We would like to bring to your attention that the deadline for payment of the 2021 annual company levy of €350, which was due on 30th June 2021, has been extended to 31st December 2021.
The Cyprus House of Representatives has voted and approved an amendment to the Cyprus Company Law, Cap.113, which was published in the Official Gazette on 7th July 2021, and applies retrospectively since 30th June 2021.
According to the amendment, the deadline for payment of the annual company levy for the year 2021 is extended up to and including 31st December 2021, without the imposition of any penalties.
Moreover, the amended Law grants power to the Minister of Energy, Commerce and Industry to further extend the deadline via the issuing of a Decree.
The extension was deemed necessary, due to the adverse financial situation caused by the Covid-19 pandemic.
We would like to inform you of the deadline for submission of the 2021 provisional tax return, which is due on 31st July 2021.
Due dates for submission and payments
Cypriot tax resident companies need to estimate their taxable profit for the year 2021 and submit a provisional tax return (TD6 form) by 31st July 2021. The resulting tax liability needs to be paid in two equal instalments, by 31st July and 31st December 2021 respectively.
If, after payment of the two instalments, there is a tax liability remaining, this should be settled by 1st August 2022.
Estimation of taxable profit
The estimated taxable profit needs to be at least 75% of the final taxable profit. If the estimated tax turns out to be lower than the actual tax liability, a penalty of 10% will apply on the underestimated tax payable.
Companies have the right to revise their provisional tax return at any time before 31st December 2021, either upwards or downwards, by completing and submitting a revised provisional tax return.
If the estimated is revised upwards, interest at 1,75% will be payable on the difference between the revised amount payable and the amount initially declared from the due date of payment of the 1st instalment.
If it is not expected that the company will generate taxable income for the year 2021, there is no need to file a provisional tax return or to pay any instalments.
What is required
In case you expect that a taxable profit will be generated for the year 2021, please let us know the soonest in case you will need our assistance with the preparation and submission of the temporary tax return and with payment of the first instalment.
Do not hesitate to contact us for any questions regarding your tax submission obligations.
As part of the transposition into the Cyprus legislation of the European Council’s Directive (EU) 2018/843 (the 5th Anti-money Laundering Directive), the establishment of a central beneficial owner register (“BO Register”) has been implemented. All companies and any other legal entities incorporated in Cyprus are obliged to identify and record electronically on the BO Register all relevant information of the beneficial owners who own or control them.
The responsibility for the true and accurate submission of the beneficial owners’ information lies with the company and its officers, and failure to comply may result in severe penalties (up to €20.000 per company).
What is it about?
Within the context of the Prevention and Suppression of Money Laundering Activities and Terrorist Financing Law, the Registrar of Companies issued Directive 112/2021 which was published in the Official Gazette on 12th March 2021. The Directive provides for the establishment, maintenance and operation of a centralised BO Register.
As per the Directive, Cypriot companies and their officers need to take all reasonable measures to obtain and hold adequate, accurate and current information regarding their beneficial owners. As of 16th March 2021, an interim system solution has been implemented, enabling the electronic recording of such information in the BO Register. The interim solution is expected to be concluded within 12 months (12th March 2022), upon which time a final solution should be established.
To be able to electronically file the required information in the BO Register, entities must first obtain access through the ARIADNI government gateway.
Timing of filings
Entities incorporated or registered prior to 12th March 2021 have until 12th March 2022 to electronically file thebeneficial owners’ information in the BO Register.
On the other hand, entities incorporated or registered after 12th March 2021 have 30 days from incorporation/ registration to electronically file the beneficial owners’ information (however, no penalties will be imposed for late submission during the interim solution period).
In case of changes in the information of a beneficial owner, such changes need to be recorded onto the BO Register within 14 days from the change.
Upon conclusion of the interim solution and establishment of the final solution (expected 12th March 2022), companies will also be obliged to electronically confirm their beneficial owners to the Registrar on an annual basis.
Penalties for non-compliance
The responsibility for the true and accurate submission of the beneficial owners’ information lies with the company itself, as well as its officers. In case of failure to comply, the company and its officers are liable to a fixed penalty fee of €200, plus a further €100 for each day of non-compliance (capped to €20.000 per company).
It is noted that during the implementation of the interim solution for the collection of beneficial owner details, no penalties will be imposed.
Definition of beneficial owner
In the case of corporate entities, beneficial owners are considered to be any natural persons who ultimately own or control the entity, by holding (directly or indirectly) at least 25% plus one share, or who have an ownership interest of more than 25%, or who exercise control via other means (e.g. exercise dominant influence, power to appoint senior management, etc).
If, after having exhausted all possible means, no such persons can be identified, then the entity’s senior management officials will be considered to be the beneficial owners.
In the case of Trusts, the beneficial owners are considered to be the settlor, the trustee, the protector (if any) and the beneficiaries. In case of Foundations or other similar legal arrangements, the beneficial owners are considered to be the natural persons holding equivalent or similar positions.
Information to be filed
The following information needs to be filed in the BO Register for each beneficial owner:
- Name, surname, date of birth, nationality and residential address
- Nature and extent of the beneficial interest held directly or indirectly by each beneficial owner, including through percentage of shares, voting rights, or the nature and extent of the significant influence or control with other means exercised by each controlling person
- Identification document number indicating the type of document and the country of document issuance (identity card or passport)
- Date on which the natural person was entered in the register as beneficial owner
- Date on which there were changes in the particulars of the natural person or the date on which the natural person ceased to be a beneficial owner.
If no natural persons are identified as the beneficial owners based on the ownership rights, the details of the senior management officials must be submitted (in such case, it is not necessary to report the nature and extent of the beneficial interest).
The responsibility for submission of the above information lies with the company and its senior management officials.
Who will have access to the BO Register
During the interim solution stage, access to the BO Register is granted only to Competent Supervisory Authorities, the Financial Intelligence Unit (FIU), the Customs Department, the Tax Department and the Police, without any restriction, and upon submitting a written request to the Registrar of Companies.
Upon establishment of the final solution, the following persons shall have access to the beneficial owners’ information through the electronic BO Register:
- Competent Supervisory Authorities, the FIU, the Customs Department, the Tax Department and the Police (unlimited access, with no need to submit a written request to the Registrar)
- Obliged entities, in the context of conducting due diligence and identification measures for the client as defined in the Law (limited access)
- All members of the general public (limited access)
Obliged entities and the general public will need to register with ARIADNI to gain access to the BO Register. Also, their access will be restricted to the name, month and year of birth, nationality and country of residence of the beneficial owner, and nature/ extent of the beneficial interest held, following payment of a fee of €3,50 per company.
Ministers issue Decree for the obligation to accept payments through credit cards
The Council of Minsters issued a Decree on the 18th June 2021 regarding the obligation to accept payments through credit cards. The Decree was published in the Government Gazette on the same day.
According to the Decree, retail stores and service providers whose activities are within the scope of the Decree (the “relevant activities”) are obliged to accept payment cards as a means of payment during the conclusion of transactions with customers. They are also obliged to notify their customers of their ability to pay through payment cards in a manner that is clear and not subject to misinterpretation, and such notifications should be clearly visible at the entrance and at the payment desk.
The relevant activities are listed in detail as an Appendix to the Decree, which can be found here. These include most retail and wholesale stores, professional services, hospitality, education, and health services.
The Ministry of Finance has clarified that companies active in the sectors of manufacturing, electricity, water provision, transport and communications (publishing, movie production, television and radio shows and computer programming) are exempt from the obligation to accept card payments.
Businesses that are within the scope of the Decree are obliged to comply with its provisions as follows:
- Businesses already engaged in relevant activities must comply within 3 months from the date of issue of the Decree.
- Businesses that will commence a relevant activity during the last 30 days prior to the expiry of the 3-month deadline must comply within 4 months from the date of issue of the Decree.
- Businesses that will commence a relevant activity (or will modify their existing activity) after the expiry of the 3-month deadline must comply within 1 month from commencement (or modification) of the activity.
According to the Decree, a business carrying out a relevant activity is considered to be in compliance with the provisions of the Decree if the payment is carried out through wired or wireless POS, mobile POS, virtual POS, as well as other applications which accept payment cards.
The Decree clarifies that a cardless credit transfer, a direct debit, or any alternative means of service such as e-banking are not considered to be a card terminal.
Businesses within the scope of the Decree are obliged to accept means of card payment that have been issued through a four-party scheme (e.g. VISA, Master Card, Maestro, Union Pay), and are not obliged to accept means of payment through a three-party scheme.
Further, businesses within the scope of the Decree are obliged to contract with licensed payment system providers according to “The Provision and Use of Payment Services and Access to Payment Systems Law”.
The Tax department is the competent authority responsible for the carrying out of audits, the assessment of any violations and the imposition of administrative fines.
Cyprus signs Double Tax Treaty with Netherlands
A Double Tax Treaty was signed between Cyprus and Netherlands on 1st June 2021, and was published in the Official Gazette on 4th June 2021. The Treaty will enter into force once the ratification process is completed, and its provisions will be applicable on 1st January of the following year.
The Treaty is based on the OECD Model Convention, and thus incorporates all the latest international standards with regards to the exchange of information, and it takes into account recommendations of the BEPS Action Plan.
The Treaty is expected to pave the way for further expansion of the two countries’ economic and commercial relationships, while at the same time strengthening their cooperation in tax matters.
The Treaty’s main provisions are as follows:
No withholding tax if the beneficial owner of the dividend is:
- a company holding at least 5% of the capital of the dividend-paying company throughout a 365-day period that includes the day of the dividend payment;
- a recognized pension fund which is generally exempt under the Cyprus Corporate Income Tax Law
For all other cases, the Treaty provides for withholding tax at the rate of 15%
No withholding tax, provided that the recipient of the interest is the beneficial owner of the income.
No withholding tax, provided that the recipient of the royalties is the beneficial owner of the income.
Gains derived by a resident of one of the Treaty countries from the alienation of shares deriving more than 50% of their value directly or indirectly from immovable property situated in the other country may be taxed in that other country.
Limitation of benefits
The Treaty contains a limitation of benefits clause in the form of a ‘principal purpose test’, whereby benefits under the Treaty shall not be granted in cases where it is reasonable to conclude that obtaining such benefits was one of the principal purposes of any arrangement or transaction.
Further extension of deadline for submission of reports without penalties being imposed.
The Law on Administrative Cooperation in the Field of Taxation has been amended on 18th March 2021, implementing Council Directives (EU) 2018/822 and 2020/876 regarding the mandatory automatic exchange of information in the field of taxation (commonly known as DAC6). The implementation had retroactive effect from 1st January 2021, and the first submission of information regarding reportable cross-border arrangements was initially set for 30 June 2021.
On 26th February 2021 the Cyprus Tax Department had issued an announcement, stating that no penalties would be imposed for filings effected up to 30th June 2021 in respect of arrangements with a triggering event between 25th June 2018 and 31st May 2021.
The Tax Department issued an additional announcement on 4th June, further extending the deadline to 30th September 2021. As such, any arrangements with a triggering effect between 25th June 2018 and 31st August 2021 can now be filed up to 30th September 2021, without any penalties.
DAC6 in brief
In a nutshell, DAC6 applies to cross-border arrangements with an EU nexus, i.e. concerning either more than one EU Member State, or a Member State and a third country. In case where such arrangements meet at least one of a series of “hallmarks” which indicate potentially aggressive tax planning, then with a view to prevent harmful tax practices, DAC6 imposes an obligation to intermediaries to submit information to their local tax authorities regarding such arrangements (termed “reportable cross-border arrangements”).
The information on reportable cross-border arrangements needs to be filed with the tax authorities through the Government Gateway Portal “Ariadni”, via uploading an XML file.
Fines for failure or delay in reporting are substantial, and may reach €20.000 per reportable arrangement.
“Intermediaries” are defined as any persons with an EU nexus that design, market, organize or make available for implementation, or manage the implementation of, a reportable cross-border arrangement. Intermediaries include (but are not limited to) accountants, auditors, tax advisors, service providers, bankers, fund managers and lawyers.
“Hallmarks” are essentially a series of characteristics which indicate potentially aggressive tax planning. If a cross-border transaction meets at least one of the hallmarks, it becomes reportable for DAC6 purposes. Hallmarks are categorized as follows:
- Generic hallmarks: arrangements whose tax benefits are subject to confidentiality clauses, or give rise to performance fees, or mass-marketed schemes
- Specific hallmarks: contrived acquisition of loss-making companies, conversion of income into capital or other forms of exempt income, circular transactions resulting in round-tripping of funds
- Specific hallmarks relating to deductible cross-border transactions between related entities: Arrangements giving rise to tax deductions without a corresponding amount of taxable income on the other jurisdiction, certain double reliefs or deductions, or other mismatches
- Specific hallmarks regarding automatic exchange of information and beneficial ownership
- Specific hallmarks relating to transfer pricing