Eurofast Accounting Team in Cyprus is delighted to bring you the latest insights from the Cyprus Tax Authorities. On the 20th of October 2023, the Tax Department issued Circular 9/2023, a significant development aimed at providing clarity on the revised income tax declarations, in accordance with Article 5B of the Certification and Collection Law and its amendments, which took effect on the 20th of August 2023.
This circular extends its guidance to various aspects, including the revised income tax declaration forms for both individuals and legal entities, addressing late submissions of these revised declarations, and the intriguing question of when these declarations can be submitted after a tax audit has been set in motion.
The Revised Income Tax Declaration Forms for Individuals and Legal Entities
During the transitional phase until the full implementation of the new tax portal 'TaxForAll,' the Tax Department will continue to accept revised declarations through two distinct forms. Individual taxpayers should use form TF001AN when submitting their revised income tax declarations. However, legal entities must submit form TF004AN alongside their annual financial statements.
It is important to note that if there are outstanding tax payments for the tax year in question, the submission of revised forms does not defer the collection of these taxes.
In other words, any outstanding tax obligations must still be settled promptly, regardless of the submission of revised forms.
Late Submissions of the Revised Declarations
According to the provisions of Article 5B (1), if revised declarations are submitted after the expiration of a three-year period following the initial deadline, they will not be accepted. However, in accordance with the regulations stated in Article 20(1) and further elaborated upon in Circular 2010/3 dated 22nd March 2023, there are exceptional circumstances in which late submissions may be considered. These exceptions come into play if the revised declarations are submitted within specific deadlines (specified below) and if they meet either of the following criteria: (i) they are submitted prior to the issuance of the first taxation or (ii) they are submitted in response to a timely or untimely objection, accompanied by all the necessary documentation supporting the changes, as described in the cases outlined below.
The first case pertains to the submission of financial reports and statements in a regulatory context. It involves two categories of individuals: legally obligated to prepare and submit annual reports and audited financial statements as specified in Article 30(1), and individuals who, despite they are not obliged by law to prepare these reports, voluntarily engage in the preparation of annual reports and audited financial statements. Such submissions can relate only to changes in the determination of the taxable income or profit subjected to deemed dividend distribution and not resulting from changes in the profit and loss statement. Examples of such changes include, but are not limited to:
- Failing to claim capital allowances specified under Article 10 of the Income Tax Law of 2002 or foreign tax credits.
- Incorrectly completing Part 5.1 of the TF 004 form, which may involve not deducting retained earnings from fair value revaluations or not deducting profits that were distributed to shareholders and fall under deemed dividend distribution.
- Instances where income exemptions were originally included in the initial declaration but were inadvertently omitted during the tax calculation process. This may pertain to profits from the sale of securities, foreign exchange gains, and similar scenarios.
- Late submissions of revised declarations may be considered under exceptional circumstances if they are submitted within the following time limits:
- Within six (6) years from the original deadline if the changes pertain to tax relief related to losses, as outlined in Article 13(3) of the Law.
- Within six (6) years from the initial deadline if the changes involve tax refunds, as specified in Article 35(3) of the Law.
- Within the deadlines established by Article 35(9) and 35(10) of the Income Tax Law, as well as by Articles 36(1), 36(2), and 36(3) of the Certification and Collection Law, when the revisions are associated with tax allowance claims related to foreign tax credit.
Submissions of the Revised Declarations after the Tax Audit Initiated
It is highlighted that regardless of whether the three-year period following the deadline has passed, submitting a revised declaration after the expiration date is not permitted. This restriction is set by written notification, which is communicated to the taxpayer in accordance with the provisions outlined in Paragraph 1(a) of the Implementation Directive 03/2020, issued on 7th October 2020, and in Article 5B (4) of the Certification and Collection Law.
Furthermore, submitting a request for the issuance of a tax clearance certificate triggers the initiation of a tax audit.
At Eurofast Cyprus, we stay ahead of the game, tracking the latest developments in mandatory tax submissions. Should you need further guidance, do not hesitate to reach out to us at email@example.com
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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.