In brief

On 31 July 2020 the Cyprus Parliament voted to amend certain provisions relating to the Assessment and Collection of Taxes Law 4/78 aiming at improving tax compliance, strengthening tax collection and providing additional powers to the Tax Department. The amendments were gazetted on 20 August 2020 which is the date of their enactment.

A summary of the amendments is outlined below.

In detail

1. Submission of tax returns, due filing dates, due payment dates

(i) Obligation of individuals to submit a tax return

For tax years beginning 1 January 2020, all individuals who have gross income that falls under Article 5 of the Income Tax Law are obliged to file a tax return, irrespective of whether the individual received any notice for filing. Previously, the obligation to file a tax return was only for those earning annual gross income of more than ?19,500.

Note that gross income that falls under Article 5 of the Income Tax Law also includes, amongst others, dividends, interest and profits from share dealings (before any deductions, reliefs and credits) which may not be taxable under any tax or not taxable under income tax.

The Council of Ministers is empowered to issue decrees which will specify which categories of taxpayers with a total annual gross income below the taxable threshold of ?19,500 will be exempted from the obligation to submit a tax return, and which will provide extensions to the due filing date.

(ii) Due filing dates and due payment dates

For tax years beginning 1 January 2020, the due filing date for individuals, whether filing electronically or otherwise, and the due payment date is 31 July of the year following the tax year.

For individuals and companies who are obliged to file tax returns based on audited financial statements, the due filing date is 15 months from the relevant tax year end (e.g. for the tax year 2020, the due filing date is 31 March 2022) and the due payment date is 1 August of the year following the relevant tax year.

In addition, registered taxpayers should inform the Tax Department of any changes affecting their tax data within 60 days from the relevant change.

(iii) Powers of the Commissioner of Taxation

The Commissioner of Taxation has the power to request, via a notice, the submission of:

  1. a tax return and any additional information that may be required;
  2. a detailed statement of assets and liabilities (in and out of Cyprus) of himself/herself, his/her spouse and of any dependants, covering a period specified in the notice. The period should not exceed 6 years, unless a longer period is justified according to the provisions of Article 23(2).

Note that it is the responsibility of taxpayers to keep all necessary documents that support any amounts or information included in the tax return for a period of 6 years from the end of the tax year which they relate to.

2. Cyprus incorporated non-Cyprus tax resident companies

Cyprus incorporated but non-Cyprus tax resident companies must inform the Commissioner of Taxation of the state of their business activities within 60 days of incorporation through a specific form.

3. Submission of revised tax returns

Taxpayers who have filed their tax returns can file revised tax returns only within 3 years from the due filing date of the tax return for that tax year and under certain conditions. These conditions include:

  1. claim of relief, deduction or tax credit; or
  2. correction of errors; or
  3. for purposes of consistency with the provisions of the tax legislation.

Irrespective of the above, a revised tax return cannot be filed during a tax examination or a tax audit. A taxpayer filing a revised tax return must settle any additional tax liabilities within 30 days from the date of the revised filing.

Revised tax returns filed beyond the due filing date of 3 years will be accepted if they are filed within 6 months from the date of enactment of the current legislation (i.e. filed by 20 February 2021).

4. Employer's return

The new due filing date of the Employer's return (form TD7), which has to be submitted electronically, is 31 May of the year following the tax year (instead of 31 July of the year following the tax year, which was the due filing date for tax years up to and including 2019).

There is also a new provision that clarifies that emoluments include the deemed benefit from loans to directors/shareholders and their related individuals according to Articles 5(1)(g) and 5(2)(g) of the Income Tax Law.

5. Tax Inspections

For the purposes of exercising any powers, the Commissioner of Taxation may now enter and inspect business premises, or other premises where business activity is carried out, at any reasonable time without prior notice.

6. Compulsory acceptance of credit cards as a payment method and public lottery program

Certain payment beneficiaries (which are to be determined based on their Code of Economic Activity) must compulsorily accept credit cards as a method of payment and should proceed to install the appropriate set-up with licenced credit card payment providers.

The Council of Ministers will issue a decree which will specify details of how this provision will be applied. Note that there is a ?2,000 fine for non-compliance.

Transactions undertaken using credit cards or other electronic means of payment will participate in a public lottery and the winners will be rewarded with cash or in-kind prizes.

7. Tax refunds

No tax refund will be paid until there is compliance with the filing of VAT returns for periods up to the end of the tax year during which the examination of the tax year of the refund was initiated.

The takeaway

The law amendment was passed following extensive public consultation and provides for additional obligations for taxpayers and income earners and also provides for additional powers of inspection for the Commissioner of Taxation. It is noted that the disputed amending provisions regarding directors' personal liability were dropped but a future revisit is expected.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.