriculum through individual and group work on topics that serve the learning objectives and stem from social and other issues of interest to the community. In addition to arithmetic, reading and writing, time will be invested in discussions, review, introspection and empathy. Students will learn through books and lectures as well as practical experience and creative expression. Schools will be hubs for formal, non-formal and informal learning. This reflection is difficult. Deep. It touches

on all aspects of all three educational levels, which is why it must be done with creativity but also with a strict plan. Issues of educational content, pedagogy, exams, training, structures, infrastructure, legal framework. We need a clear political vision and a technocratic program, unhooked by the changes in power and with a firm commitment to its implementation. It needs serious financial investment. It needs the involvement of all stakeholders, with a clear change agenda and specific terms of reference, it needs scientificity and technocratic contribution within a human-centered work environment. We can do it. For Cyprus, the transformation of education is not just a policy choice. The competitive advantage of Cyprus can not be other than its human capital. Research and innovation are key pillars for the development of a new sustainable, non-opportunistic economic model. Our only choice and basic condition to achieve this is a modern educational system which must be demanded by society, designed with the initiative and responsibility of those responsible and implemented with the contribution of all of us.

ACCOUNTANCYCYPRUS | APRIL 2021 |

| C-SUITE CORNER

Meeting George Hatjineophytou Chief Operation Officer of Global Dots

ead the insightful interview of Mr. George Hadjineophytou of Global Dots Group who talks about the activities and challenges of his organisation and industry, about his personal and professional life.

What challenges did the Covid pandemic bring to your sector and Group? The IT services sector was indirectly hit by the Covid pandemic. Although the need for such services continued and, in some cases, increased due to the enhanced use of technology, our clients were affected globally. As we work B-2-B, we started to get affected as our clients got affected. The global pandemic influenced almost all sectors of the economy all around the world. Some of our clients saw substantial reductions in revenues which forced them to react in different ways. Of the clients affected, some had to suspend trading and others needed to go into “hibernation” to survive. Our sector works with long-term contracts which meant that in the beginning, the impact of the pandemic was not felt. As the duration of the pandemic increased, clients found it increasingly difficult to pay as cash flow became the single most important factor across all sectors. The IT services sector is heavily reliant on people, with payroll being the single largest expense after purchases. Shortage of cash meant having to manage purchases and payroll very closely to avoid having to lay off people as much as possible. The sector employs some very specialized people with unique skills which are sometimes hard to find and takes time to train once you find them. We avoided laying people off, and on the contrary, the pandemic also provided the opportunity to grow in certain areas,

with the number of people in the Group growing during the last twelve months. The situation in the sector is still very fragile due to the pandemic and the effect it is having to our clients. As clients are looking for more costefficient ways to do business, the sector needs to adapt and look for such alternatives without compromising some of the core values of the services offered, such as security. What is your role in the Group? I am an Engineer who qualified many years ago as a Chartered Accountant. After working in the profession for eight years, I moved into industry where I have been working for the past nineteen years in Finance and Operational roles. I joined the GlobalDots Group of companies three years ago with a view of building up the Operations function as the Group COO. Although the Group was already almost 15 years old at the time, the way it was operating, scattered around the world and focusing predominantly on sales and growth, meant that the Operations function was not developed to meet the needs of a growing and complex Group. Building the Operations function meant building up teams to handle finance, administration, IT, HR and legal responsibilities, putting in place all the necessary policies and procedures to ensure a smooth running of the function. The team has now grown to around twenty people, scattered in three countries.

48 | ACCOUNTANCYCYPRUS | APRIL 2021

George Hadjineophytou Chief Operation Officer of Global Dots

GlobalDots serves over three hundred and fifty enterprise customers worldwide, including Lufthansa, Bosch, Fiat, Playtika, AppsFlyer, End Clothing, etc. Our portfolio includes over eighty cutting-edge cloud, web and network vendors, with twelve new vendors introduced in 2020 alone

What are the GlobalDots Groups’ activities. The GlobalDots Group was founded seventeen years ago. It is now regarded as a leading, independent Group in cloud innovation, connecting businesses with the latest cloud and web technologies. We number in excess of 80 people, with presence in 11 countries. With innovation at the heart of what we do, a diligent team of hands-on experts helps our customers maintain an up-todate technology position in a quicklychanging world. We consult, resell, implement, and customize full-stack solutions, including cost and performance optimization, security, connectivity, and managed services. Our services streamline business processes and provide the foundations for sustainable business growth. GlobalDots serves over three hundred and fifty enterprise customers worldwide, including Lufthansa, Bosch, Fiat, Playtika, AppsFlyer, End Clothing, etc. Our portfolio includes over eighty cutting-edge cloud, web and network vendors, with twelve new vendors introduced in 2020 alone. GlobalDots is a certified partner of AWS, Akamai Technologies, CloudFlare, Okta, Cato Networks and other world-class players. Being a tech Group, what advise you give to other companies and accountants? Our advice is that companies need to invest in technology in order to either differentiate or simply keep up with changing times. Everything around us

is changing at a very fast pace. Whether you keep up with your own, in-house resources or you employ a consultant to do this, you simply cannot afford to fall behind. Investment in technology is exactly what the words suggest, investment, and not a cost! Accountants are usually at the heart of such an investment as they are the ones mostly affected by changes. Whether it is affecting their own department or not, it is usually the accountants who will be asked to manage the commercial application of such technologies. What specific skills have you developed for your position? I have been working for international companies for many years. I also worked with a number of start-ups in my career, but this was the first time working with an established Group, which in many respects had to be treated as a start-up, in setting up a number of functions, processes, hiring people and at the same time working in a fully remote environment with colleagues spread all around the world. Communications skills were probably the skills that had to be developed the most, both in terms of working fully remotely (even before the pandemic

forced us to work in this way) and also working with people from around fifteen different nationalities. What inspires you in your position? Being the COO of the Group means that you are always at the heart of things. You have constant interaction with people in an effort to support them, whether proactively or reacting to issues they are facing. In addition to dealing with colleagues, you also deal with vendors, clients and other third-party providers of various services. You need to be quick on your feet and develop your knowledge of the various individuals and appreciate their background and cultural differences. You need to respect these differences when offering your input to them to ensure that you are not, in any way, insulting them when you are only trying to help. No two days are the same in this position and there is no real manual to follow when it comes to performing your duties. This offers a great sense of freedom, but at the same time a great sense of responsibility. I have never shied away from responsibility and this position is offering these attributes.

WHAT ARE THE PROSPECTS FOR YOUR GROUP? The GlobalDots Group operates in an industry which is both expanding and changing. The group relies on a complex matrix of the collective knowledge of its people and the matching of vendor offerings to customer needs. The prospects of the Group are good, aiming to continue its growth which has seen it increase its turnover significantly, year-on-year, in the past years.

ACCOUNTANCYCYPRUS | APRIL 2021 |

| ECONOMIC CRIME & FRAUD

How an organisation’s culture can affect occupational fraud

onsumer electronics and engineering company Toshiba, struggled since at least 2008 to meet its financial targets. In 2015, the company admitted that because of its struggles, it committed a multi-year $1,22 billion accounting fraud that culminated in the resignation of CEO Hisao Tanaka in July 2015.

The fraud started with senior management pressuring employees, who interpreted this as implicit directions to cook the books. Many employees were ultimately involved in the massive scheme and coverup. An 82-page summary of the investigation’s findings stated that “there existed a corporate culture at Toshiba, where it was impossible to go against the boss’ will”. The investigation concluded that the earnings inflation was intentional, and the report described it as “a systematic involvement including by top management, with the goal of intentionally inflating the appearance of net profits”. So, is there a correlation between fraud and the culture of an organisation? And if there is, how can organisations promote an ethical and anti-fraud culture and reduce the likelihood of occupational fraud occurring?

George Zornas President of the ACFE Cyprus Chapter

50 | ACCOUNTANCYCYPRUS | APRIL 2021

Culture Culture is defined as the system of values, beliefs, and behaviours that shape how work gets done within an organisation. It is the soul of a business unit and it is always at

the forethought of every decision by every employee and never an afterthought. The importance of culture Healthy cultures are integral to the vitality and viability of all organisations. The factors associated with healthy or unhealthy cultures are the same ones which determine the organisation’s quality of goods and services. So, what can an organisation do, to promote an ethical culture and reduce the likelihood of occupational fraud occurring? Communicate what is expected of employees Organisations should implement a written code of ethics and produce a clear statement of management philosophy. The code should be given to every employee and vendor who works on behalf of the organisation, to read and sign it. It should also be continuously reinforced through communications from the organisation’s leaders. Set an ethical “Tone at the top” In its paper on the Tone at the top, the Association of Certified Fraud

Examiners (ACFE) refers to the former as the “ethical atmosphere that is created in the workplace by the organisation’s leadership. Whatever tone management sets will have a tickle-down effect on employees. In short, employees will do what they witness their bosses doing.” Management should therefore lead by example and lead with integrity. Executives cannot just “talk the talk”, they also have to “walk the walk” and show employees how to act by setting the right example. Management should demonstrate their commitment to ethics through both their words and their actions. Whistleblowing - Provide a safe mechanism for reporting violations If employees are afraid to go to their managers, or if they do not know where to go if they have an issue, that should raise a red flag. Organisations need to instil in their staff an “if you see something, say something” policy. An environment of safety for employees to report misconduct and fraud should be created. Employees should be in a position to come forward and

report misdeeds without the fear of retaliation from upper level management or their colleagues. Reward integrity and punish unethical actions Organisations should not reward employees only for meeting financial goals. The performance of all employees, including upper-level management, should be based and measured on core values and long-term strategy. Acting with integrity and ethics, should also be rewarded and should be integrated into existing employee incentive programs. However, no control environment will be effective unless there is consistent discipline for ethical violations. There should be sanctions for engaging in, tolerating, or condoning improper conduct. Consistent discipline requires a well – defined set of sanctions for violations and strict adherence to the

prescribed disciplinary measures. Implement a formal training program It should be mandatory for all employees, including upper-level personnel, to receive ethics training, which should cover the organisation’s code of ethical conduct, procedures and standards, as well as the employees’ roles and responsibilities to report fraud and misconduct. It should also inform employees about what kinds of acts and omissions are prohibited by law and by the organisation to help them avoid situations that could lead to criminal conduct. Follow through with investigations on fraud and misconduct Organisations should have a standard procedure for dealing with fraud allegations and should conduct a fully-fledged investigation when fraud or misconduct is reported.

KEY TAKEAWAY

It is crucial to an organisation’s success for executives and management to set an ethical example of how employees should behave in the workplace. When those in top positions set the wrong, unethical example by committing fraud, their employees will follow their steps, creating an entire culture of workplace fraud. When executives put pressure on employees to meet unrealistic goals to yield profits for the organisation, as in Toshiba’s case, they are essentially forcing employees to do whatever it takes to achieve those goals, whether they achieve those improperly or not. In their minds, the end justifies the means.

ACCOUNTANCYCYPRUS | APRIL 2021 |

| FINANCIAL SERVICES

Reflecting on Gender equality in the Insurance Sector

Stavros Violaris Cyprus Insurance sector Leader

ender equality has been a topic of discussion across several forums, government bodies, public entities and other organisations; While much progress has been made, there is still a great deal of work to do. I am of a strong view that the more industry specific we make the issue, the more likely it is that actionable plans will emerge. As the Insurance leader at EY, I am committed to assisting the industry take the right steps forward.

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GENDER EQUALITY: EASY TO DEFINE, DIFFICULT TO ACHIEVE Everyone can have their own definition on how they understand gender equality; A broad definition can be that gender equality means that everyone, regardless of gender identity, has the same opportunities for professional success and the same compensation and rewards for their performance. It is a simple definition, but nevertheless true gender equality has yet to become a reality and there are reasons for it. Cultural factors have certainly played their role in preventing gender equality from becoming reality, irrespective of public commitments of companies towards equality. In some cases, perception biases can hold people back. Irrespective of how talented a female insurance professional is, there is, in a lot of cases the perception that she will not go all the way to making a career. Do women get the credit they deserve? Are they prevented from expressing new, fresh, innovative ideas due to the fear of how these will be perceived? Do they stand out for themselves when they feel overlooked or does the fear factor

MOVING FORWARD WITH GENDER EQUALITY The way forward is not simple and achieving gender equality in the Insurance sector will be a long journey. I am choosing some simple actions from our Global insurance leader, Isabelle Santenac. “Identify strong performers early in their careers. I always encourage highpotential candidates to think big and strategically about their careers, and not be shy about their ambitions. We must look beyond self-doubt about our ability to lead, which is common in many women. The key is to project ourselves into the leadership roles we want and gain the courage to raise our hand and ask for them. Make themselves visible. This is a critical step because it strengthens networks, demonstrates what can be accomplished and helps boost confidence, which is often necessary for women to make the most of their leadership potential. Women must also overcome reluctance to assert themselves and find sponsors who can help them increase their visibility. Serve as champions of inclusiveness and diversity. We must actively engage our male colleagues to ensure they understand existing biases and how they can help eliminate them by advocating for gender equality. Male and female leaders alike must live that advocacy in the teams they build and the decisions they make. Women can’t do it alone. prevail? In all these cases, the end result is that promotions go to those who make their feelings known and demand recognition. A good example in the Insurance Industry would be the actuaries. How many female university students major in actuarial science, a discipline that historically produces many senior executives in insurance? The future is only as strong as the next generation of workers who are recruited into the field and into the right functions. Looking more closely at the state of women in the insurance industry. According to research from ACORD, women drive the insurance industry, comprising more than 60% of the workforce. Leadership is where we find inequality. Women hold only: • 19% of board seats • 11% of named officer positions • 12% of C-level positions These numbers reflect the reality that gender equality remains a distant goal.

Encourage their daughters, nieces and other young women. We must teach the rising generations to be fearless in choosing their fields of study, including largely male domains (such as math, science and engineering). If they want a career in financial services, we shouldn’t be shy in pointing them toward cybersecurity, artificial intelligence, analytics and data science, while also coaching them about what to expect in these traditionally male-dominated domains. Ultimately, I see gender equality as a matter of performance and leadership. The insurance industry needs more than ever to attract and more than ever retain the best talent, regardless of gender, ethnicity, race or sexual orientation. The future success of our firms demands it. Thus, it’s a primary responsibility of all executives in financial services. It is both the right thing to do and an imperative for business.” Gender equality is not only social responsibility but a matter of performance and leadership. The insurance industry needs to attract and retain the best talent, regardless of gender, ethnicity, race or sexual orientation and it is a primary responsibility of all executives to work in that direction. It is simply the right thing to do. Personally, I am particularly proud for our EY Insurance female team. Our strong performance would not be possible without them.

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| FINANCIAL SERVICES

Cyprus Fund industry: An evolving and dynamic powerhouse

yprus has, over the past few years attracted some serious attention as a rising fund domicile within the European Fund Industry. According to the European Fund and Asset Management Association (EFAMA), Cyprus has seen a formidable growth momentum, with assets under management rising from €2.7 billion in 2016 to almost €8.6 billion in the fourth quarter of 2020. Those figures are more remarkable considering that the industry is no more than 10 years of age.

Andreas Yiasemides President of the Cyprus Investment Funds Association (CIFA)

This continuous growth is the result of a variety of factors that make Cyprus a unique fund jurisdiction supported by the efforts of the public and private sector in promoting Cyprus as a reliable jurisdiction for investment funds and fund managers; these include our European status and access to the European markets, our ability to offer a cost-effective and tax favourable solution and our geostrategic position that creates opportunities in the unexplored, yet promising, Middle East, Asian and African markets, topped with our flexible and transparency-oriented legislation. Although these factors continue to be important, there are others now which are equally significant, including the rising sophistication

CIFA has suggested certain proposals to the current legislative framework that would enable Registered Alternative Investment Funds (RAIFs) to acquire a loan portfolio

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of the industry over the past few years, which gradually results in larger numbers of experienced service providers and specialist advisory firms. Although still in an infantry level, compared to its European counterparts, such us Luxembourg or Ireland who have long been established as traditional fund jurisdictions, Cyprus, both from the level of the regulator, as well as from the level of the industry which is represented by CIFA, strives to never stay complacent. For instance, CIFA has suggested certain proposals to the current legislative framework that would enable Registered Alternative Investment Funds (RAIFs) to acquire a loan portfolio.

Our report to this end, which has already been submitted to the Cyprus Securities and Exchange Commission, being the competent regulator of the fund’s industry is currently examined by the latter, and we are confident that it will positively impact amendments to our current legislation which would add to Cyprus competitiveness as a funds jurisdiction. Simultaneously, in spite of the apparent favorable tax environment currently in place, CIFA has been exploring ways to further enhance Cyprus’ drive in this respect and put forth specific proposals that

would simplify tax calculation for Cyprus funds. Equally important is the formulation of the legislation that will regulate fund administration services, to which CIFA has contributed through research and findings with respect to the implemented practices of the fund administration profession in other mature EU jurisdictions. The Cyprus Securities and Exchange Commission (CySEC) is due to publish the relevant consultation paper right after the Easter holidays and we are beyond excited that our efforts to this end gradually capitalise. Last but not least, coordinated efforts are

being made for the implementation of partnership structures with distinct legal personality. The addition of this legal structure will bring Cyprus in line with every other major fund jurisdiction, regarding the availability of legal forms for fund structures. Cyprus’s ambition with respect to funds is evident. Its fund industry is open, approachable and all the industry and governmental arms are aligned. As such, we are hopeful that CySEC and the House of Parliament will positively respond to these pending proposals which will definitely assist the industry get to the next level. Our medium-term target is to increase the Cyprus Funds’ Assets under Management to Eur 25 billion and attract key worldwide players of the fund industry, such as fund managers, custodians, and other participants in the market. In spite of the unprecedented times we currently face, we remain optimistic and confident that our mission to further strengthen the position of Cyprus as a hub for investment funds will be accomplished. We are committed to staying focused on the key topics which influence demand. Working together is the key element in bringing success and it is imperative that this ideology works as a steppingstone in our way forward.

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| FINANCIAL SERVICES

Christis Michaelides Ancoria Insurance Public Ltd

Stock markets were not absent from the drama. The roller coaster ride of March 2020 sparked the shortest bear market in U.S. history. For some investors it presented a golden opportunity for bargain hunting, but for the faint-hearted investors it was a nightmare come true. STRATEGY OVER EMOTION In 2019, stocks went on an upward frenzy and markets posted their best year since the financial crisis of 2009. Early into 2020, investors were confident. In March it all came crashing down. In a four-day span, the Dow Industrial Average lost 26% of its value. It was during those days that nervous clients were seeking guidance as well as support. It is not an easy task to reassure someone that has

What investors learned (again) in 2020 The year 2020 will be remembered for all the right and wrong reasons. The deaths from Covid-19 and the images of deserted cities highlights the dark aspect. On the other hand, staying home and working less, reconnecting with family, living life at a slower pace, all have yielded a physical and mental rejuvenation to a workaholic and fast-paced society. For the first time in decades the skies went blue again in India and the waters of Venice became crystal. seen their pension savings lose 20% of its value in a matter of days. However, the punchline was the same to everyone; stick to your guns, nothing has changed. A pension portfolio follows a long-term approach and short-term market hiccups must not derail the master plan. It is understandable that the fear of loss can be overwhelming, but conviction in a sound strategy is what must prevail. Nervous, yet composed, most stood firm and rode the brief but rough storm. Their patience was rewarded. The year finished with gains, but most importantly, they learned a priceless lesson in investing; strategy over emotion. Do not act due to panic. TIMING THE MARKET Even the most experienced and seasoned

professionals do not claim that they can time the market. T he well-known Warren Buffet cliché “It's about time in the market, not timing the market” is as effective as it is simple. Some of the clients that called in March asked if they should sell and buy at the bottom. Unless one has a crystal ball, it is impossible to know when the bottom has been reached. Those who were not brave enough to stay the course, sold and waited for the bottom to get back in again. Well, the bottom came, the bottom left and the losses of March 2020 were erased. Those who panicked and liquidated are still sitting on cash, and will not reposition themselves because they consider prices “too high”. “Too high” does not exist if you follow a long-term strategy.

HISTORY IS ON YOUR SIDE For a long-term investment strategy to be successful, two ingredients are paramount: Well-Diversified Portfolio and Time Horizon. Once the correct Funds are selected, the investor will just need to be patient and disregard short-term fluctuations, irrespectively of how nerve-breaking these may be. In a recent study conducted internally at Ancoria Insurance, historical market data were used to illustrate how investment horizon can diminish the possibility of market losses. The study triumphantly proved how time and performance are interrelated. Between 1987 and 2018, if one invested in either the MSCI World Index, S&P 500 Index or the STOXX Europe 600 Index with a 20-year horizon, the probability of a negative return was zero. As the horizon decreased, the probability of a negative return increased. Investors often have the urge to fiddle with their investments, especially during volatility. They are overcome by an emotion of helplessness, or even sometimes despair, and feel they ought to act. However, engaging in frequent trades to time the market will not yield the intended results. If it works out sometimes, it is purely a matter of luck. In the long term this strategy will not work. The best thing to do is nothing. Stay put, have faith in your strategy and let time work for you. It is as simple as that.

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| ICT

Blockchain technology and the audit profession

ALEXIS NICOLAOU Chief Executive Officer Block.Co

Is Block-chain te-chnology here to stay or just another buzz word? I often get asked this question. Blockchain is definitely here to stay and at some point, in the not so distant future, we will not even be referring to it as Blockchain, but just like we no longer refer to https, we will simply be calling it the internet. It will become a standard just like https has.

To quote a report published by Gartner “we are now on the peak of the slope of enlightenment, when corporates and customers really learn and begin to use the technology for practical, useful purposes that will change how companies, applications and users interact”. According to that same report, “the 2020s will be the decade when blockchain technology will leave small-scale proof-of-concept projects behind and make its way into the operational structure of multinational corporations”. As of this year and over the next couple of years, it will expand into several pragmatic use cases in payment processing, data sharing, equity trading and contract/document keeping and tracking. Blockchain will be fully scalable by 2023. Our own profession will also be “touched” by this nascent technology. And how can it not be, when Blockchain is in fact itself a ledger that is distributed across several computers or nodes. Because all entries in a blockchain are distributed and cryptographically sealed, it is virtually impossible to destroy or manipulate information, preventing people from being able to ‘cook the books’ or conduct other forms of financial fraud. Blockchain would be accessible to all relevant parties by employing the so-called triple-entry bookkeeping model. Triple entry adds a third layer of entry, a cryptographic seal, with all transactions written on the blockchain shared with everyone involved.

Accounting will become more continuous. Imagine a world where the books are always ready for reporting, where you always have real-time, complete, up-to-date information about the performance of your business. The future accountant must have a flare for IT and not just numbers. The accountant must work closely with the IT department, so that they understand one another’s language The auditor of the future will also have to be a different beast. They will be more closely concerned with validating systems of governance and controls, validating the security and integrity of data within systems, and being capable of determining whether platforms or applications are operating as intended. It’s likely the auditor of the future will not even be an accountant but a blockchain expert trained to identify and report ways in which blockchain technology can be abused. Applications of blockchain technology in other sectors could also provide auditors with powerful tools that will help them carry out their work more efficiently and effectively. For example, there are solutions developed on top of public blockchains i.e. the Bitcoin or the Ethereum blockchain, that enable institutions to secure the authenticity of any electronic document they issue, by anchoring a fingerprint of that document on the Blockchain, and at the same time enabling any third party to validate the authenticity of that document, i.e. an auditor or any other authority, independently. That is, without having to contact the issuer. This document could be an invoice or a set of Financial Statements. Think of the ease with which an invoice, most of which are nowadays issued electronically in pdf format, can be tampered, and the difficulty for an auditor to identify such a fraudulent action. Or the efficiency of issuing a company’s audited financial statements on the Blockchain, and for the Blockchain to be the single most reliable source of truth as to the authenticity of those Statements.

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| TAXATION

Opening address th to the 4 Cyprus International Tax Conference

I Kyriakos Iordanou General Manager ICPAC Conference Chairman

am delighted to welcome you to the 4th Cyprus International Tax Conference. Given the circumstances of the times, this year’s conference will be delivered online, without depriving it though from its quality and content that it has built over the last three years. Anyway, we have adapted to the imposed new reality. We remain hopeful, that the situation will gradually return to normality and we shall soon enjoy physical events and face to face encounters and network. The Cyprus International Tax Conference has been established as the unique source of information and discussion forum on the strategic issues of international taxation, considering Cyprus’ position as an international business centre. Today we will address the current and most important challenges of international business and international taxation, the imminent challenges and those around the corner, all with a forward-looking perspective. I would like to open this year’s conference by stating that we are in indeed living very interesting times, from various aspects! The Covid 19 pandemic demonstrates that we are actually living in a close neighbourhood. The world appears not be

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so big after all! The same apply for global business and societies. The spread of the pandemic forced and dictated many changes in our ordinary daily personal and business lives. Since we are not living in silos, we are greatly influenced by all global developments and phenomena, which affect economies, businesses and societies. We see that all countries around the globe struggle with the pandemic and strive to maintain their economies at an acceptable survival level. The primary focus is on the health and safety of the populations, whilst a major bet is the sustainability of the business activity and of the enterprises that constitute the productive cells of each country’s economy. With the lock downs for social purposes, the closing down of numerous businesses and the freezing of various sectors, governments try to match the financial support given to society with the reduced revenues from tax collection. It is indeed a very difficult mathematical equation, which the technocrats at the respective Ministries of Finance have to be extremely resourceful to solve. Amid the inescapable paradox of the Covid 19 and the uncertainty and fear it drugs

along, the international business remains alive and active. There are plenty of challenges that need to be addressed, both in the business development side, in the regulatory and compliance side, as well as in the operational and legal side. To mention just a few, OECDs initiatives remain high on the agenda, with the Transfer Pricing and Multi-lateral Instruments posing at a coveted position, European Union’s directives, spearheaded by the introduction of DAC 6, are still crucial to EU members states, reporting, transparency, exchange of information and overall tax compliance are earning more and more attention and significance. At the same time, as if the existing challenges were not enough on their own, Brexit and the TCA agreement between the UK and EU opens a whole new chapter. Taxation obtains new dimensions, being now also used as a tool to impose sustainability measures and “green” policies, coupled by new roles as an Environmental, Social and Governance metric. There is also a growing appetite to restrict practices of the past for aggressive tax planning and profit shifting, and to

combat tax evasion and avoidance, as well as illicit financing. There is also increasing debate about the digital taxation and to tax the profits where the ultimate consumption of goods and services actually happens. All of the above, and many more, occupy a substantial part of the tax agenda. The rules of the international taxation shape the nature and substance of the international business, which in turn, has a fundamental influence on the economic models of various countries. The traditional international business centers are considered now obsolete, given the extensive transparency and reporting requirements. I believe that there is an a growing difficulty for countries to compete in the international business arena, claiming their share of FDI, resources, capital and tax revenues. There is the risk of emergence of countries with different gears of development and economy, even within economic alliances and unions, eg the EU. So, sustainability, growth and the competitive edge between countries to attract international funds and corporations will elevate into a much more challenging serial, with factors like technology and competitiveness being decisive and catalytical. So, all of the above bring us to the core of our discussion today. Having in mind the aforementioned factors and developments, one would reasonably start considering: • The nature and format of the international business activities • The future of the tax services per se and the new role and skills that tax professionals may need to adopt • The way businesses will behave in the developing scenery • The future of the international business centers, including Cyprus • The underlying legislation and the challenge to traditional legal bases, eg GDPR and privacy rules. In order to assist us to better understand and comprehend the crucial elements of international tax and to obtain answers to the above questions, we have the pleasure to host an array of distinguished speakers both from Cyprus and abroad, each of whom will enlighten us from his /her own perspective.

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| TAXATION

Address at the 4th Cyprus International Tax Conference

he revamping of the tax system in 2015 was catalytic to the improvement of Cyprus’ business and investment climate. However, the complex phenomena of globalisation, digitisation and the green economy have reengineered the traditional business models, creating the need for diversifying the architecture of tax systems. At the same time, aligned global and European measures are in force, in an effort to combat the emerging tax risks. The time has come to redesign our tax framework, taking into account all these dynamics.

Lucy Herodotou Mouskou Director Economic Policy, European and International Affairs Directorate Ministry of Finance

Ladies and Gentlemen, good morning,

detect potential loopholes.

First of all, allow me to thank the organizers for hosting this event and extend my greetings to the distinguished guests and esteemed fellow speakers. I am honored to be addressing this event today and have the opportunity to present a multidimensional issue of shared concern, amidst the unrest that lies in a pandemic crisis. In my speech, I will endeavor to analyze the dynamics derived from the emerging global challenges that we are called to face, such as the complex phenomena of globalisation, digitalization and the green economy, and how these will affect the future of Cyprus taxation. The revamping of our tax system in 2015 was catalytic to the enhancement of Cyprus position as a business and financial centre, which paved the way for attracting companies with real economic presence and companies oriented in innovation, R&D, creating new jobs and increasing the potential growth of Cyprus. However, the preconditions for a successful architecture of a tax system should take into account global and European developments. Distinctively, the OECD BEPS actions to combat tax base erosion and profit shifting (BEPS), aggressive tax planning and tax evasion, that had triggered corresponding actions at EU level, have been neuralgic to the continuous redesign of our tax laws, in order to meet the new requirements. New measures, were embedded into national Law, armoring the tax authorities with the necessary tools to be able to assess, avert and tackle harmful tax practices, identifying loopholes and promoting tax compliance. A very recent example which it is worth mentioning, is the introduction of the commonly known DAC 6 in our tax legal framework, that specifically provides the necessary information to the Tax Authorities to identify aggressive tax planning practices that lead to base erosion and profit shifting issues and

Digitalization of the economy A rising and evolving issue that introduces another complex chapter in our tax agenda is the digitalization of the economy, where the traditional business models have been diversified in order to accommodate the new trends. There is a global consensus that the existing international tax rules and standards are not adequate to allocate taxing rights among economies in a fair manner and effectively to fight harmful tax competition among countries. The digitalization of the economy has amplified these problems. The challenge of how to tax the digital economy was identified by OECD in its Action 1 of the BEPS initiative, followed by the issuance of the blueprints on pillar 1 and 2 in October 2020, where the OECD has committed to finalize its analysis by mid-2021. These global developments have not left Europe in apathy. Europe has been in anticipation of the final analysis to be concluded by the OECD, however EU Ministers of Finance noted recently that in the absence of an international consensus by mid-2021, the EU will engage unilaterally in a preparatory work in order to address the tax challenges of the digital economy. Moreover, it is expected that the Commission will put forward in the first semester of 2021, a proposal on a digital levy, with a view to its introduction as a new own resource for the EU budget by 1 January 2023 at the latest, which will be independent from the OECD workings. Cyprus stance has always been supportive in a global solution within the workings of the OECD on international digital taxation, rather than a unilateral approach. As far as the digital levy is concerned, we note that the Commission has launched a public consultation on a future legislative proposal for a new digital levy, which we are in anticipation of the outcome. These developments will play an integral role in the

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CONCLUSIONS I would like to conclude by emphasizing the key role of the Tax Authorities in the practical implementation of the tax policies that are being formulated. The Tax Department has demonstrated significant progress in its strategic objectives of enhancing voluntary tax compliance, collecting taxes more efficiently and improving the effectiveness of services to the taxpayer. In addition, I would like to welcome the important role and contribution of the economic operators and representatives of the business society, who are actively involved in the consultations coordinated by the Ministry of Finance. We are confident that, the nexus relationship of “government-private sector” will continue to be sustained and provide fruitful results in the efforts of the government to carve a renewed tax framework aligned with the emerging trends, with a view to promoting the financial interests of Cyprus, while safeguarding the rights of taxpayers.

reengineering of Cyprus tax rules as we already know them, when it comes to digital companies. The Ministry of Finance and the Tax Department will closely monitor the upcoming European proposal in collaboration with all stakeholders, to achieve an outcome that will not bring the single market into a disadvantageous position, vis-à-vis the other economies of the world. Green economy What has further been the center of policy debate in the recent years, is the concept of green economy. Green economy is accompanied by a new economic growth paradigm that is friendly to the earth’s ecosystems with a social dimension. This is what the European Green Deal aims to succeed, when announced on 11 December 2019 by the President of the European Commission. An ambitious package of measures with the ultimate objective of making the European continent climate neutral by 2050. This transition will create appropriate conditions at national level for the design of a tax framework, which shifts the tax burden from individuals and entities to environmental pollution activities, while taking into account the social dimension. In order to address the serious climate challenges the Government of the Republic of Cyprus contemplates the introduction of a fiscally neutral green reform, in accordance to the European Green Deal. The reform will gradually (over a period of 5 years), introduce a carbon tax for fuels used in the sectors of the economy that do not fall under the Greenhouse gas Emissions Trading Scheme. The reform will also entail the introduction of a levy on water, within a time span of two years, that will reflect the scarcity of this natural resource and the cost to the environment of its use, as well as the introduction of a country wide charge on household waste. The fiscally neutral Green Tax Reform will take into consideration the effects on the households and businesses and

may propose compensatory measures. The reform aims at reducing greenhouse gas emissions, which are detrimental to the environment, in order to achieve our set goals of reducing emissions by 24% until 2030 (compared to 2005). International and European requirements This global and European evolution will give an impetus to a revamped national tax system; however, the challenge is to strive in keeping it simplified and easy in its practical implementation, whilst in tandem encouraging tax compliance. But what other fundamentals and developments should the government take into account for structuring properly a new tax regime? Our recent evaluation by the OECD Global Forum on tax transparency and exchange of information that yielded in December 2020 to a rating of largely compliant, as well as the latest evaluation of Moneyval Report on the effectiveness of the Cypriot AML regime, have reflected a strong commitment of the government and key players, to comply with these international standards. However, from the recommendations received, it is imminent to maintain or even step up our efforts to safeguard our reputation and project the right messages to our peers. This is why our existing national mechanism should be reinforced further to promote tax transparency, tax compliance via communication campaigns, proper enforcement, the usage of new tools to tackle aggressive tax planning, tax fraud and base erosion profit shifting, with the backing of IT support and enhanced human resources. These are only few important elements that should accompany the redesign of our tax model. Thank you very much for your attention.

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| TAXATION

An historical note on the taxation system in Cyprus

I Peter Clarke Emeritus Professor of Accounting at University College, Dublin and Visiting Professor at Cyprus International Institute of Management.

n most modern jurisdictions, individuals and business entities, are liable to pay Income Tax or Corporation Tax on earnings; a tax on spending (e.g. Value Added Tax and Excise Duties), or a tax on the ownership of various assets (e.g. Property Tax, Estate Duties, or other forms of Capital Taxation). Such methods of taxation have evolved over time in different countries. This short article outlines some interesting, historical issues associated with the comprehensive Report of the Commission appointed to enquire into the System of Taxation in Cyprus (1930). It is interesting to note that the Commission made many recommendations but did not favour the introduction of income tax in Cyprus at that time.

THE 1930 COMMISSION AND ITS FINDINGS By way of historical background, in 1925 the Legislative Council (of Cyprus) argued that the broad issue of taxation in Cyprus – not just income tax - should be investigated and a Commission was established in November 1926. In 1930, this Commission published its 27 page report, having held “32 meetings, visited all of the six towns of the island and 24 villages in the various districts and examined 153 witnesses”. This

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Report contains useful statistics which are relevant to all those interested in studying the economic history of Cyprus. The Commission expressed the opinion that the evidence provided to it was “voluminous and fairly exhaustive”. The Commission acknowledged some of the difficulties associated with their task of preparing such a Report, which was “accentuated by the reticence of some of the witnesses who, being

suspicious of the object of our enquiry, sometimes gave us wrong or misleading information on matters in which they were personally interested”. (In modern terms, this may be, simply, described as “noncooperation” with the tax authorities!). The Commission also expressed the opinion that “the number of (tax) officials employed is in excess of actual requirements, thus making the cost of administration too costly (and) “the Commission recommended that this aspect) should be most closely scrutinized”. Of interest is that this suggestion is as relevant to-day as it was 9 decades ago. The Commission (Appendix A of its Report, and summarised in Table 1 below) presented summary figures which they considered to be “approximately correct”. For example, it was estimated that the annual tax receipts in Cyprus amounted to approximately 17% of total income (€600,000 ÷ £3,500,000), with about 1/3rd of the total tax receipts (£220,000) being generated by Customs Duties in the import of goods: It is interesting to highlight four issues which were mentioned in the Commission’s

Report and which provide some insights on life in Cyprus in the late 1920s, as follows: (i) Coffee shops in Cyprus In their report, the Commission indicated that: “We find after exhaustive enquiries, that the farmer is generally industrious. There are, however, still many individuals who are lazy or indifferent and allow their lands to suffer deterioration whilst they sit in cafes passing their time in chatting or playing cards. The cafes of Cyprus, especially in villages, are far too numerous and give temptation to anyone passing by to sit down, start chatting, and soon forget all about his original intention of going out to his fields to work. We are therefore submitting a recommendation that coffee shops should pay a license duty similar to that paid by premises licensed to sell wines and spirits in order that, at least, their numbers may be reduced and the temptation to use them lessened”. The Commission proposed that a license duty be imposed on the, estimated, 3,000 coffee shops in the island – 2,500 in the villages and 500 in the towns. The

Table 1: Summary of estimated total income and total tax revenue Annual income of Cyprus

£3,500,000

of which the biggest items Wheat (22%), Donkeys/animals (14%), Fruit/Vegetables (9%), Barley (6%), Carobs (6%) and Mining (6%).

National income per head

£10 per annum

Annual taxation levied

£600,000 (c. 17% of total income) of which the biggest items: Customs import duties £220,000 (1/3rd) Tobacco duties £102,000 (1/6th) Stamp duties £37,000 (1/20th) Salt £32,000 (1/20th)

Tax revenue collected per head 35 shillings (i.e. £1.15.0). Source: Report of the Commission Appointed to Enquire into the System of Taxation in Cyprus, 1930 (Nicosia: Government printing office)

Commission suggested that a license on coffee shops would help to “eliminate this evil”. (To better understand this comment one needs to note that the population of Cyprus, around that time, had been estimated at about 350,000 who could avail of some 3,000 coffee shops). (ii) Income Tax and Accounting Records The Commission reported that the topic of income tax “has occupied our earnest and constant attention and expressed the opinion that there is no fairer tax than an income tax. However, the Commission admitted that they had “reluctantly come to the conclusion that it is difficult, in the present somewhat backward state of the island in regard to keeping of commercial accounts, to impose such a tax”. The Commission also explained that “one of the difficulties for the adoption of an income tax scheme is that unfortunately in Cyprus there are very few traders who keep proper records and accounts. As a result, this would make it difficult to arrive at a trader’s income”. Therefore, the argument continued, it would not be fair to impose an income tax on those whose incomes could be easily ascertained but would facilitate other traders to evade the payment of taxation by not keeping appropriate accounting records. Moreover the Commissioners expressed their uneasiness relating to the examination of accounting books and tax documents of traders by a Board of Assessors which would result in a leakage of information and, in certain cases, affect the credit-worthiness of the person whose books have been examined. The majority of witnesses agreed that “they would not trust any Board of Assessors… either as to secretiveness or as to their capability of fair assessment”. Indeed, two (informed and experienced) witnesses expressed the opinion that “they know of no county in the world less (emphasis added) suitable for the imposition of an income tax than Cyprus”. (iii) Taxation of differential income It was, initially, suggested that salaried employees be liable to income tax, based

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| TAXATION on their actual income, whereas selfemployed traders would pay a fixed amount according to an estimate made by the Board of Assessors. However, this proposal was rejected as it was considered that self-employed traders would pay too little income tax. (This argument over the taxation of differential incomes, which we now refer to as Schedule D for self-employed income, and Schedule E for income from employment, would continue for many years). (iv) Taxation of motor cycles and pedal bicycles The Commission noted that the ownership of motor cycles had “increased in the island to such an extent that they were becoming a source of danger and are interfering with the peace of the inhabitants”. Furthermore, the Commission argued that, since motor cycles did not add to the wealth of the country, it was recommended that the existing tax rate on motor cycles be increased threefold! Also, it was noted that, at that time (pedal) bicycles were unlicensed, but they made “use of the pubic highways for which considerable sums are expended on upkeep”. Thus, the Commission suggested that pedal bicycles be registered and the owners should pay an annual license fee of 5 shillings. Since it was estimated that there were 6,000 bicycles in the island at that time (c. 1930), this proposal could generate additional annual revenue of £1,500 (i.e. 6,000 bicycles x 5 shillings each ÷ 20 shillings per pound).

THE INTRODUCTION OF INCOME TAX IN CYPRUS IN 1941 A decade after the publication of the Commission’s Report, an income tax system, broadly similar to the current system which exists, was introduced in Cyprus with effect from 1st January, 1941 (Income Tax Law, 1941). (Some years previously, Cyprus had operated a different system for the taxation of income but this was abolished in 1906, “much to the delight of the inhabitants”.) The 1941 legislation was modeled, with appropriate adjustments, on the income tax system which had been in continuous operation in Great Britain since 1842. The introduction of Income Tax in 1941 can be attributed to the outbreak of World War 2. During this period, Cyprus served as an important Allied airbase – requiring extensive construction expenditure and regular maintenance. However, there was a significant inflow of earnings into the pockets of the military personnel stationed

on the island and, in addition, to those Cypriots who worked with the Allied forces. Thus, the introduction of income tax (in 1941) reflected Cyprus’ strategic role in the War effort, and its potential as an important player in the development of the Far East region in the post-war era, due to its proximity to the Suez Canal. Furthermore, post-war prosperity could be expected and would be facilitated by earnings from mineral shipments, an increasing flow of emigrant remittances from abroad, and by additional earnings from an expanding tourism industry. (Official tax figures indicate that the annual yield received from income tax receipts in Cyprus in the early 1950s was one-third of total Government revenues). Reference: Cyprus (1930) Report of the Commission Appointed to Enquire into the System of Taxation in Cyprus (Nicosia: Government Printing Office) Comments to: Peter.Clarke@UCD.ie

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CONCLUDING REMARKS The introduction of a formal income tax system in Cyprus in 1941 had many implications. One such implication was that an income tax system would require the maintenance of formal, accounting records, accurate income tax returns and supporting documents. In turn, these requirements stimulated the need in Cyprus for trained accountants and income tax advisors with appropriate accounting qualifications/accounting skills. Perhaps, as another author has suggested, these accounting professionals helped prevent annual income tax returns becoming “imaginative fiction”! Reference: Cyprus (1930) Report of the Commission Appointed to Enquire into the System of Taxation in Cyprus (Nicosia: Government Printing Office) Comments to: Peter.Clarke@UCD.ie

| IFAC NEWS

IFAC Latest Activity

On the IFAC Gateway & Implementation Support: • All 12 Installments of the Exploring the IESBA Code are now available! Each installment of the series highlights important concepts and topics in the International Code of Ethics for Professional Accountants (including International Independence Standards). • Installment 6 (Businesses in Difficulty) of Anti-Money Laundering: The Basics is out now! The publication is the final part of a series helping accountants enhance their understanding of how money laundering works, the risks they face, and what they can do to mitigate these risks and make a positive contribution to the public interest. • Perseverance, Purpose, Power: What Digitalization Means for PAOs—IFAC’s PAO Development & Advisory Group discusses experiences with digital transformation and encourages PAOs to complete IFAC’s Digital Readiness Assessment Tool. • The Social and Economic Impacts of COVID-19 Have Not Been Gender-blind – Neither Should Our Response— One particular troubling consequence has been the pandemic’s devastating impact on gender inequality. The evidence is clear – the gender inequality gap is widening despite decades of progress that sought to close it. To tackle gender inequality,

governments around the world can employ a critically important public policy tool known as gender-responsive budgeting (GRB) when designing COVID-19 economic recovery packages. • Diversifying the Finance Function: How CFOs Can Meaningfully Promote DE&I— Business leaders are growing to recognize the benefits of DE&I when it is embedded in their corporate culture. This is also true in the finance function, where DE&I initiatives can address some of the most pressing challenges we face, like talent management, digital transformation, managing risk and creating long-term, sustainable value in an increasingly competitive and global marketplace. IMA (Institute of Management Accountants) and cosponsor CalCPA (California Society of Certified Public Accountants), in collaboration with IFAC as global research partner and several other accounting organizations, released a U.S. focused report on DE&I in the accounting and finance profession. Entitled “Diversifying U.S. Accounting Talent: A Critical Imperative to Achieve Transformational Outcomes,” the report examines DE&I in the U.S. accounting profession, looking in-depth at race and ethnicity, gender, and LGBTQIA orientation.

Independent Standard-Setting Boards Audit • Quality Management Standards: • Visit IAASB’s dedicated webpage to the new and approved Quality Management standards – effective December 15, 2022. • Getting Started on the New IAASB Quality Management Standards: An Overview— Firms are required to have their system of quality management designed and implemented by December 15, 2022—and ready to start operating from that date. • IAASB Support Material! • Addressing risk of overreliance on technology arising from the use of automated tools and techniques and from information produced by an entity’s systems— The IAASB released a nonauthoritative Frequently Asked Questions document to help auditors address the risk of overreliance on technology, whether it arises from using automated tools and techniques or from using information produced by an entity’s systems.

• Assurance Standards Keeping Pace on NonFinancial Reporting— IAASB Chair Tom Seidenstein has published a new article detailing the IAASB's forthcoming guidance on extended external reporting, which includes sustainability or ESG (environmental, social and governance) reporting, integrated reporting, reporting on corporate social responsibility, greenhouse gas statements, and service performance reporting in the public sector. • Exposure Draft. The IAASB is requesting public comments on its • Exposure Draft addressing changes in some of its standards and framework resulting from the new and revised quality management standards. Comments are requested by May 24, 2021!

ACCOUNTANCYCYPRUS | APRIL 2021 |

Ethics

Education

• IESBA Staff Publication! proposed IESBA Definition OF Public Interest Entity: Supplemental Guidance to Exposure Draft to Aid Local Body Considerations Regarding Adoption and Implementation— This publication provides additional context to the Board’s recently proposed revisions to the definition of a public interest entity (PIE) and supplements the guidance. • Ethical Leadership in an Era of Complexity and Digital Change— ICAS, IFAC and CPA Canada joined forces to deliver an exciting virtual workshop exploring how professional accountants (PAs) continue to add value in the digital world. • Exposure Draft. The IESBA has released for public comment the Exposure Draft, Proposed Revisions to the Definitions of Listed Entity and Public Interest Entity in the Code. The proposed revisions broaden the definition of a public interest entity (PIE) to include more categories of entities, given the level of public interest in their financial condition, for the purposes of additional independence requirements to enhance confidence in their audits. Comments are requested by May 3, 2021!

• Syllabus & Competencies Matrix for a Three-level Qualification— This syllabus and competency matrix for a three-level qualification for professional accountants was developed by the Institute of Chartered Accountants in England and Wales under the IFAC Professional Accountancy Organization Capacity Building Program funded by the UK Aid from the UK Government. • Revisions to IES 2, 3, 4, and 8 are now effective, as of January 1, 2021. The revisions to these standards reflect the increasing demand for accountants skilled in information and communications technologies and place further emphasis on the professional skepticism skills and behaviors. These apply to both aspiring and professional accountants. • Conversations with Experts | Advancing Accountancy Education—on-demand videos with experts talking about integrated reporting and assurance, public sector, and ‘robot proofing’ accountancy education!

Public Sector • 2021 Handbook of International Public Sector Accounting Standards, published as of January 31, 2021 is now available. • Your voice matters! IPSASB Issues Two LeasesRelated Publications For Public Comment— Stakeholder comments on ED 75 and Request for Information due by May 17, 2021! • Exposure Draft 75, Leases • Request for Information, Concessionary Leases and other Arrangements similar to Leases

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