On 20 August 2020, a law amending the Assessment and Collection of Taxes Law was published in the Gazette. The amending law introduces provisions which among others aim to improve tax compliance and offer additional powers to the Commissioner of Taxation with regards to tax collection.
Following its publication, on 28 August, the Tax Department issued a clarifying Circular (Circular 46) with regards to the practical application of the law. Nevertheless, certain details are still pending and will be communicated to taxpayers in the form of Decrees.
Below we provide a summary of the main provisions of the amending law:
Obligation to submit personal income tax returns from 2020 onwards
From tax year 2020 onwards, all* individuals with gross income that falls under the provisions of Article 5 of the Income Tax Law are obliged to submit a personal income tax return. Such income includes, amongst others, dividends and interest.
Up until tax year 2019, individuals with gross income not exceeding €19.500 (tax-free threshold) were not obliged to submit a personal income tax return, unless they received a notice/request for submission.
*From 2020, individuals with gross income not exceeding €19.500 will need to meet certain conditions in order to be exempt from the obligation to submit a personal income tax return. The Council of Ministers will communicate such conditions through a Decree.
Deadlines for the submission of income tax returns and the payment of income tax for tax years 2020 onwards
The deadlines for the submission of income tax returns and the payment of income tax for tax years 2020 onwards are shown in the table below:
|Taxpayer||Tax return||Submission deadline for tax return||Payment of tax|
|Individuals who don’t have an obligation to prepare audited FS||TD1||31 July of the year following the relevant tax year||31 July of the year following the relevant tax year|
|Companies and individuals with an obligation to prepare audited FS||TD1 (self-employed)|
|15 months from the end of the relevant tax year||1 August of the year following the relevant tax year|
Submission of revised income tax returns
Taxpayers can submit a revised tax return for tax years 2020 onwards, within 3 years from the submission deadline of the relevant tax return and only if the revision arises:
- as a result of claiming a relief, deduction or tax credit; or
- as a result of correcting an error; or
- for the purposes of being consistent with the provisions of the tax laws.
Irrespective of the above, a revised tax return cannot be submitted during a tax examination or a tax audit of the relevant tax return.
A taxpayer must settle any tax liability arising from the revision, within 30 days from the submission of the revised return.
For tax years up to and including 2019, revised tax returns for which the submission deadline has passed, will be accepted by the Tax Department if they are submitted within 6 months from the date of entry into force of the amending law, i.e. up to 19 February 2021.
Change of taxpayer’s data
Taxpayers must notify the Tax Department of any changes to the information they have submitted upon tax registration, within 60 days from the date of change.
The deadline for the electronic submission of the Employer’s return (TD7) is amended from the 31st of July of the year following the relevant tax year, to the 31st of May of the year following the relevant tax year.
In addition, it is clarified that the deemed benefit arising on a financing arrangement provided by a company to an individual shareholder/director and his related individuals is considered as “remuneration” and should be included in the Employer’s return.
Obligations of Cyprus incorporated but non-Cyprus tax resident companies
A Cyprus incorporated company that is not a tax resident of Cyprus, must inform the Tax Department of its intended activities in Cyprus within 60 days from its incorporation date.
In addition, such companies have an obligation to submit an annual tax return, 15 months following the end of the tax year.
Powers of the Commissioner of Taxation
The Commissioner of Taxation has the power to request the submission of:
- tax returns and any supporting documentation as well as
- a detailed statement of assets and liabilities (capital statement) of a taxpayer, his/her spouse and of any dependants, covering a period not exceeding 6 years. The period under review can be extended to 12 years in case of fraud or wilful default.
The Commissioner of Taxation has the authority to enter and inspect business premises at a reasonable time, without providing a notice to the relevant person.
Accepting payments through credit cards
Certain businesses that will be determined in a Decree to be issued by the Council of Ministers, will not be allowed to refuse payment by credit card. In order to meet this requirement, they would need to have the appropriate equipment, made available from licenced credit card payment providers. From 21 February 2021, in case of non-compliance, an administrative fine of up to €2.000 will be imposed.
No refund in case of non-compliance with VAT obligations
The refund of any tax will be suspended in cases where the taxpayer has not submitted any VAT return due by the end of the tax year in which the examination for the refund began, until the taxpayer complies with this obligation.