News alert

Cyprus Government Tax and VAT measures in response to COVID-19

Following our alert issued on 18 March 2020, we note that the House of Representatives proceeded with the approval of the relevant Tax and VAT legislations on Friday 27th March 2020 in response to the COVID-19 outbreak. These amendments were announced in the Government Gazette and include a number of Tax deferral concessions, an overview of which is provided below.

Indirect Tax – Temporary deferral of VAT payable

For VAT returns relating to periods ending on 29th February 2020, 31st March 2020 and 30th April 2020, no penalty or interest will apply for late payment, subject to the condition that the VAT return is submitted on time in accordance with the provisions of the VAT Law, and the related payable tax is discharged until 10th November 2020.

Taxable persons whose activity codes are included in the table below are excluded from the afore-mentioned concession. The activity code may be found on the VAT registration certificate issued at the time of registration.

Activity codes exempted from deferred VAT payment concession:

 

Activity code

Activity description

1.

35111

Production of electricity

2. 

36001

Collection and distribution of water for irrigation

3.

47111

Supermarkets and grocery stores

4.

47112

Mini markets

5.

47191

Department stores selling a variety of items of which there is no predominance in food products, beverages or tobacco

6.

47211

Retail sale of fruit and vegetables

7.

47221

Retail sale of meat and meat products, including poultry

8.

47231

Retail sale of fish and seafood

9.

47241

Retail sale of bread and bakery products

10.

47242

Retail sale of confectionary products

11.

47301

Retail supply of fuel

12.

47411

Retail sale of computers, peripheral hardware and software including video games

13.

47611

Retail sale of books

14.

47621

Retail sale of newspapers and stationery

15.

47651

Retail sale of toys other than video games

16.

47731

Pharmacies

17.

61101

Cyprus Telecommunications Authority (CyTA)

18.

61201

Internet services

19

61301

Satellite services

20.

61901

Telecommunication services other than CyTA

Comments

VAT returns are due on the 10th of the 2nd month following the end of the reporting period. Even though payment can be deferred in accordance with the above rules, it is important to note that the VAT returns are duly submitted. Failure to comply will result in an automatic 10% penalty, late submission penalty and interest.

Proposed legislation on VAT rates reduction was withdrawn.

Direct tax

The Collection of Taxes and Assessments Law has been amended to enable the Minister of Finance to modify the deadline for submission of Tax returns and the deadline for settlement of the related liability via a Ministerial Order.

Comments

It is expected that the Minister of Finance will exercise their power pursuant to these amendments to extend the deadline for Direct Tax liabilities.

GHS (General Health System) Contributions

Following the introduction of increased contributions for “Phase B” of the GHS, the amendment to the GHS Law provides that only “Phase A” contributions will apply for the months of April, May, and June 2020. It should be noted that the increased “Phase B” contributions will still apply for March 2020. A summary of GHS Contributions is as follows:

 

Category

March 2020

April, May and June 2020

July 2020 onwards

a.

Employees

2.65%

1.70%

2.65%

b.

Employers

2.90%

1.85%

2.90%

c.

Self-employed

4.00%

2.55%

4.00%

d.

Pensioners

2.65%

1.70%

2.65%

e.

Persons holding an office

2.65%

1.70%

2.65%

f.

Persons responsible for payment of emoluments of an officer

2.90%

1.85%

2.90%

g.

Persons earning income from sources such as rents, dividends and interest

2.65%

1.70%

2.65%

h.

Contributions by the Republic on emoluments of persons in categories a, c, d and e above

4.70%

1.65%

4.70%

Comments

The Ministry of Finance announced on 30 March 2020 that for persons who have already applied reduced rate for March 2020 the period for which the reduced rates will apply is adjusted to the period from 1 March 2020 until 31 May 2020.

Overdue Social Contributions

Persons who have regulated their overdue liabilities via installments within the scope of the Settlement of Overdue Social Contribution Law of 2016 (N.76(I) of 2016 as amended) may defer their installments for the months of March and April 2020, thereby extending the repayment period by two months.

Comments

As per the amendments to the afore-mentioned Law on 14 February 2020, Tax returns up to and including 2015 may be submitted by 30 June 2020 to benefit from the relevant arrangements. The number of installment defaults allowed before cancellation of the arrangement has been increased from three to five.

Extension of date of submission of Income Tax Returns

In addition to the above measures, on the 30th of March, the Tax Department announced that the date of submission of the declaration of the Income Tax Return (T.D.4) for companies and Self-Employed with financial statements for the tax year of 2018, is extended from 31 March 2020 to 01 June 2020.