European Union: Cyprus Chapter Of The Legal 500 Country Comparative Guide To Tax

Last Updated: 11 October 2018
Article by Elias Neocleous
Most Read Contributor in Cyprus, September 2018

1. How often is tax law amended and what are the processes for such amendments?

Apart from implementation of EU directives, amendments to the Cyprus tax laws are generally infrequent. This means that taxpayers can undertake transactions with a high degree of assurance that the tax environment they anticipated at the time will continue to apply. There is generally advance consultation with stakeholders over a period of several months before legislation is enacted.

2. What are the principal procedural obligations of a taxpayer, that is, the maintenance of records over what period and how regularly must it file a return or accounts?

For income tax purposes, books and records and supporting documentation must be retained for six years after the end of the tax year to which they relate.

Taxpayers are required to submit annual returns of income for income tax purposes, based on audited financial statements complying with IFRS if the taxpayer is a company, or an individual with income above a certain threshold (currently EUR70,000). There is a self-assessment system for income tax, under which taxpayers must submit an estimated tax return part-way through the tax year accompanied by payment of half the estimated liability, and the balance of the estimated liability by the end of the tax year. The final tax return is submitted after the end of the tax year, together with payment of any final balance. See the answer to question 5 for details of due dates.

Employers are also required to submit returns of employees' pay and tax deducted under PAYE.

Special Defence Contribution, commonly known as SDC tax, is payable on rents, interest and dividends. Subject to certain exemptions, companies making such payments must deduct SDC tax at source and account for it to the Tax Department. Taxpayers receiving rents, interest or dividends from which SDC tax has not been deducted must submit semi-annual returns together with payment of the amount due.

All returns and payments in respect of income tax, SDC tax and PAYE must be made online. Taxpayers must report any capital gains as they arise. However, as capital gains tax only applies to a very limited range of assets this is not an issue that affects most taxpayers.

There is a separate tax system for qualifying businesses engaged in international shipping, which is outlined in the answer to question 15.

3. Who are the key regulatory authorities? How easy is it to deal with them and how long does it take to resolve standard issues?

The Tax Department within the Ministry of Finance was formed in 2014 by combining the Inland Revenue Department, which administers direct taxation, and the VAT Service.

As with many government departments in Cyprus, routine procedures, such as final agreement of tax returns and issuing of assessments, can take time. However, the department responds efficiently and constructively to inquiries. Advance tax rulings are available and taxpayers may request an expedited ruling, guaranteeing a response within 21 working days provided all the necessary information is supplied, on payment of the prescribed fee (currently EUR2,000).

4. Are tax disputes capable of adjudication by a court, tribunal or body independent of the tax authority, and how long should a taxpayer expect such proceedings to take?

Decisions of the tax authorities can may be can be challenged by submitting an application to the Tax Tribunal, which is an independent body, or to the Administrative Court. A decision of the Administrative Court may be the subject of an appeal to the Supreme Court. The Tax Tribunal is required to reach a conclusion within a year of receiving an application. There are no set time limits for the courts.

5. Are there set dates for payment of tax, provisionally or in arrears, and what happens with amounts of tax in dispute with the regulatory authority?

The tax year in Cyprus for individuals and companies is the calendar year.

Both individuals and companies must submit a provisional estimate of profits and tax payable for the year by 31 July of the tax year, together with a remittance of half the estimated tax payable. The estimates may be revised at any time before 31 December of the tax year, and the balance of the estimated tax payable must be paid by then. A penalty may be imposed in the event of an excessive difference between the first and the final estimate. Individuals who are exempt from the requirement to provide audited financial statements are required to submit their final tax return for the year, with a remittance for any tax payable, by 30 September following the end of the tax year. Tax returns must be submitted electronically via the official TAXISNET system.

Employers must submit their return of payments to employees and tax deducted for each tax year no later than 31 July of the following year.

Companies and individuals who are obliged to provide audited financial statements are required to pay the balance of tax due by 1 August following the end of the tax year. The final tax return must be submitted before 31 March of the following year (15 months after the end of the year in question).

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Originally published in Practical Law

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.

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