Cyprus - co-operation with other Tax Authorities
This article has been written in co-operation with the ITAS team.
Co-operation between Cyprus Tax Department (CTD) and other Tax Authorities
As referred to in previous articles, in July 2014 we established a new Tax Department which brought together the former Direct Tax and VAT Departments.
The establishment of the new Department necessitated co-operation with other countries to assist in the application of best practice.
We received assistance from the UK’s Her Majesty’s Revenue & Customs (HMRC) for the update of four manuals, which had been prepared in co-operation with HMRC about 10 years previously. These manuals relate to the compliance of:
· Cash traders
· Electronic commerce businesses
· Transfer pricing matters
Further, colleagues from HMRC visited Cyprus to train tax auditors on areas covered by the above manuals and other matters of compliance. Training took place in the years 2017-2019. Except for the training in 2019, which was funded by the British High Commission in Cyprus, the rest of the project was supported by the EU and specifically the Fiscalis Programme.
Co-operation with HMRC was very successful, and we are under negotiations for the commencement of a new project for the preparation of a Tax Audit Procedural Manual that is expected to be co-funded by the Ministry of Finance in Cyprus and the British High Commission in Nicosia.
We also co-operated with the Spanish Tax Authorities under the Fiscalis Programme for the training of a large number of tax auditors on IFRS 15 (Revenue from Contracts with Customers) and its tax implications.
Furthermore, in 2016, we co-operated with the EU Commission, for the design of the training programme for the employees of the Department, on the Code Ethics and Conduct of the Tax Department.
CTD initiated a project for the introduction of an Integrated Tax Administration System (ITAS), to contribute to the re-organization reforms and the CTD strategic plan to optimize operations by replacing outdated and fragmented legacy systems in line with the reorganization process.
In 2016, personnel of CTD visited the Finnish Tax Administration, through the Fiscalis programme, to obtain insight and share the experiences of another Member State (MS) that had initiated a similar project for the introduction and implementation of a new tax COTS (commercial off the shelf) IT system.
The main objectives of this working visit were:
· To increase the awareness and the ability of the CTD to deal with and take decisions on issues that need to be considered in a project of introducing and implementation of a new tax COTS IT system.
· To be informed and advised on:
· The procedures followed to identify the functional and the non-functional requirements;
· Problems identified, encountered during the pre-procurement and the procurement process;
· The selection criteria used for the evaluation of the tenders;
· The customization of the COTS solution;
· The implementation process and data migration from legacy systems to the new system;
· Lessons learned by the tax administration during the whole project.
In 2018, CTD participated in another Fiscalis working visit to Bosnia and Herzegovina in order to exchange good practices with another tax authority that had successfully implemented an IT tax system of similar scale with regard to project organization and management with a view to in mitigating risks and benefiting the quality of the project.
The main objectives of this visit were:
· To be informed and advised on the project planning (organisation, planning procedures and management);
· To be informed and advised on the customization of the COTS solution;
· To be informed and advised on the implementation process and data migration from legacy systems to the new system;
· To be informed and advised on the lessons learned by the tax administration during the whole project;
· To be informed and advised on the difficulties encountered during the implementation of the system;
· To review (production or test environment) the customized COTS new system and discuss the benefits identified compared with the legacy systems.
Currently, CTD receives technical assistance from the Finnish Tax Administration, through the Structural Reform Support Service, in order to strengthen the institutional capacity of the Cyprus Tax Department (CTD) to enable and facilitate the management of the changes resulting from the implementation of the new Integrated Tax Administration System (ITAS) or from any institutional changes that take place in the organisation.
The subject of this project includes:
· Assistance in establishing a change management team;
· Assistance in updating the CTD’s change management strategy and development of a communication action plan;
· Training on change management of the management and change management teams of CTD;
· Coaching the team of CTD involved in the change management of the Integrated Tax Administration System (ITAS) project;
· Assistance in planning communication of the changes related to ITAS implementation to the staff of CTD and taxpayers.
Establishing change management capacity of CTD is critical to ensure that the implementation of the new ITAS and all subsequent changes impacting on the staff will be understood, accepted and supported by all parties involved in the process.