In brief
On 29 April 2021 an amendment (the "Law Amendment'') to certain provisions relating to the Procedure for Settlement of Overdue Taxes Law 4(I)/2017 (the "Law") was published in the Government Gazette. The Law Amendment extends the scope of application of the Law to tax years 2016-2019, but only for certain businesses affected by the COVID-19 pandemic.
In detail
Introduction
Up to the date of the Law Amendment, eligible taxpayers-debtors were able to settle their overdue tax liabilities for tax years up to and including 2015 through the entering into a payment plan. This enabled taxpayers-debtors to reduce the amount of interest and penalties relating to the said overdue tax liabilities. Even though certain provisions of the Law as it existed prior to the Law Amendment have since expired, taxpayers-debtors can still apply for a payment plan with respect to tax years up to and including 2015 subject to certain conditions.
Extension of Scope
The Law Amendment extends the scope of the Law to tax years 2016-2019 provided that the taxpayer-debtor is a person falling in one of the following categories:
a) A business or a self-employed person subject to VAT (i.e. registered, or should have been registered, mandatorily, or registered voluntarily) and presents at least a 25% reduction in its 2020 revenue as compared to its 2019 revenue (as evidenced by the submitted VAT returns). Such reduction of revenue must be due to the restrictive measures taken to address the COVID-19 pandemic; or
b) A business or a self employed person exempt from the obligation to register for VAT purposes, and not registered voluntarily either, and presents at least a 25% reduction in its 2020 revenue as opposed to its 2019 revenue (possibly as evidenced by an auditor declaration). Such reduction of revenue must be due to the restrictive measures taken to address the COVID-19 pandemic.
Out of this category, actually only the businesses or self employed persons specifically referenced by the Law Amendment may benefit, i.e. only Approved Private Institutes, Conservatories/Music Schools, and Dance Schools; these referenced businesses or self employed persons are those eligible for the specific subsidy scheme for which they could apply through form TD9001.
Taxpayers-debtors falling within one of the above two categories can proceed with entering into a payment plan for settlement of the relevant tax liabilities of tax years 2016-2019 within a 12 month period following the entering into force of the Law Amendment (i.e. 29 April 2021, which is the date of publication in the Government Gazette). For the avoidance of doubt, the term relevant tax liabilities for the purposes of this paragraph includes liabilities of the tax years 2016-2019 (e.g. provisional taxes, self-assessments, assessments issued by the Cyprus tax authorities) that were already due on 29 April 2021 or will arise up to 29 April 2022.
Tax returns of the above taxpayers-debtors up to and including tax year 2019 must be submitted no later than 31 December 2021 (and in any case prior to the application for a payment plan).
The Law Amendment clarifies that the ability for taxpayers-debtors to enter into a payment plan within a six month period from the date when a liability is notified to the relevant taxpayers-debtors is limited to liabilities of tax years up to and including 2015 (thus does not extend to tax years 2016-2019).
Note
The wording of the Law Amendment leaves it uncertain as to whether the potential benefits described above, which are available for tax years 2016-2019 under the COVID-19 conditions described above, are actually available for tax years up to and including 2015 as well, under the same COVID-19 conditions. It remains to be seen how the practice develops on this point.
Extension of Grace Period
Up until the Law Amendment, a grace period was applicable for the period between 1 March 2020 and 30 June 2020 (both included) during which unpaid instalments were not taken into account when calculating the 5 instalment threshold required for the disapplication of the payment plan. The Law Amendment extends the end of the grace period to 31 December 2020. The Grace Period applies only to payment plans regarding tax years up to and including 2015.
The takeaway
The Law Amendment provides an additional measure taken with the aim of assisting businesses and self-employed persons affected by the COVID-19 pandemic.
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.
