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Cyprus Tax Alert: Arrangement for Payment of Delayed Tax Liabilities

Published on: 20/02/2017

Cyprus tax payers (individuals and companies) do now have the possibility of paying their delayed tax liabilities by long-term instalments.

The new Law will refer to the possibility for applying taxpayers to arrange with the Tax Department the payment of taxes due (including penalties and interest) by instalments.

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The tax arrears must be settled to equal instalments, as following:

  • 54 instalments for tax arrears not exceeding EUR 100.000 with a minimum instalment amount of EUR 50,
  • 60 instalments for tax arrears exceeding EUR 100.000 with a minimum instalment amount of EUR 1.852.

The taxpayer shall be exempted from the payment of penalties, interest and charges proportionately with the number of instalments agreed with the Tax Department.  Further, during the period of the Arrangement, no additional penalties, interest or charges shall accrue.

Taxes eligible for instalment arrangements:

The Arrangement as introduced applies to tax arrears including penalties, interest and charges, arising under the:

  1. Cyprus Income Tax Laws
  2. Special Contribution for the Defence Laws
  3. Capital Gains Tax Laws
  4. Immovable Property Tax Laws (up to the date they were abolished)
  5. Inheritance Tax Laws (up to the date they were abolished)
  6. Special Contribution Laws for employees of both the private and the public sector (up to the date they were abolished)
  7. Stamp Duty Laws
  8. Value Added Tax (VAT) Laws

To which periods does the Arrangement apply?

The Arrangement will apply to tax arrears arising in designated periods that precede the entry into force of the Law which will be set by the Tax Commissioner through a notification and will be published in the Official Gazette.

The Tax Commissioner has the discretion to allow the application of the Arrangement to tax arrears arising after the entry into force of the law but are relevant to the designated periods to which the Scheme applies.

The relevant provisions shall not apply with respect to undeclared funds, deposits or transfers made for the benefit of the same individuals and/or applicants seeking to benefit from the arrangement, irrespective of whether these funds have been located in Cyprus or abroad.

What is the procedure?

An application should be submitted within a period of 3 months from the entry into force of the Law. The applicant must submit all tax returns due for the periods falling under the Scheme.

The application is assessed by the Tax Commissioner within 15 days from the receipt of the application and the taxpayer is informed of the Tax Commissioner’s decision. If the Tax Commissioner does not respond within the 15-day period, the application is considered admissible and the applicant’s suggestions are adopted.

The applicant should submit an acceptance of the Arrangement within a period of 15 days.

The applicant taxpayer has the right to object to a Tax Commissioner’s decision to decline the application. The objection must be filed within a period of 15 days from the date the Tax Commissioner’s decision is notified to the applicant. The objection must be assessed within a further period of 30 days.

What else should be taken into account?

The Arrangement is automatically cancelled if the taxpayer delays the payment of:

  1. any instalment for a period of three months, or
  2. three cumulative instalments, or
  3. further, the Arrangement will also be cancelled upon failing to submit any tax return due during the period of the Scheme and settle all current taxes arising.

When will the new provisions enter into force?

The date of entry into force of the new provisions shall be specified in a notification to be issued by the Tax Commissioner which will be published in the Official Gazette. Though such notification has not yet been issued, it is estimated that the Tax Commissioner shall set the date of entry into force during mid-April 2017.

Source: Tax Department and KPMG

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