Gold Magazine April - May 2013, Issue 25 | Seite 77

to enter into agreements with the IRS directly.
This will resolve important problems of FATCA implementation, including data protection
conflicts. An IGA will also address another important issue for Cypriot financial institutions,
given their presence in non-EU countries –
most notably Russia. Under the proposed FATCA regulations, a financial group that signs a
FATCA agreement directly with the IRS will
still be considered non-compliant if it has
subsidiaries in jurisdictions where FATCA
cannot be implemented. However, this
issue does not arise if the financial institution is located in a jurisdiction which has
entered into an IGA, even if some affiliates of
the institution are located in countries that are
not FATCA-compliant. It is understood that,
at present, Russian law does not allow the adoption of FATCA by Russian domestic financial
institutions and that the Russian government
has significant reservations about signing an
IGA. Should Russia choose not to sign, the
operations of Cyprus financial institutions with
Russian affiliation will not be penalized, provided that Cyprus has entered into an IGA.
Given that Cyprus and the US already have
a bilateral tax treaty that provides for the exchange of information, Cyprus will enter into
a FATCA IGA Model 1, the same as the one
signed by the UK, (the “reciprocal version”)
whereby Cypriot FFIs will report details on
identified US accounts to the Cypriot Tax
Authorities rather than to the IRS and the US
and Cyprus will exchange information about
each other’s taxpayers. The Ministry of Finance
wants to conclude the IGA and then draft
legislation to implement FATCA in Cyprus.
Following a meeting between the relevant tax
official dealing with FATCA IGAs in the US
Treasury and her Cypriot counterpart, it has
emerged that the US authorities do not wish to
amend the FATCA IGA Model 1 other than
to include country-specific financial entities
and products that should be exempted from
FATCA obligations (in Annex II of the IGA).
Also, it is understood that discussions for signing the IGA will be held directly between the
US Treasury and the Cypriot Tax Authorities
rather than involving other official state channels, in order to expedite matters.
The Greek authorities have also decided to
enter into an IGA (the “reciprocal” version) and
have already had meetings with US Treasury
representatives to advance this. This is an important development for Cypriot banks which
have a significant presence in Greece, while
Greek banks have a number of subsidiaries in
Cyprus. Having both Cyprus and Greece enter
into an IGA with the US, and also the fact

An agreement at sovereign
level means that individual
Cypriot institutions will not
have to enter into agreements
with the IRS directly
that the IGAs will be identical, makes
compliance much simpler for cross-border
Cypriot and Greek banking groups.
Cypriot banks have mobilized their project
teams, and conducted impact assessments in
preparation for the introduction of FATCA.
The Association of Cyprus Banks has set up
ad-hoc committe