Who is obliged to prepare the SIT?

The SIT reporting obligation is applicable for all Taxpayers who have transactions between related parties on an annual basis.

When is the deadline for preparation and submission of the Local File?

The SIT shall be submitted to the Tax Department, via Tax For All (TFA) portal concurrently with the income Tax Return

PENALTIES

What is the penalty for not submitting the SIT on time?

The penalty for non-submission of the SIT by the deadline as provided in the Regulations (e.g., the submission deadline of the income tax return) is €500.

The Cyprus Tax Department has issued Frequently Asked Questions with reference to Article 33 & Article 33C of the Income Tax Law, Κ.Δ.Π. 314/2022 and Κ.Δ.Π. 273/2022 with effect as from 1st January 2022.

You can visit the FAQs by clicking the link below:

Τμήμα Φορολογίας | Συνήθεις Ερωτήσεις (mof.gov.cy)

The Directive is intended to increase transparency in the area of direct taxation, with a view of combating tax avoidance and tax evasion in the EU.

Following that approach, potential aggressive tax planning is reported in order to balance the asymmetry of information between Tax Authorities and taxpayers. This will enable EU Member States to prevent harmful tax practices and close any loopholes.

DAC6 has a retroactive application, being in force as of 25 June 2018. This means that intermediaries and taxpayers must review the necessary information relating to transactions implemented on or after that date, in order to fulfil their reporting obligations.

ADMINISTRATIVE FINES

The Cyprus Tax Department has announced that there will be no imposition of administrative fines for overdue submission of DAC6 information that will be submitted until 30 June 2021, in the following cases:

• Reportable cross-border arrangements (RCBAs) that were implemented between 25 June 2018 and 30 June 2020 and had to be submitted by 28 February 2021;

• RCBAs held between 1 July 2020 and 31 December 2020 and had to be submitted by 31 January 2021;

• RCBAs held between 1 January 2021 and 31 May 2021, that had to be submitted within 30 days from the date they were made available for implementation or were ready for implementation or the first step in the implementation was made, whichever occurred first;

• RCBAs for which secondary intermediaries provided aid, assistance or advice, between 1 January 2021 and 31 May 2021 and had to submit information within 30 days beginning on the day after they provided aid, assistance or advice.

The penalties for non-compliance start from €1,000 until €20,000 depending on the reasoning

Non-Cyprus and non-domiciled Cyprus tax residents are not affected by the provisions of Deemed Dividend Distribution.

The Deemed Dividend Distribution provisions apply where a Cypriot tax resident company has not distributed at least 70% of its after tax profits, as adjusted, within two years from the end of the tax year to which such profits relate. In such a case, the undistributed part of such profits is subject to Special Defence Contribution at 17%.

Therefore, companies with accounting profits for tax year 2017 that fall within the Deemed Dividend Distribution provisions must declare the appropriate amount of dividend until 31 December 2019 and pay the relevant Special Defence Contribution via JCC smart (www.jccsmart.com) by the end of the following month that such dividend was declared, with the latest date being 31 January 2020. 

If no actual dividend distribution is made, the relevant undistributed accounting profits (up to the 70% threshold) would be considered as deemed distributed and the relevant Special Defence Contributio would need to be paid by 31 January 2020 via JCC smart.

It should be noted that as from 1 March 2019, the distribution of either an actual dividend or a deemed dividend, to Cypriot tax resident shareholders, both domiciled and non-domiciled, is also subject to contributions to the General Healthcare Scheme at 1,7%.

Late payment of the Special Defence Contribution and General Healthcare System due will be subject to a penalty of 5% on the tax due and interest at the current rate of 2% per annum. An additional penalty of 5% on the tax due may be imposed if the tax remains unpaid two months after the above due dates.

In relation to annual returns (i.e. filing of audited financial statements) the administrative penalty to be applied for late filing is €50 plus an additional charge of €1 for each day of delay for the first 6 months and thereafter €2 for each day of delay.

The maximum penalty for each annual return is €500.

In addition, from 18 December 2019 the Registrar of Companies shall also impose administrative penalties on companies for the late submission of the relevant forms for changes in registered address, directors, directors’ occupation and addresses, allotment and transfer of shares. The administrative penalty that shall be applied is €50 plus an additional charge of €1 for each day of delay up to the maximum total penalty of €250 per relevant form.

• NOTES
  • For the tax year 2017 onwards, all returns should be submitted through TAXISNET
  • Effective from 14 July 2017, an additional penalty of 5% on the tax due will be imposed if the omission continues more than 2 months from the payment deadline
  • The 5% extra tax for late payment of the tax due is subject to the relevant interest rate for late payment
  • The interest rates charged on the due taxes are:

  • YEAR	Percentage
    Up to 31/12/2006	9,00%
    1/1/2007 -31/12/2009	8,00%
    1/1/2010-31/12/2010	5,35%
    From 1/1/2011	5,00%
    From 1/1/2013	4,75%
    From 1/1/2014	4,50%
    From 1/1/2015	4,00%
    From 1/1/2017	3,50%

The overdue taxes which are covered by the law are:

• All taxes due for the years up to and including 2015
• Amounts which become payable as a result of submission of a self-assessment up to and including the year 2015. The relevant tax returns must have been submitted but no tax payment is made
• Tax liabilities which are assessed after 3 July 2017 by the Commissioner of Taxation and relate to tax years up to and including 2015.

Relief of interest and penalties will be given depending on the number of instalments, These are shown below:

• No of instalments / % of relief
  • 1 (Full settlement) / 95%
  • 2-8 / 90%
  • 9-15 / 85%
  • 16-21 / 80%
  • 22-28 / 75%
  • 29-35 / 70%
  • 36-42 / 65%
  • 43-49 / 60%
  • 50-56 / 55%
  • 57-60 (maximum instalments) / 50%

A settlement scheme is terminated in cases where the taxpayer:

• Fails to file tax returns and VAT returns during the settlement period OR
• Fails to settle a liability that relates to a period after the 31st December 2015 OR
• Delays to pay any 3 instalments OR
• Delays to pay an instalment for more that 3 consecutive months, including the month the instalment was due.

• 54 instalments for overdue taxes not exceeding 100,000 Euro with a minimum instalment of 50 Euro per month
•  60 instalments for overdue taxes not exceeding 100,000 Euro with a minimum instalment of 1,852 Euro per month

The provisions of the law are applicable for the following:

• Income tax law
• Special defence contribution law
• Capital gains tax law
• Immovable property tax law
• Stamp duty law
• VAT law
• Inheritance tax law

Once the Tax Department and the taxpayer reach an agreement to settle the overdue taxes in instalments, no new interest and penalties will accrue and no criminal proceedings will commence provided that the taxpayer meets his/hers obligations.

The Law will be modified in the near future in order to provide a relieve on interest and penalties already imposed on overdue taxes which will benefit the taxpayers by agreeing to settle the overdue taxes in instalments.

Please contact us for further information or assistance on completing and submitting your application to the Tax Department