Accountancy Cyprus - No. 146 - March 2025

No.146 / MARCH2025

AccountanCY

PRUS

9

TAX REFORM

DISTRICT POST OFFICE CY-1901 NICOSIA, CYPRUS POSTAGE PAID LICENCE no.33 SEALED UNDER PERMIT no. 133

Industry Experts Share T heir Insights

ΠΕΡΙΟΔΙΚΟ ΤΑΧΥΔΡΟΜΙΚΟ ΤΕΛΟΣ ΠΛΗΡΩΜΕΝΟ ΑΔΕΙΑ ΑΡ. 239

ΚΛΕΙΣΤΟ ΕΝΤΥΠΟ ΑΔΕΙΑ ΑΡ. 133

FORWARD THOUGHTS

Kyriakos Iordanou GENERAL MANAGER OF ICPAC

I

Let’s pause for a moment, to reflect on our position . . .

f I were to make an innocent observation, I would dare to notice that over the last several years, the last decade I would say, we have been just running after the events, trailing the ever-changing developments, striving to fill the gap of any new uncertainty and trying to adapt to the alternating business, regulatory and social landscape. More or less, we have been caught amid a marathon race, though with frequent sprints and hurdles!

And as time passes, the uncertainty grows, and the stakes become higher. The horizon around us contains a plethora of concerns and challenges: identifying a few, e.g. political and geopolitical, military warfare, business and trade soaring wars and restrictions, health and medical, safety, climate and environmental, social, economic, tax, regulatory and compliance, technological advancements, sustainability and globalisation matters.

To the above, one could also add the changing cultures and generational shifts, increased cost of living and finance, lack of trust in the institutions and aversion to the sociopolitical regime.

We have been continually adapting to the new conditions, adopting and learning new things, dealing with difficult and diverse circumstances, being in a vicious struggle to remain relevant, viable and in line with all contemporary phenomena.

Being immersed into this ongoing routine apparently, we were not given the luxury to halt for a moment, rationalise what we do and consolidate the avalanche of changes. Given the pressures exerted from the surroundings and the unquestionable dilemmas, we subconsciously followed a rather shortsighted stance in goal setting and strategic deployment, since our highest priorities were the imminent threats and targets externally imposed, requiring quick responses.

It is also true that the current international landscape, both in terms of geopolitics and business, differs significantly from what we knew so far. The dominances have changed, shifting from the traditional bipolar world, into a multipolar global scenery, where the number of protagonists is increasing, and the overall own or nationalistic interests are surging. Complexity, overzealous for natural resources, financing and trade dominance take a prominent place in this reformed landscape. Country competitiveness gave its place to sheer competition!

So, this frenzy picture and the random pace followed, without a clear view as to where we are actually heading, lead us to a no-precise “Ithaka”, but merely to spontaneously emerging destinations. Hence, we ought to relent for a while, make a pause and take a big breath... and rethink!

It is fundamental to assess and reconsider firstly, what is going on around us and how we are affected, secondly, where we actually stand and, thirdly, how we react, how we reposition ourselves and how we recalibrate our goals and objectives.

And we have to do it in a sober, sensible and knowledgeable way, taking into account all the pressing factors around us.

We need to redefine our strategic course and reposition our economic, business, social and professional compass.

Otherwise, the risks and hazards eagerly lurk to lure us to an inescapable “minoan labyrinth”!

So, it does not make any particular difference in which directions we are caught in: e.g. the accountancy profession, the domestic political situation, the European and international politics and geostrategic ploys, the fierce business and trade competition at a global level or in any other predicament. What matters is what we do next!

Hence, we must take a break and put our minds together to make conscious decisions about the way forward, the future!

So, we should: - Keep calm, have an open mind and be keen to transform - Perform a position audit and re-evaluate of our position - Assess the political, economic and geostrategic environment, measuring its impacts - Revisit the practices and procedures followed for so long - Challenge ourselves on many aspects - Redefine who our audience, clients, and stakeholders are - Redefine our core principles and objectives, whilst maintaining the fundamental values - Redraft new strategies and reset priorities - Set clear and holistic visions - Aim to remain relevant, valued and sustainable The world around us will never cease to change and reshape, it is up to us to render ourselves, our businesses and our communities capacitated and competent to excel in any situation which may pose itself as a challenge.

So, let’s take a moment, away from anxiety, fatigue, prejudice and pressure, to rationalise and “replenish the oxygen in our minds”, thus clearing our thoughts. It is imperative to take a good look at the bigger picture with a clear view of the macro horizon. We need to be bold in transforming into something better, into something more innovative, more unique. Let us pause for a moment and consider taking a different path in moving forward! For a more sustainable, enjoyable, prosperous and rewarding future…

3 - ACCOUNTANCY CYPRUS - MARCH 2025

ADVERTISING ORDER FORM YEAR 2025 EDITOR OF “ACCOUNTANCY CYPRUS” We wish to book the following advertisements in the “Accountancy Cyprus” Journal:

Colour

Any inside page:

2025 fixed price per issue € 2

Back cover (size Α4)

1000

Inside front cover (size Α4)

900

Inside back cover (size Α4)

800

Advantage pages 3 και 5 (size Α4)

600

Inside pages

500

Jan 1

Apr 1

Jun 1

Thank you in advance. For more info: 22 870030

Special Prices Book multiple ads in the same issue and get 10% off

Name: ......................................................................................................................................................................................................................

Position:..................................................................................................................................................................................................................

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

Address:................................................................................................................................................................................................................. ...................................................................................................................................................................................................................................... ......................................................................................................................................................................................................................................

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

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

Signature: ............................................................................................................... Date:...............................................................................

1. Please mark with an X any quarter as appropriate 2. The above prices do not include VAT 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

ACCOUNTANCY CYPRUS ISSN 1450-2380 The Institute Council Nicos Chimarides (Chairman) Odysseas Christodoulou (Vice-Chairman) Eleni Pyrgou (Secretary)

CONTENTS

8-16

ICPAC news

A summary of the Institute’s most important recent initiatives, announcements, and activities.

Members

• Career Pathways 2025 Successfully Concludes with Strong Participation • Appointment of Eleni Assioti to the IFAC SMP Advisory Group • CFO Roundtables in Cyprus Highlight the Evolving Strategic Role of Finance Leaders • Advancing Tax Reform and Gender Equality: Insights from ICPAC at the "GENDER BUDGETING & GENDER MAINSTREAMING" • Strengthening Bilateral Cooperation Between ICPAC and the Institute of Internal Auditors Cyprus • ICPAC: Strategic Priorities and Challenges for 2025 • Informative Meeting of ICPAC with Committee Chairs and Vice-Chairs Highlights Strategic Priorities and Strengthens Governance

Andreas Avraamides, Andreas Andreou, Marios Demetriades, Afxentis Zemenides, Stavros Ioannou, Constantinos Kallis, Eliza Livadiotou, Ioanna Nicolaidou, Demetris Shacallis, Nicolas Shiakallis, Spyros Spyrou, George Hadjineophytou

General Manager Kyriakos Iordanou

Address

11 Byron Avenue, 1096 Nicosia, Cyprus

Mailing Address

18-23

P.O. Box 24935, 1355, Nicosia, Cyprus Tel.: +357 22870030 Fax: +357 22766360 Ε-mail: info@icpac.org.cy www.icpac.org.cy

INTERVIEW

Design and Pagination

24-37

The publication is prepared by RedwolfOgilvy 8 Ilioupoleos Street Tel: +357 22252522 Fax: +357 22767970 E-mail: info@redwolfogilvy.cy www.redwolfogilvy.cy

Accountancy Cyprus is published quarterly by the Institute of Certified Public Accountants of Cyprus and is sent free to all members of the Institute as well as to many other persons, companies, and organizations.

COVER STORY

TAX REFORM 9 Industry Experts Share Their Insights

>>

Maria Stylianou

Maria Panayiotou, President of CIFA “The Evolution and Future of Cyprus” Investment Funds Industry

38-41

TAXATION

OECD transfer pricing guidance concerning the application of the Transactional Profit Split Method

42-43

BUSINESS & ECONOMY

Significance of Goal Setting: Does it Work?

44-47

BUSINESS & ECONOMY ICPAC CFO Society – The vision that comes true

48-49

TAXATION

Cyprus’ Pillar Two Adoption Calls for MNE Safe Harbor Testing

50-52

TAXATION

Rethinking Tax Reform in Cyprus: A Holistic Approach to Include VAT and Tax Justice…separately and in stages

54-55

BUSINESS & ECONOMY Clients Come Calling: Attracting the Right People to Your Practice

56

SUSTAINABILITY Omnibus legislation: what does it mean for companies that fall under the CSRD?

IC PAC N E WS

Career Pathways 2025 Successfully Concludes with Strong Participation

T

he “Career Pathways 2025” initiative was successfully concluded, organized by the Career Guidance and Counseling Service (CGCS) of the Directorate of Secondary General Education, under the Ministry of Education, Sports, and Youth, in collaboration with the Pancyprian Confederation of Federations of Parents’ Associations of Public Secondary Schools and supported by the Bank of Cyprus. The event occurred on Saturday, January 18, 2025, at the Bank of Cyprus Headquarters in Nicosia.

The Institute of Certified Public Accountants of Cyprus (ICPAC) played a key role in the event, presenting the opportunities and prospects offered by the accounting profession. ICPAC’s General Manager, Kyriakos Iordanou, provided an in-depth analysis of the responsibilities of a modern accountant and highlighted the expanded employment opportunities available beyond the traditional scope of the profession.

Additionally, the pathway to obtaining the professional title of Accountant/Auditor was outlined, along with the requirements for ICPAC membership. This presentation emphasized the strategic importance of the accounting profession in the labor market and the career prospects it offers young professionals.

The “Career Pathways 2025” initiative aimed to provide reliable information about professions, professional rights, and labor market requirements. The impressive participation of students, university attendees, parents, and the wider public confirmed the necessity of initiatives that bridge education with the workforce.

THE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS OF CYPRUS (ICPAC) PLAYED A KEY ROLE IN THE EVENT, PRESENTING THE OPPORTUNITIES AND PROSPECTS OFFERED BY THE ACCOUNTING PROFESSION.

8 - ACCOUNTANCY CYPRUS - MARCH 2025

ICPAC NEWS

Appointment of Eleni Assioti to the IFAC SMP Advisory Group

T

he Institute of Certified Public Accountants of Cyprus (ICPAC) proudly congratulates Eleni Assioti on her appointment to the Small and Medium Practices (SMP) Advisory Group of the International Federation of Accountants (IFAC), effective January 2025. This prestigious appointment reflects her profound expertise, unwavering dedication, and significant contributions to the accounting profession, both in Cyprus and internationally.

As Head of Technical and Professional Matters at ICPAC, Eleni Assioti has been instrumental in shaping policies and strategic initiatives across key domains, including financial reporting, audit and assurance, ethics, and sustainability. Her extensive technical knowledge, combined with her ability to navigate

complex regulatory landscapes, has significantly enhanced the professional standards and best practices within the accounting sector.

Beyond her role at ICPAC, Eleni actively engages in international forums and technical committees, ensuring that Cyprus remains well-represented in global accounting discussions. Her contributions in these arenas not only strengthen the country’s standing in the international accounting community but also foster cross-border collaboration and knowledge exchange.

Her appointment to IFAC’s SMP Advisory Group is a well-deserved recognition of her outstanding professional acumen and leadership. ICPAC is confident that she will bring valuable insights to the advisory group and contribute meaningfully to IFAC’s mission of advancing the accountancy profession worldwide.

We extend our sincere congratulations to Eleni Assioti and wish her every success in this important and influential role.

THIS PRESTIGIOUS APPOINTMENT REFLECTS HER PROFOUND EXPERTISE, UNWAVERING DEDICATION, AND SIGNIFICANT CONTRIBUTIONS TO THE ACCOUNTING PROFESSION, BOTH IN CYPRUS AND INTERNATIONALLY.

9 - ACCOUNTANCY CYPRUS - MARCH 2025

IC PAC N E WS

CFO Roundtables in Cyprus Highlight the Evolving Strategic Role of Finance Leaders

T

he Institute of Certified Public Accountants of Cyprus (ICPAC) and the Institute of Chartered Accountants in England and Wales (ICAEW) recently organized a series of high-level CFO roundtable discussions in Cyprus. These sessions provided a unique platform for finance leaders to exchange insights and experiences regarding the evolving role of CFOs and their broader impact on business strategy.

The discussions were led by Peter van Veen, Director of Corporate Governance & Stewardship at ICAEW, focusing on the contemporary challenges CFOs face and their critical role in ensuring long-term organizational sustainability.

This initiative builds on similar roundtables conducted in the UK, whose key findings are outlined in the report, What does the CFO’s changing role mean for you?

Senior executives from diverse industries—including shipping, banking, technology, real estate, and retail— shared their perspectives on the shifting business landscape. Particular emphasis was placed on the transformation of the CFO role beyond financial management to encompass strategic responsibilities such as sustainability, risk management, and stakeholder engagement.

Key themes that emerged from the discussions included the growing importance of cybersecurity and artificial intelligence, with CFOs emphasizing the need for enhanced data protection and staff training in these areas. The increasing demand for ESG compliance and the integration of sustainability into financial

decision-making were also central topics. While larger corporations are generally better prepared to meet these requirements, SMEs face challenges due to high compliance costs and limited resources.

The impact of geopolitical developments, particularly the conflicts in Ukraine and the Middle East, on business operations was another focal point.

Participants also explored opportunities arising from talent attraction in Cyprus, alongside the evolving CFOboard dynamics, where financial leaders play a more strategic role in governance and reporting.

Economic challenges, including rising living costs and workforce retention, were also discussed, with CFOs considering solutions such as flexible working arrangements and targeted incentives to enhance employee satisfaction.

The CFO roundtables underscored the pivotal role of finance leaders in shaping modern business strategy.

Participants highlighted the need for continuous adaptation and innovation to navigate the complexities of today’s economic landscape.

10 - ACCOUNTANCY CYPRUS - MARCH 2025

ICPAC NEWS

ECONOMIC CHALLENGES, INCLUDING RISING LIVING COSTS AND WORKFORCE RETENTION, WERE ALSO DISCUSSED, WITH CFOS CONSIDERING SOLUTIONS SUCH AS FLEXIBLE WORKING ARRANGEMENTS AND TARGETED INCENTIVES TO ENHANCE EMPLOYEE SATISFACTION.

Commenting on the initiative, Stavros Kattamis, Chair of ICPAC’s CFO Committee, noted: “The CFO role is continuously evolving. Today’s CFO is a trusted advisor to business owners, CEOs, and senior management.

Finance leaders must possess a broad range of skills and expertise to meet the demands of this challenging role.”

The collaboration between ICPAC and ICAEW in delivering this initiative reaffirms their commitment to strengthening the strategic role of CFOs, contributing to business growth and competitiveness in Cyprus.

11 - ACCOUNTANCY CYPRUS - MARCH 2025

IC PAC N E WS

Advancing Tax Reform and Gender Equality: Insights from ICPAC at the “GENDER BUDGETING & GENDER MAINSTREAMING”

T

he General Manager of the Institute of

budgeting methodologies play a crucial role in shaping

Certified Public Accountants of Cyprus

a fair and progressive financial ecosystem. By adopting

(ICPAC), Mr. Kyriakos Iordanou, had the

gender-sensitive fiscal strategies, governments and

distinguished honor of being invited to

institutions can create an environment that not only

present his expert insights on tax reform at

promotes sustainable economic growth but also

the prestigious “GENDER BUDGETING & GENDER

ensures the active participation of all societal groups in

MAINSTREAMING” conference.

economic decision-making.

This high-level event, organized by the Cyprus Gender

As the leading professional body for accounting and

Budgeting Platform, took place on Tuesday, February

auditing in Cyprus, ICPAC remains steadfast in its

18, 2025, in Nicosia and served as a pivotal forum for

commitment to fostering a modern, fair, and sustainable

discussions on economic policy advancements and the

economic landscape. Through its active engagement

formulation of equitable budgetary frameworks.

in policy dialogues and strategic initiatives, ICPAC continues to advocate for robust reforms that align with the evolving economic and social needs of the country.

The conference brought to the forefront critical issues related to the economy, taxation, and entrepreneurship, with a strong emphasis on fostering equal opportunities

The “GENDER BUDGETING & GENDER

across genders. Central to the discussions were

MAINSTREAMING” conference provided a vital

key strategic pillars, including the reinforcement

platform for exchanging knowledge and best practices,

of meritocracy, transparency in decision-making

further reinforcing the importance of inclusive

processes, and the elimination of discrimination in

economic planning. ICPAC’s contribution to this forum

economic and financial policies.

highlights its dedication to shaping policies that uphold the principles of fairness, accountability, and economic sustainability for the benefit of all stakeholders.

In his address, Mr. Iordanou underscored the imperative of integrating gender-responsive approaches into fiscal policies to enhance economic efficiency and inclusivity.

He emphasized that equitable tax structures and

12 - ACCOUNTANCY CYPRUS - MARCH 2025

ICPAC NEWS

AS THE LEADING PROFESSIONAL BODY FOR ACCOUNTING AND AUDITING IN CYPRUS, ICPAC REMAINS STEADFAST IN ITS COMMITMENT TO FOSTERING A MODERN, FAIR, AND SUSTAINABLE ECONOMIC LANDSCAPE. THROUGH ITS ACTIVE ENGAGEMENT IN POLICY DIALOGUES AND STRATEGIC INITIATIVES, ICPAC CONTINUES TO ADVOCATE FOR ROBUST REFORMS THAT ALIGN WITH THE EVOLVING ECONOMIC AND SOCIAL NEEDS OF THE COUNTRY.

13 - ACCOUNTANCY CYPRUS - MARCH 2025

IC PAC N E WS

Strengthening Bilateral Cooperation Between ICPAC and the Institute of Internal Auditors Cyprus Commitment to Good Governance, Transparency, and Accountability

T

he Institute of Certified Public Accountants of Cyprus (ICPAC) and the Institute of Internal Auditors Cyprus (IIAC) have reaffirmed their commitment to strengthening good governance, transparency, and accountability through the renewal and expansion of their cooperation agreement.

The Memorandum of Understanding (MoU) was signed

by Mr. Kyriakos Iordanou, General Manager of ICPAC, and Mr. Aristodimos Yiannakas, President of IIAC. This renewed agreement further solidifies the strategic partnership between the two institutions, reinforcing their shared vision for the continuous enhancement of internal audit and assurance functions in Cyprus.

Strategic Objectives of the Cooperation The expanded collaboration is built upon a mutual objective of fortifying the role of internal auditing and financial oversight. This will be achieved through continuous professional development, knowledge exchange, and joint initiatives aimed at strengthening corporate governance frameworks. Particular emphasis is placed on developing preventive mechanisms and strategies to combat financial crime, contributing to the overall resilience of the financial ecosystem in Cyprus.

Key areas of cooperation include: • Joint development of specialized training and professional education programs to enhance the skill sets of internal auditors and financial professionals.

• Co-organization of conferences, seminars, and thought leadership events to promote best practices in governance, risk management, and compliance.

• Collaboration on research and policy recommendations to enhance regulatory frameworks and improve corporate governance standards in the financial and business sectors.

• Exchange of expertise and best practices between the two organizations to support members in addressing emerging challenges in auditing, risk management, and financial oversight.

Impact on the Financial and Business Environment Through these initiatives, the collaboration between ICPAC and IIAC aims to elevate the professional competencies of their members while reinforcing their collective contribution to shaping a more robust, transparent, and trustworthy economic and corporate landscape in Cyprus.

The strengthened partnership is expected to further embed a culture of integrity and ethical business conduct across the public and private sectors. By fostering a proactive approach to risk management and compliance, ICPAC and IIAC aspire to create a business environment that aligns with international best practices and regulatory expectations, enhancing Cyprus’s reputation as a credible financial and investment hub.

With the continuous evolution of financial regulations and corporate governance standards, ICPAC and IIAC reaffirm their commitment to leading the way in professional excellence, ensuring that their members remain at the forefront of industry advancements. This enhanced cooperation reflects their dedication to equipping professionals with the necessary tools, knowledge, and ethical framework to navigate the complexities of the modern financial world.

14 - ACCOUNTANCY CYPRUS - MARCH 2025

ICPAC NEWS

ICPAC: Strategic Priorities and Challenges for 2025

T

he leadership of the Institute of Certified Public Accountants of Cyprus (ICPAC) has outlined its strategic objectives for 2025, emphasizing the pivotal role of accountants and auditors in safeguarding economic stability and sustainability.

During a dedicated reception for financial journalists in Nicosia, ICPAC highlighted its commitment to fortifying the profession, adapting to evolving global trends, and integrating modern technological and regulatory frameworks to meet the growing demands of both the domestic and international markets.

A Transformative Year for the Accounting Profession In his address, ICPAC President Mr. Nikos Chimarides underscored the challenges that lie ahead, stressing the necessity for the profession to adapt to rapidly shifting economic and social landscapes.

“The year 2025 marks a defining moment for the accounting and auditing profession in Cyprus. The accelerating pace of economic transformation heightened demand for transparency, and increased emphasis on accountability necessitated the adoption of cutting-edge technologies and innovative methodologies. Enhancing the quality of our services to align with the highest international standards is imperative,” stated Mr. Chimarides. “Our mission remains steadfast: to empower professionals within the industry while fostering market trust and promoting sustainable development in the Cypriot economy.”

Commitment to Continuous Professional Development ICPAC’s General Director, Mr. Kyriacos Iordanou, emphasized the Institute’s unwavering dedication to continuous professional development and strict adherence to international accounting and auditing standards.

requirements, particularly by incorporating Environmental, Social, and Governance (ESG) criteria into corporate strategy.

“The integration of ESG criteria is no longer an optional consideration but a fundamental prerequisite for sustainable and responsible business practices,” Mr. Iordanou emphasized.

“ICPAC remains fully committed to equipping its members with the necessary expertise and tools to implement ESG principles effectively, thereby fostering a more responsible corporate and social environment.”

Enhancing Collaboration and Regulatory Compliance A key component of ICPAC’s 2025 agenda is strengthening collaboration with regulatory authorities and government bodies to ensure the effective implementation of compliance frameworks and promote a business environment that supports economic development and transparency.

“Close cooperation with regulatory authorities and the state is essential for reinforcing transparency and upholding the integrity of our profession,” Mr. Iordanou stated. “By ensuring compliance with the most stringent international standards, we safeguard the credibility of our services and contribute to the robustness of the financial sector.”

Driving Economic Prosperity Through Innovation and Compliance With a strategic focus on education, innovation, and adherence to international best practices, ICPAC remains dedicated to fostering economic prosperity in Cyprus and elevating the profession’s role within the national and global financial landscape. The Institute’s objectives for 2025 reflect its enduring commitment to promoting transparency, reliability, and sustainable economic growth, thereby reinforcing the competitiveness of the Cypriot business community on the international stage.

“The rapid evolution of technology and regulatory frameworks on a global scale necessitates ongoing adaptation and modernization of our practices. Ensuring that our members receive continuous professional training is paramount to maintaining the quality, reliability, and credibility of accounting and auditing services in Cyprus,” Mr. Ioannou remarked. “At the same time, integrating innovative technologies will enhance our capabilities, enabling us to respond more effectively to the needs of businesses and stakeholders.”

Integrating ESG into Business Strategy A central theme of ICPAC’s strategy for 2025 is the imperative for businesses to align with modern sustainability

15 - ACCOUNTANCY CYPRUS - MARCH 2025

IC PAC N E WS

Informative Meeting of ICPAC with Committee Chairs and Vice-Chairs Highlights Strategic Priorities and Strengthens Governance

T

he Institute of Certified Public Accountants of Cyprus (ICPAC) held an informative meeting with the Chairs and Vice-Chairs of its committees, reaffirming its commitment to strengthening governance, fostering collaboration, and enhancing the overall effectiveness of its committee structure. This initiative forms part of ICPAC’s broader strategy to continuously improve its internal operations while reinforcing its role as a key institutional advisor to both the State and the business community.

During the meeting, the operational framework of the committees was presented in detail, providing clarity on roles, responsibilities, and processes. Participants engaged in a constructive dialogue around current developments in the economy and the accounting profession, highlighting challenges and emerging opportunities in the rapidly evolving local and international landscape.

THROUGH AN OPEN EXCHANGE OF VIEWS AND SHARED EXPERTISE, ICPAC CONTINUES TO BUILD A DYNAMIC AND FORWARD-LOOKING PROFESSIONAL ENVIRONMENT THAT RESPONDS EFFECTIVELY TO THE NEEDS OF ITS MEMBERS AND STAKEHOLDERS.

The meeting also served as a platform for discussing the Institute’s strategic priorities for the coming period. These include promoting innovation and professional excellence, strengthening regulatory compliance and ethical standards, and further enhancing ICPAC’s influence in shaping policy and supporting sustainable economic growth.

The active participation and valuable insights of committee members demonstrated their strong commitment to the Institute’s vision. Through an open exchange of views and shared expertise, ICPAC continues to build a dynamic and forward-looking professional environment that responds effectively to the needs of its members and stakeholders.

ICPAC extends its sincere appreciation to all committee members for their dedication and contribution towards shaping a robust, progressive, and innovative professional landscape in Cyprus.

16 - ACCOUNTANCY CYPRUS - MARCH 2025

SITE TOUR

ICPAC'S POSITION IN THE PUBLIC CONSULTATION

MONITORING & COMPLIANCE In 2024, ICPAC launched a new "Monitoring & Compliance" tab on its website, providing easy access to a wide range of compliance-related resources.

This includes Compliance Circulars, Guides, information on sanctions & restrictive measures, training materials, templates, and more. The new section aims to support members and the public by centralizing all compliance information in one convenient location.

ICPAC ISSUES TECHNICAL CIRCULARS FOR THE TECHNICAL SUPPORT OF ITS MEMBERS. The technical circulars of ICPAC aim at informing the members as regards changes or amendments of regulations and procedures relating to the accounting/auditing profession, which stem either from ambiguities or omissions that are identified during accounting or auditing work, or from harmonisation directives of the European Union for the accounting/auditing profession.

Find the most recent technical circulars sent to the members below.

WHAT IS CPD? Continuous Professional Development (CPD) is the learning and development activity that you will do throughout your ICPAC membership. CPD will provide you with the knowledge and skills required to perform your day-to-day job in your chosen professional role, as well as to enhance your employability for the future.

FIND MORE …

www.icpac.org .cy

Maria Panayiotou

PRESIDENT OF CIFA

18 - ACCOUNTANCY CYPRUS - MARCH 2025

INTERVIEW

“The Evolution and Future of Cyprus’ Investment Funds Industry”

O

ver the past decade, Cyprus has emerged as a dynamic player in the European investment funds landscape, transforming from a relatively niche market into a competitive and well-regulated jurisdiction.

This remarkable growth has been driven by a robust regulatory framework, strategic legislative initiatives, and strong collaboration between the government, regulatory bodies, and private sector stakeholders. Key milestones, such as the introduction of the Alternative Investment Funds (AIF) Law in 2014 and the Registered Alternative Investment Fund (RAIF) regime, have played a pivotal role in attracting fund managers and institutional investors to Cyprus.

Maria Panayiotou, President of the Cyprus Investment Funds Association (CIFA), discusses the evolution of the sector, highlighting the advantages that position Cyprus as an attractive fund domicile. From tax incentives and fund structuring flexibility to the rise of ESGdriven investments and fintech advancements, Cyprus continues to adapt to global trends, fostering innovation and sustainable growth. As the industry navigates emerging challenges, including regulatory complexities and geopolitical uncertainties, CIFA remains committed to enhancing Cyprus’ competitiveness, strengthening international partnerships, and ensuring the longterm success of the sector. In this exclusive interview, Panayiotou shares insights into the future of the industry and the strategic initiatives shaping its trajectory.

Over the past decade, Cyprus has experienced significant growth in its investment funds sector.

What are the key milestones and driving forces behind this development?

Cyprus’ investment funds sector has evolved from a relatively minor industry into a dynamic and competitive market within the European financial landscape. This transformation began after the 2013 financial crisis when the government and regulators sought to diversify the economy and attract foreign investment. Key milestones in this journey include the introduction of the Alternative

FROM TAX INCENTIVES AND FUND STRUCTURING FLEXIBILITY TO THE RISE OF ESG-DRIVEN INVESTMENTS AND FINTECH ADVANCEMENTS, CYPRUS CONTINUES TO ADAPT TO GLOBAL TRENDS, FOSTERING INNOVATION AND SUSTAINABLE GROWTH.

Investment Funds (AIF) Law in 2014, which provided a structured regulatory framework aligned with EU directives, making Cyprus an attractive jurisdiction for fund managers.

Another critical development was the establishment of the Cyprus Investment Funds Association (CIFA) in 2013. CIFA played a pivotal role in promoting the sector internationally, advocating for regulatory enhancements, and positioning Cyprus as a competitive fund domicile.

The introduction of the Registered Alternative Investment Fund (RAIF) regime further enhanced Cyprus’ appeal by providing a flexible and cost-effective fund structure without requiring prior licensing by the Cyprus Securities and Exchange Commission (CySEC).

The steady rise in Assets Under Management (AUM) has been another testament to Cyprus’ growth, with AUM exceeding €9.3 billion in 2024. Additionally, Cyprus’ strategic location, skilled workforce, and modern infrastructure have contributed to its attractiveness as an investment hub. Continuous collaboration between regulatory authorities, the government, and private sector stakeholders has ensured that Cyprus remains a compelling destination for investment funds.

19 - ACCOUNTANCY CYPRUS - MARCH 2025

“THE EVOLUTION AND FUTURE OF CYPRUS’ INVESTMENT FUNDS INDUSTRY”

How does Cyprus compare to other European and international jurisdictions in terms of investment fund attractiveness and competitiveness?

Cyprus has successfully positioned itself as a competitive jurisdiction for investment funds. One of Cyprus’ key competitive advantages is its EU membership, which allows investment funds domiciled in the country to benefit from passporting rights across Europe. This ensures seamless access to EU markets while maintaining a robust regulatory framework that adheres to European Fund and Asset Management Association (EFAMA) standards.

Furthermore, Cyprus’s tax regime is highly favorable for investment funds. With no withholding tax on dividend distributions to non-residents, no capital gains tax on securities transactions, and an efficient double taxation treaty network, the country offers significant fiscal advantages.

In terms of fund structuring flexibility, Cyprus allows for a wide range of fund types, including UCITS, AIFs, and RAIFs. The regulatory framework enables managers to choose between different fund structures, including open-ended, closed-ended, and umbrella funds. This adaptability and a well-developed professional services sector make Cyprus a strong contender among European jurisdictions.

By offering a cost-effective and business-friendly alternative to larger financial centers such as Luxembourg and Ireland. Unlike these traditional hubs, Cyprus provides lower setup and operational costs, making it an attractive option for emerging fund managers and smaller-scale investments.

What role have the government and regulatory authorities played in fostering the development of the investment funds industry, and what further steps are being considered to enhance its growth?

The Cypriot government and regulatory authorities have played a proactive role in shaping the investment funds industry into a key pillar of the economy. Through CySEC, the regulatory environment has been continuously updated to align with EU directives and international best practices, ensuring investor protection while fostering a businessfriendly climate.

Government-backed initiatives such as tax incentives, infrastructure development, and streamlined administrative procedures have also encouraged fund managers and investors to establish a presence in Cyprus. Invest Cyprus, the country’s investment promotion agency, has been instrumental in marketing Cyprus as an attractive funds jurisdiction through international roadshows, networking events, and strategic partnerships.

CYPRUS HAS SUCCESSFULLY POSITIONED ITSELF AS A COMPETITIVE JURISDICTION FOR INVESTMENT FUNDS. ONE OF CYPRUS’ KEY COMPETITIVE ADVANTAGES IS ITS EU MEMBERSHIP, WHICH ALLOWS INVESTMENT FUNDS DOMICILED IN THE COUNTRY TO BENEFIT FROM PASSPORTING RIGHTS ACROSS EUROPE. THIS ENSURES SEAMLESS ACCESS TO EU MARKETS WHILE MAINTAINING A ROBUST REGULATORY FRAMEWORK THAT ADHERES TO EUROPEAN FUND AND ASSET MANAGEMENT ASSOCIATION (EFAMA) STANDARDS.

Looking ahead, further regulatory refinements are expected, including enhancements to digital finance and fintech regulations to support innovation in the sector.

Additionally, the proposed tax reforms aim to modernize the fiscal framework, making Cyprus even more attractive to fund managers and investors.

Cyprus is known for its strong professional services sector.

How have lawyers, accountants, auditors, and other professionals contributed to the expansion and credibility of the investment funds industry?

The professional services sector in Cyprus has been a cornerstone of the investment funds industry, providing the expertise and support needed for efficient fund management and regulatory compliance.

Accounting and auditing firms, including global players, have reinforced transparency and credibility in financial reporting, a crucial factor for attracting institutional investors. These firms provide tax advisory services, audit compliance, and risk management solutions tailored to the investment funds industry. Law firms specializing in fund structuring have helped foreign and local managers navigate the legal framework, ensuring seamless fund establishment and compliance with EU regulations.

Fund administrators play a vital role in handling investor relations, NAV calculations, and reporting obligations, allowing fund managers to focus on investment strategies rather than administrative burdens.

Depositary services are also a crucial component of the investment funds industry in Cyprus, further reinforcing the jurisdiction’s reputation for transparency, investor protection, and regulatory compliance. Depositaries play a key role in safeguarding fund assets, ensuring proper

20 - ACCOUNTANCY CYPRUS - MARCH 2025

INTERVIEW

oversight, and verifying the accuracy of transactions.

Combined, these professional services enhance the credibility and efficiency of Cyprus’ investment funds sector, making it an attractive destination for investors seeking reliability and compliance with international standards.

Which specific asset classes or investment strategies have demonstrated the highest growth in Cyprus-based funds in recent years, and what are the emerging opportunities?

In recent years, Cyprus-based investment funds have seen significant growth in sectors such as real estate, shipping, technology, healthcare, education, and renewable energy.

Real estate investments have been particularly strong due to Cyprus’ attractive property market and the country’s status as a prime location for tourism and residential developments.

Shipping funds have also gained traction, leveraging Cyprus’ position as a leading maritime center. The country’s well-established shipping registry and tax incentives make it an appealing jurisdiction for ship finance and investment.

The rise of ESG-compliant investments has introduced new opportunities in sustainable and socially responsible investing. Renewable energy funds focusing on solar, wind and hydro energy projects in Cyprus and neighboring regions have attracted significant interest from institutional investors.

Additionally, fintech and digital asset investments are emerging as growth areas. With the implementation of regulations like MiCA (Markets in Crypto-Assets) and DORA (Digital Operational Resilience Act), Cyprus is positioning itself as a hub for digital finance and alternative investments.

to expand into international markets, leveraging Cyprus’ competitive advantages. The continued digital transformation of financial services and the emphasis on ESG investments are expected to further enhance the investment climate.

How would you describe the current investment climate in Cyprus for both domestic and international fund managers and investors?

What are the primary challenges currently facing the investment funds sector in Cyprus, and how is the industry addressing these obstacles?

The investment climate in Cyprus remains strong, characterized by economic stability, regulatory transparency, and an attractive tax framework. Fund managers benefit from a well-regulated jurisdiction that balances investor protection with flexibility for asset management.

Like any growing sector, Cyprus’ investment funds industry faces challenges such as increasing global competition, evolving regulatory requirements, and geopolitical uncertainties.

For international investors, Cyprus provides a gateway to European, Middle Eastern, and African markets, supported by a growing network of double taxation treaties. Despite global economic uncertainties, the Cypriot investment funds industry has demonstrated resilience, maintaining steady growth in AUM and fund registrations.

Domestic fund managers are also increasingly looking

Regulatory complexity can pose challenges for smaller fund managers, who must navigate compliance requirements that are continually evolving to align with EU standards.

Efforts to streamline regulatory processes and adopt digital solutions for fund administration are ongoing to mitigate these challenges.

Additionally, geopolitical tensions in the Eastern Mediterranean and global economic fluctuations can

21 - ACCOUNTANCY CYPRUS - MARCH 2025

“THE EVOLUTION AND FUTURE OF CYPRUS’ INVESTMENT FUNDS INDUSTRY”

impact investor sentiment. However, the industry is addressing these risks through diversification, strong regulatory oversight, and a focus on sustainable investment strategies.

What is your vision for the Cyprus investment funds industry over the next five to ten years, and what trends will likely shape its trajectory?

How does the investment funds industry interact with and support other key sectors of the Cypriot economy, such as real estate, shipping, and technology?

The vision for the Cyprus investment funds industry over the next decade is to further strengthen its position as a leading European fund jurisdiction, leveraging its regulatory framework, strategic location, and cost-effectiveness. The aim is to continue attracting international fund managers, institutional investors, and high-net-worth individuals who seek a flexible and well-regulated environment for their investments.

The investment funds sector plays a crucial role in channeling capital into vital sectors of the Cypriot economy. Real estate investment funds contribute to property development, boosting both residential and commercial projects. Shipping funds support Cyprus’ well-established maritime industry, financing vessel acquisitions and operations. Technology and fintech investments foster innovation and digital transformation, creating new business opportunities and jobs. A significant volume of Assets Under Management is also invested in the sectors of Health and Education improving the quality of the provided services offered to the people of Cyprus. By providing structured investment vehicles for these industries, the funds sector enhances economic diversification and long-term growth.

Several key trends are expected to shape the industry’s trajectory. Firstly, despite the U-turn of the US in relation to this matter, we still believe that sustainable and ESGdriven investments will become increasingly dominant as investors demand greater alignment with environmental and social responsibility. The rise of green finance and impact investing is expected to drive new fund structures focusing on renewable energy, circular economy initiatives, and sustainable infrastructure.

Secondly, fintech advancements and digital transformation will play a pivotal role. Blockchain-based funds, tokenized assets, and AI-driven investment strategies are likely to gain traction. The implementation of the Markets in Crypto-Assets (MiCA) regulation and the Digital

22 - ACCOUNTANCY CYPRUS - MARCH 2025

INTERVIEW

THE VISION FOR THE CYPRUS INVESTMENT FUNDS INDUSTRY OVER THE NEXT DECADE IS TO FURTHER STRENGTHEN ITS POSITION AS A LEADING EUROPEAN FUND JURISDICTION, LEVERAGING ITS REGULATORY FRAMEWORK, STRATEGIC LOCATION, AND COST-EFFECTIVENESS. THE AIM IS TO CONTINUE ATTRACTING INTERNATIONAL FUND MANAGERS, INSTITUTIONAL INVESTORS, AND HIGH-NET-WORTH INDIVIDUALS WHO SEEK A FLEXIBLE AND WELLREGULATED ENVIRONMENT FOR THEIR INVESTMENTS.

Operational Resilience Act (DORA) will further integrate fintech into the investment funds sector.

Thirdly, Cyprus will continue to promote cross-border investment opportunities, enhancing its attractiveness as a platform for international fund managers looking to expand into Europe, the Middle East, Asia and Africa. The expansion of the country’s double taxation treaty network will be crucial in this effort.

Finally, the industry will work on improving its operational efficiency through digitalization and regulatory enhancements, ensuring that Cyprus remains competitive amid increasing global competition. The development of new fund administration regulations will further reinforce investor confidence and attract larger fund managers to the jurisdiction.

How are ESG criteria, fintech advancements, and alternative investments influencing the evolution of Cyprus-based funds, and how is the industry adapting?

There is a growing preference for sustainable and responsible investing, with institutional investors demanding greater adherence to ESG principles. Cyprusbased funds are adapting by launching ESG-focused Alternative Investment Funds (AIFs) that invest in renewable energy, carbon-neutral infrastructure, and sustainable real estate projects. Additionally, green bonds and sustainability-linked loans are gaining momentum, supported by EU-wide regulatory frameworks.

To ensure compliance with ESG disclosure requirements, fund managers are incorporating EU Sustainable Finance Disclosure Regulation (SFDR) principles, ensuring transparency in sustainability-related risks. Cyprus is also expected to see further increase in social impact funds, which prioritize investments in education, healthcare, and affordable housing.

The rise of financial technology is transforming fund operations, enhancing efficiency, and reducing costs.

The use of blockchain for fund administration, AI-driven

investment strategies, and automated compliance tools is becoming more prevalent. The implementation of DORA and MiCA will bring greater regulatory clarity to digital asset investments, positioning Cyprus as an emerging hub for digital finance. Additionally, regtech solutions are streamlining compliance processes, making it easier for fund managers to navigate complex regulations.

The demand for alternative investment strategies has surged, with investors seeking exposure beyond traditional asset classes. Cyprus has responded by attracting funds specializing in private equity, venture capital, real estate, and infrastructure projects.

As President of CIFA, what are your key priorities in supporting fund managers, investors, and stakeholders, and how does CIFA plan to address both challenges and opportunities in the sector?

Our key priorities are to further strengthen Cyprus’s reputation as a leading investment fund jurisdiction, enhance regulatory competitiveness, and ensure the industry remains attractive to both investors and fund managers.

CIFA’s strategy is centered around three main pillars: • Advocating for a Competitive Regulatory Environment CIFA is working closely with the Ministry of Finance, the House of Representatives, and CySEC to ensure the regulatory framework remains competitive, efficient, and aligned with EU directives. One of our top priorities is the approval of pending legislation that will enhance fund administration, streamline licensing processes, and improve investor protection.

• Enhancing International Visibility and Market Access CIFA is actively promoting Cyprus in international financial hubs through roadshows, networking events, and collaborations with global associations such as the European Fund and Asset Management Association (EFAMA). We are engaging with global fund managers, institutional investors, and financial intermediaries to showcase Cyprus as an attractive jurisdiction.

• Fostering Innovation and Sustainability CIFA is supporting the adoption of ESG principles, fintech solutions, and alternative investment strategies. We are also working on educational initiatives and training programs to equip fund managers with the knowledge and tools to navigate emerging trends. Our goal is to position Cyprus as a center of excellence in sustainable finance and digital investments.

To address challenges such as increasing global competition and regulatory complexities, CIFA is pushing for digital transformation in fund administration, advocating for further tax incentives, and working to reduce bureaucratic inefficiencies. Additionally, we are focused on attracting international talent, ensuring that Cyprus has the skilled workforce necessary to support the growing investment funds industry.

23 - ACCOUNTANCY CYPRUS - MARCH 2025

COVER STORY

TAX REFORM:

9

Industry Experts Share Their Insights

24 - ACCOUNTANCY CYPRUS - MARCH 2025

The business community has responded positively to the government’s announcement of a tax reform, marking the first comprehensive tax overhaul in Cyprus since 2002, when the country was aligning with the European acquis. Key stakeholders agree that the President’s proposals represent significant progress, enhancing Cyprus’s competitiveness and adaptability in facing both global and domestic challenges.

NINE INDUSTRY EXPERTS SHARE THEIR INSIGHTS ON THE POTENTIAL IMPACT AND HIGHLIGHT AREAS FOR IMPROVEMENT, EMPHASISING SIMPLIFICATION, COMPETITIVENESS AND THE NECESSITY OF A TRANSPARENT TAX FRAMEWORK. They outline various aspects of the reform and assess its implications on Cyprus’s business environment and wider economy.

25 - ACCOUNTANCY CYPRUS - MARCH 2025

COVER STORY

Transforming Cyprus’ Tax System: A Pathway to Economic Competitiveness and Growth

F

or the past several years, we had been voicing an honest request towards the government to proceed with a reform, or better, a transformation of the tax system, so as to bring it up to date with the prevailing and anticipated needs of the economy, the directions of the global tax policies, the international regulatory developments, the directives emanating from the EU and other organisations, as well as the national objectives and targets.

Eventually, the government, having listened to our substantiated rhetoric, proceeded with the project of the tax reform and recently, we had the pleasure to be presented with a reform package. The new tax reform package was presented on February 26th this year, by the Centre of Economic Research of the University of Cyprus and the Ministry of Finance, thus giving us the opportunity to discuss and comment thereon. Hence, now, contrary to previous years, today we address the specific topic from another premise.

There may be various perspectives to look at it, however, yet we can say with confidence that after many years of waiting, we now have a new plan, which can serve as a good starting point for further development and improvement, till the final implementation.

Helping me build up my propositions, I would like to put forward a couple of clichés, since they are repeated quite often over the last few years: • We do live in a rather unpredictable international environment, both political and economic, far beyond our own control, as a consequence of, inter alia, military warfare in our vicinity, economic protectionism and trade wars, political uncertainty and geopolitical unrest in the wider region.

• Living in a globalised, open economy regime, the business and economic foundations of a country can be affected by events happening elsewhere in the world.

• Technology and digital economy can shape the manner we conduct business and support societies.

• Climate change, environmental conditions and the ESG saga becomes more and more relevant.

Hence, the international business and economic scenery remain volatile, liquid and complicated, underscoring the significance to install solid, robust and adaptive economic models.

So, in this ambiguous landscape, reinforcing the domestic economy is one of the primary options needed to be addressed. Taxation plays a substantial role in this effort, taking into consideration that it generates the State’s revenues.

The tax equation involves a number of factors, such as the simplicity of the tax system, the certainty and the predictability offered, the efficiency it carries, the fairness, justice and proportionality embedded, coupled by the ultimate costs incurred, or benefits generated.

Key pillars for the system are, of course, its competitive edge and the sustainability of the revenues and socioeconomic cohesion of the country. I dare say that the latter two need to be very well safeguarded, as they may determine the future.

And since the brains of the many are usually better than the brains of the one, I take this opportunity to repeat our suggestion for the establishment of a Tax Council, under the Minister of Finance, whose responsibility will be to draw up the National Tax Strategy, that will govern the tax future of the country, both for tax policy

26 - ACCOUNTANCY CYPRUS - MARCH 2025

TAX REFORM: NINE INDUSTRY EXPERTS SHARE THEIR INSIGHTS

THE TAX EQUATION INVOLVES A NUMBER OF FACTORS, SUCH AS THE SIMPLICITY OF THE TAX SYSTEM, THE CERTAINTY AND THE PREDICTABILITY OFFERED, THE EFFICIENCY IT CARRIES, THE FAIRNESS, JUSTICE AND PROPORTIONALITY EMBEDDED, COUPLED BY THE ULTIMATE COSTS INCURRED, OR BENEFITS GENERATED.

and compliance purposes and for the purposes of developing economic activity and strengthening Cyprus’ position as an international business destination of prestige and value.

We currently stand at the doorstep of a new beginning, that of the transformation of the current tax regime. Constructed upon trust, knowledge and sincere cooperation between all interested parties, public and private, we can aspire for a modernised, outwards looking, dynamic, digitalised, fair, simple and transparent tax regime, fully harmonised and supportive to the Long-Term Strategy for Economic Growth, known as Vision 2035. The successful outcome will inevitably have a multiplier effect on many side parameters in our ordinary and business lives, yielding genuine value though this augmentation of expertise and vision.

I feel the need to reiterate though, how essential the simplification of the processes would be, together with the streamlining of taxes, the reduction of bureaucratic procedures and the proportional allocation of the tax burden. In addition, given that we are not operating in silos, i.e. Cyprus is not a stand-alone entity, we need to maintain a balance between the various sources of tax revenues, to be agile in the international arena, to foster the economic activity of the country and to enlarge the overall economy via the enhancement of primary sectors and the attraction of reputable foreign direct investment.

It is thus imperative to build upon the competitiveness and attractiveness of the country, remaining relevant, valued and sought after as a jurisdiction. To achieve that, it is not only the tax rates that may have to be reviewed, but the whole and holistic transposition into a fully digitalised tax mechanism, which will promote efficiency, timeliness and transparency, minimising, at

Kyriakos Iordanou General Manager, ICPAC

the same time, ambiguity, red-tape, non-compliance and possibly corruption.

Although, the package proposed by the government is admittedly neither a holistic nor a truly transformative one, it opens up the discussion to foster an improved, more efficient and contemporary tax system, whilst, simultaneously, enhancing the reputation of the country, cementing the tax substance and base, aiming at reducing the immediate tax burden for the local businesses and households.

ICPAC supports these initiatives and shall contribute to the consultation in order to further improve it, maintaining a balanced approach and incorporating elements to enhance the country’s competitiveness and premium reputation. Needless to say, I hereby convey our utmost willingness and eagerness to work with the government and the stakeholders towards this fundamental goal.

27 - ACCOUNTANCY CYPRUS - MARCH 2025

COVER STORY

ICPAC urges clarity, simplicity and competitiveness

Nicos Chimarides, President, ICPAC Nicos Chimarides, President of the Institute of Certified Public Accountants of Cyprus (ICPAC), highlighted the anticipation within the business community regarding these proposals, recognising their potential to significantly support local enterprises. “The business community had been eagerly awaiting these announcements,” Chimarides noted, explaining that the measures would support businesses by reducing taxes, thus enabling the reinvestment of profits. This would strengthen corporate balance sheets, enhancing their resilience to both domestic and international challenges.

However, Chimarides urged ongoing collaboration between policymakers and businesses to fine-tune the reform. He outlined three major areas needing attention: the simplification of the tax system, clearer regulations to eliminate ambiguities and reinforcing international competitiveness. He stated, “A predictable and transparent tax framework is vital for investor confidence and for avoiding inconsistent interpretations of tax rules.”

Chimarides raised particular concerns about the corporate tax rate increase from 12.5% to 15%, considering global competition. He recommended strategic steps to preserve Cyprus’s appeal to investors.

ICPAC has therefore proposed the establishment of a dedicated Tax Council, tasked with formulating a national tax strategy and continuously monitoring international developments. According to Chimarides, this approach would ensure timely adjustments, securing Cyprus’s position as a competitive international business centre.

CCCI backs balanced approach, calls for faster and simpler tax administration

Stavros Stavrou, President, CCCI Stavros Stavrou, President of the Cyprus Chamber of Commerce and Industry, praised the reform as a critical milestone, marking a significant advancement since the previous reform in 2002. Stavrou expressed appreciation for the balanced approach adopted by the reform team, especially regarding the corporate tax rate adjustment and maintaining attractive

28 - ACCOUNTANCY CYPRUS - MARCH 2025

TAX REFORM: NINE INDUSTRY EXPERTS SHARE THEIR INSIGHTS

incentives for foreign investment. He stated, “The team responsible has done an outstanding job, delivering a balanced approach.” He also praised the introduction of enhanced incentives for lower-income earners, describing these measures as key steps towards social equity.

However, Stavrou highlighted the urgent need to streamline tax administration processes, asserting that a simplified tax framework benefits taxpayers and tax authorities alike. He emphasised that clarity and ease of compliance were paramount, ensuring efficient operations and reducing administrative burdens. Stavrou argued that further simplification would improve taxpayer compliance and enhance governmental efficiency, reinforcing Cyprus’s attractiveness to global investors.

29 - ACCOUNTANCY CYPRUS - MARCH 2025

COVER STORY

Employers Federation seeks clarity on fiscal projections and delay of green tax rollout

Demetris Vakis, First Vice Chairman, Cyprus Employers and Industrialists Federation Demetris Vakis, First Vice Chairman of the Cyprus Employers and Industrialists Federation, echoed the positive sentiment towards key measures such as the abolition of withholding tax on deemed dividend distributions and significant reductions in withholding tax rates. However, Vakis identified an area of concern regarding the unclear fiscal income measures outlined in the proposals, ranging between €80 million and €130 million. Vakis insisted on immediate clarification from the government, stressing, “Further simplification is crucial,” and called for swift action to reduce uncertainty and enable effective business planning.

Vakis further recommended delaying the imposition of green taxes, suggesting instead the introduction of generous incentives for adopting sustainable technologies. He pointed out the potential financial burden these taxes could pose for businesses, underscoring the importance of careful management of sustainability initiatives to maintain competitiveness and viability in the volatile global market.

30 - ACCOUNTANCY CYPRUS - MARCH 2025

TAX REFORM: NINE INDUSTRY EXPERTS SHARE THEIR INSIGHTS

Invest Cyprus stresses investor confidence and fast legislative action to protect incentives

Hotel sector warns against double taxation and unchecked green levies in tourismheavy economy

Evgenios Evgeniou, Chairman, Invest Cyprus

Thanos Michaelides, President, Cyprus Hotels Association

Evgenios Evgeniou, Chairman of Invest Cyprus, reinforced the importance of preserving incentives that significantly contribute to Cyprus’s attractiveness to foreign investors.

Evgeniou stressed that elements such as the NonDom regime, the IP Box regime and tax benefits for professionals relocating to Cyprus are instrumental in attracting Foreign Direct Investment (FDI). He stated, “Allowing the carry forward of tax losses without limitations will enhance competitiveness, especially for startups.”

Evgeniou further advocated for a swift legislative process to minimise the uncertainty for investors. He emphasised the importance of predictability, asserting that extended deliberations could deter investment, impacting economic growth. Maintaining a clear and stable tax environment is essential for fostering investor confidence and sustaining economic momentum.

Thanos Michaelides, President of the Cyprus Hotels Association, highlighted the necessity for careful and balanced implementation of tax measures, particularly those affecting real estate. Michaelides stressed that new property taxes could negatively impact the hotel sector and deter investment, advocating strongly against double taxation.

Regarding sustainability, Michaelides noted, “Green taxes should be revenue-neutral, dedicated entirely to financing sustainability projects.” He urged clear, realistic goals and timelines to ensure effective implementation without compromising Cyprus’s competitiveness, particularly in tourism. He cautioned that overly ambitious environmental targets could increase costs disproportionately, deterring potential visitors and harming Cyprus’s competitive position within the Mediterranean tourism market.

31 - ACCOUNTANCY CYPRUS - MARCH 2025

COVER STORY

TechIsland pushes for digital tax administration and innovation incentives to drive growth

Valentinos Polykarpou, Chairman, TechIsland

bolster Cyprus’s ability to attract and retain high-value talent. Furthermore, he advocated for the permanent extension of the R&D super deduction and an increase in the deduction rate from 120% to 130%, mirroring the successful Greek model. Clear eligibility criteria and a user-friendly process, he noted, would greatly strengthen the local innovation ecosystem.

Polykarpou concluded by stressing the growing economic significance of the tech sector, projected to contribute €6.95 billion to Cyprus’s GVA in 2024, 14% of the total. “Maintaining this momentum requires a forward-looking, supportive policy framework,” he said, reaffirming TechIsland’s readiness to work with the government in shaping a future-proof tax landscape.

Construction sector seeks tax relief, cash flow protection and incentives for green transition

Valentinos Polykarpou, Chairman of TechIsland, welcomed the proposed reforms as a positive step toward reinforcing Cyprus’s status as a competitive business and technology hub. He highlighted the importance of preserving and enhancing regimes like the IP Box and the Non-Dom framework, as well as measures such as the abolition of deemed dividend distribution payments, the reduction of withholding tax rates and the removal of stamp duties.

Polykarpou emphasised the critical role of digitalisation in strengthening the country’s fiscal infrastructure. “We appreciate the progress made with the broader digital transformation programme,” he noted. “Prioritising the digitalisation of the Tax Department will significantly improve efficiency and enhance the overall business environment.”

He also proposed aligning the taxation of stock options and RSUs with the defence tax rate, under employer-approved plans, with a minimum three-year vesting period, arguing that this alignment would

Joseph Merhi, Treasurer, Federation of Building Contractors Associations of Cyprus Joseph Merhi, Treasurer of the Federation of Building Contractors Associations of Cyprus, affirmed the necessity of modernising the tax framework while

32 - ACCOUNTANCY CYPRUS - MARCH 2025

TAX REFORM: NINE INDUSTRY EXPERTS SHARE THEIR INSIGHTS

noting several critical areas needing improvement. He welcomed the removal of stamp duties on contracts, highlighting its positive impact on reducing bureaucratic burdens and costs. Merhi also approved the corporate tax adjustments, emphasising their importance in addressing discrepancies between domicile and nondomicile taxpayers.

However, Merhi highlighted industry-specific challenges, notably the difficulties caused by shifting taxation from collected to invoiced revenues, causing cash flow strains. He advocated strongly for targeted incentives to support construction sector investments in green technology, suggesting these could significantly enhance the sector’s competitiveness.

Additionally, Merhi called for a substantial increase in the personal tax-free threshold, suggesting €26,000 as a more realistic figure given current inflationary pressures. He insisted on more comprehensive measures supporting recruitment and retention of skilled workers, particularly revisiting expatriate tax incentives.

33 - ACCOUNTANCY CYPRUS - MARCH 2025

TAX REFORM: NINE INDUSTRY EXPERTS SHARE THEIR INSIGHTS

34 - ACCOUNTANCY CYPRUS - MARCH 2025

TAX REFORM: NINE INDUSTRY EXPERTS SHARE THEIR INSIGHTS

Cyprus Bar Association critiques reform as fragmented, calls for legal clarity and tax justice

Meivatzis highlighted critical gaps in the reform, including the absence of a consolidated legal framework to enhance compliance, the continued prevalence of high compliance costs and a lack of robust dispute resolution mechanisms. He cautioned that increases in the corporate tax rate could erode Cyprus’s competitiveness, while new anti-abuse provisions, introduced without structured safeguards, risk undermining taxpayer rights and legal certainty.

“For Cyprus to thrive as a global business and financial hub, tax reform must move beyond piecemeal changes,” Meivatzis concluded. “It requires a strategic and wellstructured transformation. One that fosters growth, ensures fairness and cements our position on the international stage.”

Telonis frames tax reform as political tool to align with national social and economic goals Charalambos Meivatzis, Cyprus Bar Association Charalambos Meivatzis, speaking on behalf of the Cyprus Bar Association (CBA), underscored the longstanding call for a tax system rooted in simplicity, legal clarity and judicial efficiency, underpinned by transparency and a streamlined administration. While acknowledging the human-centered approach adopted by the Cyprus Economic Research Center, particularly in its focus on supporting citizens and Cypriot businesses, Meivatzis expressed concern over the reform’s lack of bold vision and innovation.

“A truly modern tax framework must be grounded in fundamental tax and legal principles, ensuring fairness, certainty, convenience and efficiency,” he stated.

According to the CBA, the core objectives of the reform, originally set out to modernise the tax system, remain largely unmet, with the proposed package reflecting more of a fragmented adjustment than a comprehensive transformation.

Ioannis Telonis, Economist Economist Ioannis Telonis described the reform as essential for modernising Cyprus’s economic framework. He underscored the importance of aligning the tax system with key economic principles: efficiency,

35 - ACCOUNTANCY CYPRUS - MARCH 2025

COVER STORY

simplicity and effectiveness in revenue collection.

Telonis also emphasised the importance of fairness, advocating policies that ensure a level playing field for all economic participants.

Telonis urged policymakers to address the substantial black economy, noting that significant revenue opportunities exist in curbing tax evasion and fostering fairness. He described the tax system as inherently political, arguing that it should reflect the economic priorities and social policies of the elected government, contributing directly to Cyprus’s overall economic and social objectives.

Overall, industry experts have largely welcomed the government’s tax reform initiative, viewing it as a significant step toward modernising Cyprus’s economic landscape. Common themes from business leaders and stakeholders include calls for simpler tax administration, preserving international competitiveness and managing sustainability measures without burdening critical sectors such as tourism and construction. Experts also highlighted the importance of clarity, predictability and transparency in maintaining investor confidence and supporting economic growth. By addressing these concerns and adopting a collaborative approach, Cyprus can reinforce its position as an attractive destination for global investors and businesses, ultimately fostering a resilient and thriving economy.

36 - ACCOUNTANCY CYPRUS - MARCH 2025

TAX REFORM: NINE INDUSTRY EXPERTS SHARE THEIR INSIGHTS

EU Tax Policy Developments: Simplification, Competitiveness and Compliance The European Union’s tax policy landscape is evolving rapidly, influenced by geopolitical shifts, the implementation of global tax initiatives such as Pillar Two and a broader push towards tax simplification. The European Commission has placed a strong emphasis on reducing administrative burdens, ensuring consistency and adapting to new global tax realities.

Simplification Efforts

A key priority for the EU is simplifying tax laws to ease compliance burdens for businesses and tax administrations. The Commission is conducting a comprehensive review encompassing both direct and indirect taxation. This initiative aligns with efforts to make the EU’s tax system more efficient, fostering economic growth while maintaining fiscal integrity.

DAC Evaluation and DAC 10 Proposal

The EU is currently evaluating the effectiveness of its existing Directive on Administrative Cooperation (DAC) measures, with a report expected in Q1. The forthcoming DAC 10 proposal will integrate findings from this review, along with insights from the Court of Auditors reports and relevant ECJ rulings. A particular focus will be placed on DAC 6 hallmarks and the legal professional privilege framework, ensuring greater clarity and effectiveness in tax information exchanges.

The “Omnibus” Directive on Tax Simplification

In a significant move towards horizontal tax reform, the Commission is developing an “Omnibus” tax simplification directive. This initiative aims to streamline non-DACrelated tax directives across various sectors, reducing complexity and enhancing legal certainty for businesses operating in the Single Market.

Competitiveness and Cooperative Compliance

Competitiveness remains at the forefront of EU tax policy.

The Commission has introduced a “competitiveness agenda” to provide strategic policy guidance. In parallel, cooperative compliance programs—including pilot projects on transfer pricing risk assessments—are being further developed. These initiatives are designed to improve tax certainty and foster cooperative relationships between tax administrations and multinational enterprises, thereby preventing disputes before they arise.

Aleksandar Ivanovski

DIRECTOR, CFE TAX ADVISERS EUROPE

BEFIT and Transfer Pricing Developments

The Business in Europe: Framework for Income Taxation (BEFIT) initiative continues to be a long-term policy goal.

However, recent discussions indicate resistance from Member States, particularly regarding the proposed Transfer Pricing Directive. The Commission is considering all approaches, including political commitments from Member States rather than binding legislative measures.

Despite the challenges, the initiative remains a key element of the broader tax reform agenda.

EU-US Tax Relations

The EU’s tax policy must also account for ongoing developments in transatlantic tax relations. Recent US tax reforms and global tax cooperation efforts, including the implementation of Pillar Two, will have significant implications for EU businesses. Ensuring alignment between EU and US tax policies remains a priority, particularly in fostering a stable and predictable investment environment.

Conclusion

The EU’s evolving tax policy framework reflects the need for simplification, competitiveness and enhanced compliance mechanisms. While significant challenges remain, particularly regarding BEFIT and transfer pricing reforms, the Commission is committed to fostering a more efficient and transparent tax system. As these developments unfold, businesses and tax professionals must stay informed and engaged to navigate the shifting tax landscape effectively.

37 - ACCOUNTANCY CYPRUS - MARCH 2025

TAXATION

OECD transfer pricing guidance concerning the application of the Transactional Profit Split Method Thus, the aim of this article is to summarise the main transfer pricing aspects of the TPSM as per the provisions of the OECD TPG.

IΙ) Background to the TPSM The TPSM seeks to establish arm’s length outcomes for controlled transactions to approximate the results that would have been achieved between independent enterprises engaging in a comparable transaction.

This method first identifies the profits to be split from the controlled transactions – the relevant profits – and then splits them between the associated enterprises on an economically valid basis that approximates the division of profits that would have been agreed at arm’s length.

Furthermore, the TPSM is particularly useful when the compensation to the associated enterprises can be more reliably valued by reference to the relative shares of their contributions to the profits arising in relation to the transactions, than by a more direct estimation of the value of those contributions.

Efthymios Kanaris

DIRECTOR AT KANARIS DEMETRIADES & ASSOCIATES HEAD OF COMPLIANCE & TAX

I) Introduction

T method.

he Transactional Profit Split method (‘’TPSM’’) is one of the acceptable transfer pricing methods as per the OECD Transfer Pricing Guidelines (‘’OECD TPG’’) that is not that widely applied and is sometimes considered as the “last resort”

However, considering that we only have five transfer pricing methodologies at our disposal, it could be considered a poor strategy to disregard such a method on the basis of the difficulties involved in applying it or because of the subjectivity involved in identifying the appropriate profit splitting factors to be used as part of the application of the said method.

IΙI) Nature of the accurately delineated transaction The accurate delineation of the actual transaction is important in determining whether the TSPM is potentially applicable. This process should consider the commercial and financial relations between the associated enterprises, including an analysis of what each party to the transaction does, and the context in which the controlled transactions take place. That is, the accurate delineation of a transaction requires a two-sided analysis, irrespective of which transfer pricing method is ultimately found to be the most appropriate.

The existence of unique and valuable contributions by each party to the controlled transaction is perhaps the clearest indicator that the TSPM may be appropriate.

Other indicators that the TSPM may be the most appropriate method could include a high level of integration in the business operations to which the transactions relate and/or the shared assumption of

38 - ACCOUNTANCY CYPRUS - MARCH 2025

O E C D T R A N S F E R P R I C I N G G U I D A N C E C O N C E R N I N G T H E A P P L I C AT I O N OF THE TRANSACTIONAL PROFIT SPLIT METHOD

economically significant risks by the parties to the transactions.

At the other end of the spectrum, where the accurate delineation of the transaction determines that one party to the transaction performs only simple functions, does not assume economically significant risks about the transaction, and does not otherwise make any contribution that is unique and valuable, the TSPM typically would not be appropriate since a share of profits (which may be impacted by the playing out of the economically significant risks) would be unlikely to represent an arm’s length outcome for such contributions or risk assumption.

IV) Indicators as to the applicability of the TPSM The TPSM is particularly applicable in the following cases:

a) Both parties to a transaction make unique and valuable contributions The TPSM can be used in cases where both parties to a transaction make unique and valuable contributions (e.g. contribute unique and valuable intangibles) to the transaction. In such a case independent parties might effectively price the transaction in proportion to their respective contributions, making a two-sided method more appropriate. In such cases, the allocation of profits under the TPSM may be based on the contributions made by the associated enterprises, by reference to the relative values of their respective functions, assets, and risks.

For example, the developer and manufacturer of a key component of a product together with the developer and manufacturer of another key component that together with the first component, form the ready-to-sell product, may both make unique and valuable contributions in terms of functions and intangibles that represent a key source of economic benefits. In practice, neither of them may be able to control the development risk of the product as a whole, but instead, they together control the development risks and share in the relevant profits resulting from their contributions.

b) Highly integrated business operations The TSPM can also be used for highly integrated operations, in cases for which a one-sided method would not be appropriate.

A high degree of integration means that how one party to the transaction performs functions, uses assets, and assumes risks are interlinked with, and cannot reliably be evaluated in isolation from, how another party to the transaction performs functions, uses assets, and assumes risks.

As an example, the TPSM can be applied to the global trading of financial instruments by associated enterprises (refer to Part III, Section C of the Report on the Attribution of Profits to Permanent Establishments).

Another example may be where the integration between the parties takes the form of a high degree of interdependency. For instance, profit split approaches may be used by independent enterprises engaged in long-term arrangements where each party has made a significant contribution (e.g. of an asset) whose value depends on the counterparty to the arrangement. In these kinds of cases, where each party makes such a contribution, and is dependent on the other party (or where the value of the contribution(s) of one party depends to a significant degree on the contribution(s) of the other party), some form of flexible pricing that takes into account, and varies with, the outcome of the risks assumed by each party arising from its dependence on the other party may be observed.

c) Shared assumption of economically significant risks, separate assumption of closely related risks The TPSM may be found to be the most appropriate method where each party to the controlled transaction shares the assumption of one or more of the economically significant risks in relation to that transaction.

In addition, the TPSM may also be found to be the most appropriate method where, according to the accurately delineated transaction, the various economically significant risks in relation to the transaction are separately assumed by the parties, but those risks are so closely inter-related and/or correlated that the playing out of the risks of each party cannot reliably be isolated.

39 - ACCOUNTANCY CYPRUS - MARCH 2025

TA X AT I O N

V) Availability of reliable information As per paragraph 2.143 of the OECD TPG, if the information on reliable comparable uncontrolled transactions is available to price the transaction in its entirety, it is less likely that the TPSM will be the most appropriate method. However, a lack of comparables alone is insufficient to warrant the use of the TPSM. Furthermore, while the TPSM can be applied in cases where there are no uncontrolled comparables, information from transactions between independent parties may still be relevant to the application of this method, for example, to guide the splitting of relevant profits or where a residual analysis approach is used (see below).

VI) Application of the TPSM Under the TPSM, the relevant profits are to be split between the associated enterprises on an economically valid basis that approximates the division of profits that would have been anticipated and reflected in an agreement made at arm’s length. In general, the determination of the relevant profits to be split and of the profit splitting factors should be: • consistent with the functional analysis of the controlled transaction under review, and in particular reflect the assumption of the economically significant risks by the parties, and • capable of being measured in a reliable manner.

In this respect, the following need to be considered towards the application of the TPSM:

a) Approaches to splitting profits This may be done by considering the relative contributions of each party (a “contribution analysis”).

Where the TPSM is the most appropriate method but at least one party also makes some less complex contributions that are capable of being benchmarked by reference to comparable, uncontrolled transactions, a two-stage “residual analysis” may be appropriate. More specifically, the OECD TPG provides for the following: Contribution analysis

Under a contribution analysis, the relevant profits, which are the total profits from the controlled transactions under examination, are divided between the associated enterprises in order to arrive at a reasonable approximation of the division that independent enterprises would have achieved from engaging in comparable transactions. This division can be supported by comparable data where available. In the absence thereof, it should be based on the relative value of the

contributions by each of the associated enterprises participating in the controlled transactions, determined using information internal to the MNE group, as a proxy for the division that independent enterprises would have achieved.

Residual analysis

Where the contributions of the parties are such that some can be reliably valued by reference to a one-sided method and benchmarked using comparables, while others cannot, the application of a residual analysis may be appropriate. A residual analysis divides the relevant profits from the controlled transactions under examination into two categories. In the first category are profits attributable to contributions that can be reliably benchmarked: typically less complex contributions for which reliable comparables can be found. Ordinarily, this initial remuneration would be determined by applying one of the traditional transaction methods or a transactional net margin method to identify the remuneration of comparable transactions between independent enterprises. Typically, the allocation of the residual profit among the parties will be based on the relative value of the second category of contributions of the parties in the same way as in the application of the contribution analysis outlined above.

b) Determining the profits to be split The relevant profits to be split under the TPSM are those of the associated enterprises arising as a result of the controlled transactions under review. In determining the relevant profits, it is therefore essential to first identify and accurately delineate the transactions to be covered by the TPSM, and from this identify the relevant income and expense amounts for each party in relation to those transactions.

c) Splitting the profits The criteria or splitting factors used to split the profit should be: • independent of transfer pricing policy formulation, i.e. they should be based on objective data (e.g. sales to independent parties), not on data relating to the remuneration of controlled transactions (e.g. sales to associated enterprises), • verifiable, and • supported by comparables data, internal data, or both.

One possible approach is to split the relevant profits based on the division of profits that actually is observed in comparable uncontrolled transactions. Examples of possible sources of information on uncontrolled transactions that might usefully assist the determination of criteria to split the profits, depending on the facts

40 - ACCOUNTANCY CYPRUS - MARCH 2025

O E C D T R A N S F E R P R I C I N G G U I D A N C E C O N C E R N I N G T H E A P P L I C AT I O N OF THE TRANSACTIONAL PROFIT SPLIT METHOD

and circumstances of the case, include joint-venture arrangements between independent parties under which profits are shared, such as development projects in the oil and gas industry; pharmaceutical collaborations, comarketing or co-promotion agreements; arrangements between independent music record labels and music artists; uncontrolled arrangements in the financial services sector, etc.

However, it can be difficult to find reliable comparable data that can be used in this manner. Nevertheless, external market data can be relevant in the profit split analysis to assess the value of contributions that each associated enterprise makes to the transactions. In effect, the assumption is that independent parties would have split relevant profits in proportion to the value of their respective contributions to the generation of profit in the transaction. Thus, where there is no more direct evidence of how independent parties in comparable circumstances would have split the profit in comparable transactions, the allocation of profits may be based on the relative contributions of the parties, as measured by their functions, assets used, and risks assumed.

Other profit splitting factors that could be appropriate in the circumstances of a given case include incremental sales, or employee compensation (relating to the individuals involved in the key functions that generate value to the transaction, for example in relation to the global trading of financial instruments). In other situations, it is possible that headcount or time spent by a certain group of similarly skilled employees with similar responsibilities could be used if there is a strong and relatively consistent correlation between this and the creation of value represented by the relevant profits.

VII) Conclusion Concluding, the TPSM can be particularly useful and offer a solution for complex trading relationships involving highly integrated operations, where it is sometimes genuinely difficult to evaluate those transactions on a separate basis.

d) Profit splitting factors As noted above, arm’s length parties can be assumed to split profits on the basis of their relative contributions to the creation of those profits. The division of the relevant profits under the TPSM is generally achieved using one or more profit splitting factors. The functional analysis and an analysis of the context in which the transactions take place (e.g. the industry and environment) are essential to the process of determining the relevant factors to use in splitting profits, including determining the weighting of applicable profit splitting factors, in cases where more than one factor is used. The determination of appropriate profit splitting factor(s) should reflect the key contributions to value in relation to the transaction.

Depending on the facts and circumstances of the case, the factor can be a figure (e.g. a 30%-70% split based on evidence of a similar split achieved between independent parties in comparable transactions), or a variable (e.g. relative value of participant’s marketing contributions) which could be calculated on the basis of a single profit splitting factor or a weighting of multiple factors.

Profit splitting factors based on assets or capital (e.g. operating assets, fixed assets (e.g. production assets, retail assets, IT assets), intangibles), or costs (e.g. relative spending and/or investment in key areas such as research and development, engineering, marketing) may be used where these capture the relative contributions of the parties to the profits being split and they can be measured reliably. Note that while costs may be a poor measure of the value of intangibles contributed, the relative costs incurred by parties may provide a reasonable proxy for the relative value of those contributions where such contributions are similar in nature.

41 - ACCOUNTANCY CYPRUS - MARCH 2025

BUSINESS & ECONOMY

Significance of Goal Setting: Does it Really Work?

According to Positive Psychology • Goal setting boosts focus, persistence, and motivation.

• Clear goals enhance performance, satisfaction, and well-being.

• Measurable goals enable progress tracking and accountability.

Magdalena Nowicka Mook CEO, INTERNATIONAL COACHING FEDERATION

T

he beginning of the year often brings the conversation about goals to the forefront.

We all start talking about our personal goals for the next 12 months, and organizations and corporation engage in the annual planning exercises. Goal setting is the process of defining and working towards specific, measurable, and achievable outcomes. It involves creating a plan of action and a timeline to reach those goals. The goals may focus on career, financial performance, business outcomes, or any personal desires – health and wellness being the most cited ones.

And yet, the process of goal setting is not always easy.

The goals must be attainable and reasonable. The timelines to accomplish them have to be realistic and they require resources – both human and financial.

In addition, not everyone is motivated by goals. Some individuals find the goal-setting process stressful and constraining. The Harvard Business School, in its Working Paper titled “Goals Gone Wild: The Systematic Side Effects of Over-Prescribing Goal Setting,” offers this key takeaway: “The key to doing our best work is time and space to apply our attention. When under pressure to deliver, we tend to leave out important aspects. Take more time and review your assumptions, asking yourself: what am I missing here? If you are reporting to a superior, try to appeal to their sense of fairness and request more time to deliver your best job. If that’s impossible, you may need to stand back from the project—better than being set up for failure before you even start.”

The Dark Side of Goal Setting: As we said, goal setting is not an effortless process. In fact, research points to the “dark side” of the entire process.

The “dark side” of goal setting refers to the potential negative consequences that can arise from overly focused (limiting) or poorly set goals, including tunnel vision, neglecting other important aspects of life, increased stress, potential for unethical behavior to achieve the goal, reduced intrinsic motivation, and a distorted sense of selfworth if goals are solely based on external validation.

42 - ACCOUNTANCY CYPRUS - MARCH 2025

SIGNIFICANCE OF GOAL SETTING: DOES IT REALLY WORK?

GOAL SETTING IS THE PROCESS OF DEFINING AND WORKING TOWARDS SPECIFIC, MEASURABLE, AND ACHIEVABLE OUTCOMES. IT INVOLVES CREATING A PLAN OF ACTION AND A TIMELINE TO REACH THOSE GOALS.

Let us examine key aspects of the dark side of goal setting: • Tunnel Vision: Single goals, established in the vacuum, may lead to neglecting other key areas of people’s lives and businesses, leading to potential burnout and imbalance.

• Unrealistic Expectations: Excessively high or, frankly, unreachable goals can lead to frustration, discouragement, and a feeling of failure.

• Ethical Concerns: The article in Harvard Business Review suggests that in the pursuit of achieving a goal, individuals might be tempted to engage in unethical behaviors to reach their target.

• Reduced Intrinsic Motivation: It is important how the success is measured. When goals are solely focused on external rewards or validation, the enjoyment and internal satisfaction derived from the activity itself can decrease.

• Stress and Anxiety: The pressure to achieve a goal can lead to excessive stress and anxiety, particularly when deadlines are approaching – therefore producing less than best-quality outcomes.

• Neglecting Personal Well-being: Over-emphasis on achieving a goal might lead to neglecting physical and mental health needs. It is true especially when achieving goals is directly linked to financial compensation or promotion.

The Way Forward: This is not the reason, however, to dismiss goal-setting process all together. There are great techniques to support this important activity. One can mitigate the dark side of goal setting by engaging in:

• Setting SMART Goals: Ensure goals are Specific, Measurable, Achievable, Relevant, and Time-bound to avoid unrealistic expectations.

• Focusing on the Process: Emphasize the journey towards the goal, not just the outcome, to maintain motivation and enjoyment. Setting milestones may be an effective way to do this.

• Regular Reflection: Being agile is a must! One needs to periodically review goals and adjust as needed to align with changing priorities and circumstances, including timelines and targets.

Backward goals There are many models for goal setting. Most commonly cited are SMART, ABCS, GROW, W.O.O.P., and Why, What, How. Many individuals and organization found on of the goal-setting techniques especially rewarding – it is called “backward goals.” It involves setting the goal to help decide what steps to take to reach that goal. The purpose of back goals is to translate a vision into measurable goals and individual steps. For example, if goal assumes cutting costs or increasing revenue by certain percentage during a year, the backward goals involve setting smaller goals, such as creating smaller targets for each quarter – with assigning specific tactics.

Instead of setting a specific goal, set the overall success you would like to have and work backwards to identify the smaller goals and targets needed to make that top goal happen. Defining milestones and allowing space for adjustments is also providing a more achievable and realistic plan.

One of ICF’s (International Coaching Federation) core coaching competency is helping clients set their goals.

More specifically, the competency of Facilitating Client Growth, defined as “Partnering with the client to transform learning and insight into action,” specifically calls for “Partnering with the client to design goals, actions and accountability measures that integrate and expand new learning.”

Coaching helps with goal setting by providing a structured framework to identify desired outcomes, create clear and actionable plans, hold individuals accountable for progress, and offer support and guidance throughout the goal achievement process, increasing motivation and clarity around what needs to be done to reach the desired goals.

Coaching can specifically help with identifying obstacles, boosting motivation, and providing an accountability partner. So – when you are facing the need and desire for establishing specific goals – think of collaborating with a professional coach. You will find the process much simpler and more enjoyable. What is most important, however, your plan will have a greater chance of being successful.

43 - ACCOUNTANCY CYPRUS - MARCH 2025

BUSINESS & ECONOMY

ICPAC CFO Society – the vision that comes true

T

he CFO’s Committee of the Institute of Certified Public Accountants of Cyprus (ICPAC) was founded in March 2015, to create a channel of communication between the Chief Financial Officers (CFOs) and the people of the financial sector in general and invite CFOs and persons acting in the capacity of Financial Manager closer to ICPAC and vice versa, for the promotion of their role, for their update and the provision of any support they need, not limited to only technical aspects.

Over the last 10 years, the Committee has been able to reach out to the CFO society through:

Irene Loizidou

HEAD OF ADMINISTRATION & FINANCE OF ICPAC

• Successful organization of conferences/forums, such as the CFO Mediterranean Summit, which has been held for three years, 2022, 2023, and 2024, and is already preparing the conference for May of 2025.

The said conference has managed to establish itself as the most important conference for CFOs. The conference hosts and attracts important people in the field of financial services both in Cyprus and abroad, both as speakers as well as financiers and is one of the most important tasks of the Committee.

• The “Mentoring Program”, which started in 2019 with the initiative of the CFO Committee and the support of ICPAC and has completed 5 years of operation. Twenty-five (25) mentors participated in the program, while more than one hundred (100) mentees have followed the program to date. It is noted that of the existing fourteen (13) members of the Committee, currently five (5) are certified “Mentors”. The program is conducted in collaboration with PricewaterhouseCoopers Limited.

44 - ACCOUNTANCY CYPRUS - MARCH 2025

I C P A C C F O S O C I E T Y – T H E V I S I O N T H AT C O M E S T R U E

• Other actions, events, and activities (e.g., webinars, breakfast events).

Considering its actions, the local and international developments as well as the growth of the role of the CFO and always having as a guide the strategic goals of ICPAC, its terms of reference (as established by the Board) and its priorities, the Committee, in 2018 submitted a request for its evolvement into a more expanded entity “Society” to which the Council then, reacted positively.

The main objective of this request was the further development of the Committee’s contribution to the sector of Financial Management through actions, events, lobbying, participatory forums etc.

In cooperation with the Management of ICPAC, the terms of reference and the operating framework of the CFO Society were prepared during 2024, and on the 17th of September 2024, the Council of ICPAC approved them. (after preceding legal and other checks).

The CFO Society will give the opportunity to ICPAC existing members and non-members of ICPAC who meet specific requirements/criteria to register and participate in the Society.

The main objectives of the CFO Society are: • To act as a single expression and representation towards the social partners, the state and professional and public interest in the field of Financial by providing information, assistance, advice and exchange of views about development issues in this field.

• To be a platform for socialization and professional networking of its members, both among themselves and with the wider economic and professional community.

• To be a scheme for all professional accountants, members and non-members of ICPAC who work in the field of Financial Management as CFOs / Financial Managers in private and public companies as well as in the public and wider public sector.

• To promote the study of Financial Management in all its forms, including the development and dissemination of knowledge through expertise and research for the benefit of its members (members and non-members of ICPAC).

• To become a center of excellence in the field of Financial Management by adopting and promoting good and best international practices.

• To provide support for the development of its members • To provide support services for the implementation of good practices in matters of Financial Management • To be the ICPAC’s link with the wider professional community of Financial Officers and to encourage dialogue, communication, information, and the wider participation of the Committee in matters of concern to Financial Officers and vice versa.

• The continuation of the Mentoring program, • Hold conferences, seminars, and other events.

Any person who wishes to be registered in the register of members of the CFO Society, submits a relevant application to ICPAC, accompanied by the necessary documentation supporting his application, as well as the appropriate amount of money as an annual membership fee of the CFO Society (the fee for nonexisting ICPAC members will be calculated based on the member’s registration date, with a six-monthly ration). For existing ICPAC members, at this stage, the annual subscription is free due to the payment of the existing annual ICPAC subscription fee.

It is noted that the participation of non-ICPAC members in the CFO Society in any way does not mean that they become members of ICPAC or acquire any other status related to ICPAC activities.

ICPAC will provide the necessary support services for the operation of the CFO Society, including accounting services, technology, membership registration and communication with the CFO Society throughout, support and organization of conferences, meetings events and other related activities.

The evolution of the CFO Committee to the CFO Society introduces a new era for the traditional ICPAC’s Committees, allowing other Committees to follow as well. The invitation to non ICPAC members will only add value and enhance the vision and mission of the Institute and to the challenges that a CFO currently faces and the practice in general.

We expect that this effort will be embraced by all CFOs and people of the financial industry in general, and it will yield the positive results we seek.

45 - ACCOUNTANCY CYPRUS - MARCH 2025

FDFVVDC

“The role of the CFO is continually evolving.

The CFO of today is the trusted advisor of the owner, the CEO and the top management of each organisation. Modern Finance leaders need to have a wide spectrum of knowledge and experience to help them cope with this demanding role. This is exactly the mission of the CFO Society,” as stated by Stavros Kattamis,

a member of the committee since its foundation in March 2015 and Chairman of the CFO Society (2023 – to date).

“The evolution of the CFO role marks a strategic transformation from the traditional financial role to a dynamic leadership role.

The CFO Committee’s progression into the CFO Society embodies this shift, reflecting a commitment to continuous development, robust networking, and integrating best practices,” as stated by Christos Tavelis, a member of the committee since its foundation in March 2015 and chairman of the committee for the period 2019-2022.

46 - ACCOUNTANCY CYPRUS - MARCH 2025

I C P A C C F O S O C I E T Y – T H E V I S I O N T H AT C O M E S T R U E

“The more self-aware CFOs become, the more able they will be to thrive and to add value to their organizations and society at large in their evolving roles. As head of the Mentoring Program on behalf of the CFO Society, our 25 Mentors encourage our mentees to develop the skills of conscious active self reflection and self awareness in everything that they do.” as stated

by Stephanos Papadopoulos, member of the committee since its foundation in March 2015 and vice-chairman of the committee for the period 2023-2024.

“In a changing world, the role of the CFO evolves to adapt to such changes. The evolution of the Committee to the Society is an attempt to follow these changes and meet the increasing demands of CFOs” as stated by

George Hadjineophytou, member of the committee since its foundation in March 2015 and chairman of the committee for the period 2016-2019 and, Member of the ICPAC Council since June 2024.

47 - ACCOUNTANCY CYPRUS - MARCH MARCH2025 2025

TAXATION

Cyprus’ Pillar Two Adoption Calls for MNE Safe Harbor Testing

T

he Cyprus House of Representatives has made a pivotal move by adopting the global minimum tax of multinational groups and large-scale domestic groups law, known as Pillar Two.

This action signifies Cyprus’ alignment with international tax standards and the country’s commitment to global tax reform and combating tax avoidance to ensure fair taxation.

The Pillar Two law, published in the Official Government Gazette on Dec. 18, 2024, implements the EU Directive issued on Dec. 14, 2022. It introduces several key provisions that will significantly impact multinationals and large-scale domestic groups operating in Cyprus.

In-scope groups must urgently evaluate the impact of these changes on their operations, including their data, systems, technology, and processes, to ensure that they can support the new requirements and ensure full compliance.

Christos A. Theophilou

TAXAND CYPRUS | PARTNER | INTERNATIONAL TAX – TRANSFER PRICING

Businesses may need to invest in new technologies and processes to meet the reporting and compliance requirements of the new law. This may involve significant costs and resources, but it is essential for ensuring compliance and avoiding penalties.

The law also has implications for the broader business environment in Cyprus. By aligning with international tax standards, Cyprus enhances its reputation as a transparent and compliant jurisdiction.

The interpretation of the Cypriot Pillar Two law aligns with administrative guidance from the OECD/ G20 Inclusive Framework provided such guidance is consistent with the Pillar Two law. This also

48 - ACCOUNTANCY CYPRUS - MARCH 2025

CYPRUS’ PILLAR TWO ADOPTION CALLS FOR MNE SAFE HARBOR TESTING

encompasses any future guidance issued by the same body. This provision ensures that the Pillar Two law remains harmonized with international standards and provides businesses with clear directives on compliance.

Notably, the Pillar Two law doesn’t amend the Cypriot Income Tax Law. Instead, it establishes an additional tax framework that functions alongside the existing income tax law. Further, the Pillar Two law doesn’t specifically include a general anti-avoidance rule—aligning with the EU Directive and Model Rules, which also don’t explicitly include such a rule.

Key Provisions Qualified income inclusion rule. The QIIR, which applies for financial years starting Dec. 31, 2023, requires a local parent company to ensure that its profits and those of its local subsidiaries are taxed at a minimum effective tax rate of 15%. The rule aims to prevent profit shifting and base erosion by ensuring that income is taxed at a minimum effective rate of 15%, regardless of its geographical location.

Qualified undertaxed profits rule. Commencing this year and applying to financial years starting Dec. 31, 2024, the QUTPR imposes a top-up tax to address any insufficient taxation not taxed by the QIIR by using a denial of deduction mechanism under corporate income tax. This goal is similar to that of the QIIR, as the QUTPR acts as a backstop to the QIIR, ensuring that any profits not sufficiently taxed under the QIIR are subject to additional taxation.

Domestic minimum top-up tax. Also effective starting this year, applying to financial years starting Dec. 31, 2024, the rule applies to constituent entities in Cyprus.

This provision takes precedence over the two rules above, ensuring that all constituent entities meet the minimum tax requirements.

The DMTT is designed to prevent tax avoidance by ensuring that all profits are taxed at a minimum rate, regardless of the jurisdiction in which they are earned.

This measure is particularly important for Cyprus, given its strategic location and role as a hub for international business.

Compliance and administration. Entities within the scope of the Pillar Two law must notify the Cyprus tax authorities within 15 months after the fiscal year-end (18 months for the transition year).

BUSINESSES MAY NEED TO INVEST IN NEW TECHNOLOGIES AND PROCESSES TO MEET THE REPORTING AND COMPLIANCE REQUIREMENTS OF THE NEW LAW. THIS MAY INVOLVE SIGNIFICANT COSTS AND RESOURCES, BUT IT IS ESSENTIAL FOR ENSURING COMPLIANCE AND AVOIDING PENALTIES

They must also submit a local self-assessment filing and make any payments due within 30 days of the global anti-base erosion, or GloBE, information return submission deadline. These administrative provisions aim to ensure compliance with the new tax rules and provide clarity for businesses operating in Cyprus.

Penalties and grace period. The Pillar Two law outlines penalties for late filings and payments. However, no administrative fines will apply for fiscal years beginning before Dec. 31, 2026, provided the group acts in good faith in compliance efforts. This provision is designed to encourage compliance while providing a grace period for businesses to adjust to the new requirements.

Actions for Multinationals When navigating the complexities of the Pillar Two law, businesses operating in Cyprus must remain vigilant and should consider the following steps.

Evaluating the applicability of the law to determine whether the particular group falls within the scope of the rules, along with an impact analysis to identify highrisk subsidiaries based on their location.

Conducting high-level safe harbor testing based on country-by-country reporting.

Performing quantitative impact assessments to calculate the top-up tax due.

Evaluating the potential for substance-based income exclusions, which allow for a reduction in the amount of income subject to the top-up tax based on tangible assets and payroll.

The article was published in Bloomberg BNA at International Tax News

49 - ACCOUNTANCY CYPRUS - MARCH 2025

TAXATION

Rethinking Tax Reform in Cyprus: A Holistic Approach to Include VAT and Tax Justice… separately and in stages

A

s Cyprus embarks on a critical journey of tax reform, it is essential to adopt a comprehensive approach that integrates not only corporate and income taxes but also value-added tax (VAT) and the broader principle of tax justice. Our recent presentation at an international tax conference highlighted these key dimensions, advocating for the inclusion and adoption of VAT reform and tax appeal mechanisms to enhance Cyprus’s tax system. This article explores the necessity of VAT reform and the potential benefits of a more equitable tax system through actionable proposals aimed at achieving a truly holistic tax reform.

George Liasis

PARTNER – INDIRECT TAXES, EY CYPRUS ADVISORY

The Imperative for VAT Reform VAT serves as a cornerstone of revenue generation for EU member states, governed by a regulatory framework that allows for certain flexibilities. As a member of the European Union, Cyprus has a unique opportunity to tailor its VAT policies to better support its economic landscape. The ongoing discussions on tax reform must prioritize VAT, particularly considering investments into emerging sectors such as shipping, fintech, real estate, technology, education, and healthcare.

Simos Simou

DIRECTOR – GREEN TAXES & CONTROVERSY, KOUKOUNIS, KARAOLIS LLC (EY LAW)

With VAT being an EU harmonised legislation, there might be some limitations on revisiting the Cyprus VAT system, yet the EU Directive avails optional, discretionary measures and permissible EU VAT aspects subject to domestic interpretation. Such strategic VAT harmonisation can simplify our system, enhance revenue generation and also foster an environment conducive to innovation and investment.

50 - ACCOUNTANCY CYPRUS - MARCH 2025

RETHINKING TAX REFORM IN CYPRUS: A HOLISTIC APPROACH T O I N C LU D E V AT A N D TA X J U S T I C E … S E P A R AT E L Y A N D I N S TA G E S

THIS ARTICLE EXPLORES THE NECESSITY OF VAT REFORM AND THE POTENTIAL BENEFITS OF A MORE EQUITABLE TAX SYSTEM THROUGH ACTIONABLE PROPOSALS AIMED AT ACHIEVING A TRULY HOLISTIC TAX REFORM.

A Call for VAT Reforms in enhancing our tax system Zooming in on EU best practices, there are VAT upgrades that can be utilised in Cyprus as well. By way of practical examples, the following proposals may reform VAT in a manner that aligns with EU regulations while simultaneously promoting economic growth and investment in Cyprus: 1. Option to Tax (VAT) for Real Estate: With Cyprus having implemented as of late 2017 a unique EU VAT obligation to tax on commercial rents where tenants have a 90% VAT recovery right, subject to opt-out, this can be ideal timing to move on real estate transactions. Transitioning to an option to tax model, where taxpayers can select to subject immovable property transactions to VAT, would allow depending on specific circumstances of each taxable person to opt in VAT and utilise input VAT recovery. This can impact property sales and leasing, empowering suppliers with greater flexibility and stimulating activity in the real estate market, inclusive of key fields such as student accommodation and commercial and residential leases. A starting point could be a flexible option to tax for commercial rents (subject to similar 90% VAT recovery with current obligation) with the potential to apply on different rental transactions the use of reduced VAT rates, where permissible by the VAT Directive.

2. Targeted Taxation Option for Financial Services:

The option to tax may also be extended to selected financial services, creating an attractive environment for companies in fintech sectors hosted in Cyprus. By conducting a thorough examination of this potential, activities may be identified for such an opt to VAT inclusion restricting liquidity issues for businesses and providing a friendly VAT environment for operational structuring.

3. Revising the Policy behind the VAT Grouping Regime

Application: An immediate reform is necessary for the practical implementation of the VAT grouping regime, which already exists in our law. Presently, holding and financial businesses are excluded from joining VAT groups, which undermines our aspirations to be a headquartering destination. By allowing these entities, for instance, to participate under certain conditions in mitigating excessive governmental revenue leakages, VAT Grouping where transaction between related entities will be disregarded with a group entity acting for VAT reporting on behalf of the others will be a useful administrative facilitation business tool.

Such a measure would facilitate better cash flow management for businesses and promote a more cohesive and consistent corporate structure.

4. Implementing Postponed Accounting for Imports:

Cyprus is one of only four EU member states that do not offer a form of postponed accounting for VAT on imports. This is a mechanism where EU member states may provide that in designated circumstances, VAT on importation does not need to be paid to the customs officials at the time the goods are released from customs control but instead by the person for whom the goods are destined through periodic VAT return. Implementing postponed accounting would alleviate cash flow pressures on VAT-registered businesses importing and need to pay VAT real time rather at a later stage of VAT return reporting. This measure may enhance liquidity for businesses but also streamline administrative processes related to VAT compliance. This measure can be easily implemented and can be the first one to undergo implementation even within the year, contributing to Cyprus’ potential to become a hub for product processing.

5. Promoting Sustainability through Reduced VAT

Rates – Input VAT recovery: In alignment with global sustainability goals, we may consider applying a reduced VAT rate for photovoltaic panels and green equipment if permitted by the EU VAT Directive.

This rate flexibility already harmonised by other member states, can be a mitigation measure to upcoming green taxes. In parallel, with lifting restrictions on Input VAT for Green Vehicles, such a move would align with Cyprus’ commitment to reducing carbon emissions and promoting sustainable practices across various sectors. Taxable persons may be able to recover VAT without facing restrictions on input VAT for ‘green’ saloon cars.

51 - ACCOUNTANCY CYPRUS - MARCH 2025

TA X AT I O N

Tax Justice Revisited?

Beyond the recommended aspects of VAT reform, it is essential to consider the broader implications of tax justice for an effective tax dispute resolution mechanism to be in place. A transparent and fair tax system can attract foreign investment, and per the recent EY Attractiveness Survey, foster certainty duly considered by current and prospective investors.

There are relatively quick actions that can be instantly taken for tax justice, given that the Cyprus tax appeals system already possesses a designated Tax Tribunal. An immediate reform could be upscaling the independence of the Tribunal via the appointment of its own tax and VAT advisor and availing a tailored budget in carrying out its functions as a hierarchical tax review body. With the Tribunal procedural rules immediately updated to ensure strict deadline adherence on process requirements, evidence, and tax cases admissibility clarified quick fixes can be easily achieved.

As regards medium-term steps required to boost tax justice upgrade with simple tax appeal system developments, below could be some considerations: • Faster Appeal Decision-Making: With the purposeful recent introduction of the Tax Objections Panel, within the tax authorities, composed of a fresh team to evaluate disputed assessments, the crucial next item is to revisit the timespan of decision making. Open objections for long (even by statutory limit of 3 years in direct tax aspects) infringes tax system trust and certainty; thus, a much earlier decision - making can be exceptionally beneficial. Similarly, having the Tax Tribunal decide within a year from the appeal process, given the tax values at stake, a shorter decision would be a plus for our system. The example from Portugal Arbitration Court resolving 20% of Portuguese tax disputes in an average time of 4 - 5 months, can be a best practice for a Cyprus future appeal system consideration.

• Need for Transactional Substance review over administrative legality: While all available dispute resolution mechanisms (even the Administrative Court) avail the chance for an independent review on the tax – VAT substance of each dispute, legality points on comprehensive investigation and good administration might delay the process due to the need for re-examinations. It is of importance in tax disputes to have a conducted hearing (not occurring over an Admin Court Appeal)

so as transactions, contracts, figures, computations, and invoicing can undergo review by an independent body.

• Appeal Process Re-engineering – Tax Tribunal Upgrade: Such a substance review can be achieved through a codified process of taxpayer hearings with prescribed deadlines and filing requirements. An idea for fast implementation could be the reform of the Tax Tribunal process, within the parameters of admin and constitutional law, to have a procedure where a hearing occurs, the filings are digitalised, and the decision is issued earlier than a year. Even utilise post legislation amendment, the upgrade to host proceedings in English for a business-friendly appeal approach. Steps will be needed for independent advisory support to be provided to the Tax Tribunal for such a process re-engineering.

• Uniformity and Extension of Tax Aspects Subject to appeal: Developing the tax appeals mechanism would allow the inclusion of new taxes, such as customs, excise, green, digital, and tonnage taxes, into a new consistent system. Deadlines and areas of taxes that can be appealed may be revisited to ensure uniformity in the options available for challenging assessments.

• Time to Add VAT and Tax Justice in Reform The proposed addition of VAT reform and tax justice system upgrades represent a significant opportunity for Cyprus to holistically tax modernize. As we move forward, stakeholders need to engage in constructive dialogue and promote collaboration among policymakers to supplement currently discussed reform with VAT measures and justice process simplification and flexibility. Given the current final consultation stage of tax reform proposals, this is the proper timing to initiate a phase 2 to capture VAT and justice.

Conclusion In conclusion, VAT and tax justice, in addition to an immediate next round of reform, would have numerous benefits for the tax system’s holistic improvement. The simplicity of the above proposals’ implementation can constitute an incentive for instant consultation that we are convinced stakeholders are eager to contribute towards materialisation of a realistic Cyprus tax framework upscale.

52 - ACCOUNTANCY CYPRUS - MARCH 2025

BUSINESS & ECONOMY

Clients Come Calling: Attracting the Right People to Your Practice

I Antigoni Marinou

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

magine if clients just lined up outside your office, eager to work with you. What would that feel like? For accountants and other professionals running their practices, attracting clients can feel challenging, especially in a field as competitive as accounting. In today’s digital world, simply being great at what you do isn’t enough clients are drawn to accountants who not only deliver but also resonate with their needs and values. How do you build that appeal?

Let’s explore three essential strategies to attract clients who value what you offer. It’s not just about visibility; it’s about creating a brand that feels personal, memorable, and, most importantly, useful.

Story Time: Let’s start with Sofia, a young accountant, fresh off the excitement of opening her practice. But she soon faced a problem—no clients! Recognizing the need to stand out, Sofia started sharing short “tax tips for small businesses” on social media, focusing on practical advice for new entrepreneurs. Her posts were short, relevant, and engaging. As she built this content, her audience grew, and soon enough, potential clients started reaching out. Sofia’s success wasn’t accidental; she took deliberate steps to showcase her expertise while making her brand approachable.

Ready to attract your clients? Let’s break it down.

1. Know Your Niche Who are your ideal clients? This isn’t about excluding people; it’s about tailoring your services to stand out in a specific area. By homing in on a niche, you make your practice memorable to those who need precisely what you offer. For example, if you specialize in small

54 - ACCOUNTANCY CYPRUS - MARCH 2025

C L I E N T S C O M E C A L L I N G : AT T R A C T I N G T H E R I G H T P E O P L E T O Y O U R P R A C T I C E

business taxes or financial planning for freelancers, highlight that. Think about your strengths and the type of clients you enjoy working with.

Here’s a fun exercise: If you were to write a book for your dream clients, what would the title be? Maybe it’s “Small Business Taxes Made Easy” or “Financial Planning for the Freelancer’s Future.” This title can help clarify your unique offerings and give you direction as you market your services.

Example: Imagine you focus on sustainability in finance.

By emphasizing this, you’ll attract environmentally conscious clients or businesses in green industries.

Knowing your niche isn’t limiting; it positions you as the go-to expert in a field that excites you.

to your client interactions makes you memorable and builds rapport that goes beyond professionalism. Simple gestures, like sending a thank-you email, remembering an anniversary, or acknowledging milestones, show clients that they matter.

Quick Tip: After meeting a new client, jot down one personal detail they mentioned—maybe they’re a new parent or recently expanded their business. Follow up later, referencing that detail. It could be as simple as, “How’s that new office space working out?” or “How’s life with the new addition?” These touches demonstrate that you care beyond just the service.

2. Create Curiosity

Example: Sofia, our young accountant, personalized her services by sending her clients a “Tax Season Survival Kit” with essentials like coffee, stress balls, and a few chocolate bars. It was fun, practical, and memorable, demonstrating to clients that she understands their experience.

Curiosity is a powerful tool for attracting clients.

People are drawn to useful and surprising information, especially when it directly relates to their lives or businesses. By sharing insights that resonate with your target clients, you create curiosity around your services.

This doesn’t mean giving away all your knowledge but offering bite-sized pieces that are easy to digest and remember.

Fun Takeaway: Here’s a “Visibility Challenge” to get you noticed. This week, share one helpful tip on LinkedIn or another platform where your clients are likely to see it. It doesn’t have to be groundbreaking—maybe it’s something straightforward, like “Here’s how you can save for taxes each quarter.” The goal? Position yourself as someone who helps clients with practical advice they can use.

Exercise: Think of one common question clients ask you often, then turn that into a quick social media post, email newsletter, or LinkedIn article. A simple myth-busting post could be, “Did you know hiring a professional accountant can save you money in taxes?” Even a brief Q&A or a list of “5 Tax Mistakes New Business Owners Make” can spark interest and encourage potential clients to reach out.

Call to Action: Brainstorm Time: Write down one unique offer, service, or personal approach you’d like to introduce to attract clients. It could be a new consultation format, a creative way to onboard clients, or a themed social media series, such as “Monday Money Tips.” This could become your signature approach, setting you apart in your clients’ minds.

Example: Say you specialize in working with startups.

Sharing “5 Accounting Tips Every Startup Needs to Know” could be both relevant and appealing. When clients see that you understand their specific concerns, they’re more likely to trust you with their business.

3. Add a Personal Touch People remember people, not just services. This is especially true in client-based fields like accounting, where trust is paramount. Adding a personal touch

Conclusion: Building a client base isn’t just about making yourself available; it’s about making yourself memorable. By defining your niche, sparking curiosity, and adding those personal touches, you create an experience that clients genuinely value. Remember, attracting clients is an ongoing process—it’s about showing up consistently, engaging meaningfully, and building trust, one interaction at a time.

So, are you ready to welcome more clients to your practice? A few small changes might be all it takes to make clients come calling.

55 - ACCOUNTANCY CYPRUS - MARCH 2025

SUSTAINABILITY

Omnibus legislation: what does it mean for companies that fall under the CSRD? Baker Tilly

T

he Omnibus package was proposed by the European Commission with the aim of simplifying ESG rules and making EU businesses more competitive. The package, if adopted, will reduce administrative burdens for all companies by 25% and for SMEs by 35%.

What will the legislation do?

Omnibus impacts the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and the EU Taxonomy and Carbon Border Adjustment Mechanism Regulation (CBAM).

Regarding the CSRD, if Omnibus is adopted, it will simplify reporting and postponing the implementation of the Directive. Also, the scope of the directive will be reduced by 80%, as only companies with over 1,000 employees will be required to issue an ESG report. Smaller companies can choose to report under voluntary standards.

Maria Christofide

SENIOR MANAGER, ENVIRONMENTAL, SOCIAL, AND GOVERNANCE

What has been adopted so far, and what are the next steps?

The European Commission submitted the proposals to the European Council and Parliament on 25 February for their consideration and adoption.

Until now, the following have been approved: 1. The CSRD has been postponed by two years for large companies and listed SMES that fall under the second and third wave 2. The CSDDD has been postponed by one year For the rest of the proposed amendments, there will be separate consultations at the European Parliament and Council. The two legislative bodies of the EU have the right to conduct up to three readings of the legislation until it adopts or rejects it.

56 - ACCOUNTANCY CYPRUS - MARCH 2025

O M N I B U S L E G I S L AT I O N : W H AT D O E S I T M E A N F O R C O M P A N I E S T H AT FA L L U N D E R T H E C S R D ?

BELOW IS A COMPARISON BETWEEN THE EXISTING LEGISLATION AND THE PROPOSED AMENDMENT: Area SCOPE

Proposed amendment

Existing legislation Wave 1: Public Interest Entities with 500+ employees Wave 2: Large companies that meet two of the three criteria: • 250 employees • € 50 million net turnover • € 25 million balance sheet total

Wave 1: Unaffected for the first year and then applicable only for companies with over 1,000 employees Wave 2: Only applicable to companies with over 1,000 employees and: • € 50 million net turnover • € 25 million balance sheet total

Wave 3: SMEs listed in an EU-regulated market Wave 4: Non-EU groups with a net turnover of more than €150 million in the EU and a qualifying EU branch or subsidiary

Wave 3: Out of scope or postponed

TIMING

Wave 1: 2025 for FY 24 Wave 2: 2026 for FY 25 Wave 3: 2027 for FY 26 Wave 4: 2029 for FY 28

Wave 1: 2025 for FY 24 (unaffected) Wave 2: 2028 for FY 27 Wave 3: Out of scope Wave 4: 2029 for FY 28 (unaffected)

LEGAL REQUIREMENTS

Mandatory for all companies in scope

Mandatory for companies with over 1,000 employees

Wave 4: Thresholds raised to: • € 450 million turnover generated in the EU, and • large EU subsidiary; or • EU branch with over €50 million turnover

Voluntary standards for companies with fewer than 1,000 employees EUROPEAN SUSTAINABILITY REPORTING STANDARDS (ESRS)

1,500+ data points to be released, depending on the type of company and material topics

ASSURANCE

Limited assurance for first years of application

ESRS to be simplified – at least 25% fewer datapoints Deletion of sector-specific standards

Sector-specific standards to be released in 2026

Limited assurance only

Reasonable assurance standards to be adopted in 2028 REPORTING FORMAT

Digital tagging

Until a delegated regulation is adopted, it is not required

Should companies stop their ESG efforts?

ESG does not start nor stop at compliance with the CSRD. Solid ESG practices bring many positive returns to companies with tangible effects on their bottom line.

Companies with solid ESG practices have access to sustainability-linked loans with better interest rates, are better positioned to attract and retain talent, and have a more loyal customer base. In addition, current and prospective investors of a company are looking into ESG reports to inform their risk management practices, provide them insights into management stewardship of ESG risks and opportunities, and evaluate the long-term value of an organization.

57 - ACCOUNTANCY CYPRUS - MARCH 2025

58 - ACCOUNTANCY CYPRUS - MARCH 2025

VISION

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

11 Byron Avenue, 1096 Nicosia, Cyprus Tel.: +357 22870030 Fax: +357 22766360 Ε-mail: info@icpac.org.cy www.icpac.org.cy