On 5 October 2020 the Cypriot Tax Department ("TD") issued Application Guidance No 2 relating to VAT and Income Tax refunds.

Based on the provisions of the amending Assessment and Collection of Taxes Law (L.126(I)/2020) and amending VAT Law (L.122(I)/2020), no income tax or VAT will be refunded to taxpayers who fail to comply with their tax filing obligations.

In this respect the TD has clarified the following:

  • Upon filing of a VAT refund request (Form VAT 4B), the TD will examine whether the taxpayer has submitted the required tax returns as per the provisions of the assessment and collection of taxes law. Once it is determined that all required tax returns have been submitted then the officer of the TD will proceed with the examination of the refund request. In case the required tax returns have not been submitted then the vat refund request will not be further examined (i.e. no substantial examination), and the taxpayer will be notified accordingly via email. The refund request will be cancelled in the electronic records of the VAT service, and as such the taxpayer would have to submit a new refund request notifying the TD that is now in compliance with the submission of pending tax returns.
  • With regard to income tax refunds, the TD will examine that all required VAT returns have been submitted. In case it is determined that not all returns have been submitted, then the examination for a refund will not progress further and the taxpayer will be notified accordingly via an email.  Upon submission of the required tax returns the taxpayer should notify the TD accordingly.
  • The amount of the refund can be affected by other liabilities that the taxpayer may have towards the TD and/or other Government services.

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.