A law was recently passed by parliament on 17 January 2017, giving the possibility for taxpayers to apply for an Arrangement with the Tax Department for the payment by installments of taxes due (including penalties and interest).

The Arrangement will include the settlement of the arrears in equal installments, the number of which shall not exceed:

• Fifty Four (54) installments for tax arrears not exceeding EUR100,000 with a minimum installment amount of EUR 50;
• Sixty (60) installments for tax arrears exceeding EUR100,000 with a minimum installment amount of EUR 1,852.

Provided that the Arrangement is approved by the Tax Department, the taxpayer shall be exempted from the payment of penalties, interest and charges proportionately with the number of installments agreed with the Tax Department.  Further, during the period of the Arrangement, no additional penalties, interest or charges shall accrue.

The Arrangement will apply to tax arrears including penalties, interest and charges that arose under the following Laws:

• The Cyprus Income Tax
• The Special Contribution for the Defence
• The Capital Gains Tax
• The Immovable Property Tax(up to the date they were abolished)
• The Inheritance Tax (up to the date they were abolished)
• The Special Contribution for employees of both the private and the public sector (up to the date they were abolished)
• The Stamp Duty
• The Value Added Tax (VAT)

The Arrangement will apply to tax arrears for specific periods that arose prior to the entry into force of the relevant Law; these will be set by the Tax Commissioner through a notification and will be published in the Official Gazette. An additional newsletter concerning more information/details about the Law will be sent by our office, once a notification is published in the Official Gazette.

The Tax Commissioner will have the discretion to approve 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 will 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.

The procedure for filing an application is the following:

• Provided that all tax returns due are submitted (for the periods that fall under the scheme), the applicant may submit an application within a period of 3 months from the entry into force of the Law
• The Commissioner shall revert to the applicant 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.

It should be noted that in case taxpayer delays the payment for certain time, the Arrangement is automatically cancelled. In addition, 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.

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, and the same is expected to take place during mid-April 2017.

Savva & Associates offers advice and guidance on international tax planning and tax management, as well as Cyprus tax and VAT matters.