For the second time now, the Cyprus Tax Amnesty has been extended. Let’s discuss in more detail the new deadline and the terms of the Cyprus Tax Amnesty.
Cyprus Tax Amnesty: Deadline Extensions
The original deadline for the Scheme for the Settlement of Overdue Taxes (the official name of the Cyprus Tax Amnesty) was October 3, 2017. The deadline, however, was extended for the first time to January 3, 2018. In early January of 2018, the deadline was further extended to the current deadline of July 3, 2018. Thus, the more recent extension gives Cyprus taxpayers another six months to bring their tax affairs in full compliance with Cyprus tax law.
Main Terms of the Cyprus Tax Amnesty
The Cyprus Tax Amnesty allows “qualifying applicants” to pay off their tax liabilities for prior years with up to 95% reduction in the interest and penalties that otherwise would have been or have already been imposed by the Cyprus tax authorities. The precise percentage of the reduction of interest and penalties depends on the number of monthly installment payments chosen by the taxpayer (i.e. if you pay off everything in full immediately, you get the full benefit of the 95% reduction in interest and penalties).
The Cyprus Tax Amnesty encompasses all outstanding tax liabilities that were incurred in the tax years up to and including 2015. The Amnesty also covers a great variety of taxes: income tax, capital gains tax, VAT, property tax, stamp duties, inheritance tax and certain special fees.
Cyprus Tax Amnesty: Qualifying Taxpayers
Since the main purpose of the Amnesty is to bring Cyprus taxpayers into full and ongoing compliance with Cyprus tax law, the emphasis is placed on assuring current compliance. This is done through the definition of “qualifying taxpayers” who are the only taxpayers eligible to participate in the Cyprus Tax Amnesty.
Qualifying taxpayers are defined as taxpayers who have been in full tax compliance from the tax year 2016 onwards – i.e. these taxpayers must have filed all of their Cyprus tax returns and paid all of their Cyprus tax liabilities for the tax year 2016 and all of the following tax years.
Cyprus Tax Amnesty is Part of a Trend Amplified by the IRS Offshore Voluntary Disclosure Program
The Cyprus Tax Amnesty is just one more example of the tax amnesty programs which have proliferated around the world in the recent years. This trend was greatly strengthened and really amplified to its current status by the establishment of the 2009 IRS Offshore Voluntary Disclosure Program (“2009 OVDP”). The 2009 OVDP, 2011 OVDI and 2012/2014 OVDPs together with enactment of FATCA have drawn the attention around the world and many countries began to imitate the successes of these US initiatives.
Sherayzen Law Office has helped clients deal with each of these major IRS voluntary disclosure programs as well as other voluntary disclosure options (like the Streamlined Domestic Offshore Procedures and the Reasonable Cause Disclosures). A voluntary disclosure program presents wonderful opportunities to taxpayers to settle their past tax noncompliance. This is why we sympathize with the Cyprus Tax Amnesty and see it as a positive development in the international tax law.