A. INTRODUCTION
In February 2017, the House of Representatives of Cyprus passed a law on the procedure for settling tax arrears, which covers the following taxes:
(a) Income tax
(b) Special contribution for the defense
(c) Immovable property tax
(d) Capital gains tax
(e) Inheritance tax
(f) Special contribution for employed, retired and selfemployed in the private sector
(g) Special contribution for refugees
(h) Stamp duties
Based on the provisions of the legislation the taxpayer shall be exempted from paying penalties, interest, charges on specified outstanding tax amounts and such exemption shall apply proportionately depending on the number of installments that the taxpayer would agree with the Tax Department that will pay in settlement of all outstanding taxes (the “Arrangement”). Also during the Arrangement period no additional penalties, interests or charges will accrue.
An application should be submitted within a periodof 3 months from the entry into force of the Law.
In terms of the procedure it should be noted as follows:
1.) The applications should be done on-line through the Ariadni Tax portal.
2.) 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.
3.) If the Tax Commissioner does not respond within the 15-day period, the application is considered admissible and the applicant’s suggestions are adopted.
4.) The applicant should submit an acceptance of the Arrangement within a period of 15 days.
5.) 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.
Provided that the delays of fails to pay a certain number of installments then the Arrangement is cancelled and the taxpayer will need to pay all taxes, interest, penalties and charges.
The date of entry into force of the new provisions would have been specified in a notification that would have been issued by the Tax Commissioner which would have been published in the Official Gazette (the “Notification”).
Such Notification was issued on 23 June 2017.
B. SUBMISSION OF APPLICATION FOR THE ARRANGEMENT
The application for entering into the Arrangement must be submitted within three months from the effective date of the Notification. The effective date of the Notification is 3 July 2017 and therefore the deadline of the submission of the applications is 2 October 2017.
The submission should be done through the government internet portal Ariadni and both the Tax Commissioner's decision and the debtor's statement of acceptance are made through the website application.
On exceptional cases whereby there are technical issues in submitting the application on-line then such application can be submitted in the District Tax Offices.
C. TAX LIABILITIES WHICH ARE COVERED BY THE ARRANGEMENT
This regulation relates to the following tax liabilities:
(a) The total amount of outstanding taxes up to and including 31 December 2015, which at the date of the application have been assessed by the Tax Department of Taxation and an assessment has been sent to the taxpayer in relation to this, irrespective whether there is already in place a lawful agreement between the Tax Office and the taxpayer for the repayment of such taxes by installment or through a court order.
(b) Amounts which became payable through the submission of a provisional tax form which concerns the tax for the years up to 31December 2015 and whereby the taxpayer did not pay such tax, and provided however that the taxpayer has submitted the annual tax return by 3 July 2017 in relation to these taxes.
(c) Tax liabilities which are assessed by the Tax Commissioner after the effective date of the Notification and related to tax years up to 31 December 2015. In such cases, the deadline for the application for the Arrangement shall be made within three months from the date on which the tax becomes payable, on the basis of the tax assessment which has been issued.
D. NUMBER OF MONTHLY INSTALLMENTS WHICH SETS THE PERCENTAGE OF EXEMPTION
Overdue taxes can be included in the Arrangement and be subject to the exemption of a percentage of penalties and interest due to non-payment of taxes due as follows:
Monthly installments(%) of exemption
(a) one off payment 95%.
(b) from 2 to 8 90%.
(c) from 9 to 15 85%
(d) from 16 to 21 80%
(e) from 22 to 28 75%.
(f) from 29 to 35 70%
(g) from 36 to 42 65%
(h) from 43 to 49 60%
(i) from 50 to 56 55%
(j) from 57 to 60 50%
Payment of the agreed installments is made to the banks with the usage of a unique code or in certain cases to the Tax Office.
E. VARIOUS OTHER PROVISIONS
(a) Tax liabilities under the Arrangement will not incur additional penalties or interest for late payment, which is otherwise provided under the relevant legislation.
(b) The procedure to be followed is set in the Introduction of this Newsletter.
(c) The regulation is terminated in specific cases of non-compliance by the taxpayer with his obligations as set on the Notification these being:
i.) The non-timely submission of the tax returns
ii.) The non-settlement of the new tax obligations which arise after 31 December 2015
iii.) The delay in payment of the cumulative of 3 installments
iv.) The delay in payment of a single installment for more than 3 months including the month that the installment should have been paid
(d) Where criminal proceedings against a taxpayer are pending before the court and the taxpayer applies for a regulation which is approved, the proceedings are suspended.
F. ENTRY INTO FORCE
The new provisions are effective as from 3 July 2017.
