The Tax Department recently issued Interpretative Circular 14, which has clarified the application of the Income Tax Law regarding a deemed benefit which is to be assessed on any drawings, loan or other financial facilities granted by a company to a non-resident director or shareholder or their spouse or close relatives. The circular clarifies that the deemed benefit is taxable in full, regardless of the period of residence of the individual in question.
On the basis of experience gained since the implementation of the Protection of Cyprus Ships Against Acts of Piracy and Other Unlawful Acts Law, the Department of Merchant Shipping has increased the maximum number of firearms that approved private ship security contractors are entitled to register from 400 to 600. However, there has been no change to the ratio of two firearms per guard; the change will therefore affect only contractors with more than 200 guards.
A recent administrative court case examined an allegation that an Electricity Authority of Cyprus (EAC) committee established to determine staff promotions had been invalidly constituted. The meeting under review had not been chaired by the EAC chair, as required by the relevant regulations, and no reason for this absence was provided. The court found that the absence of any record of the reasons for the chair's non-attendance at the meeting was sufficient grounds to invalidate the decisions made.
The Cyprus Tax Department recently clarified the treatment of additional taxes imposed under the Assessment and Collection of Taxes Law. The department has specified that any additional tax is to be treated as such, meaning that penalties and interest will be imposed if they are not paid on time. The taxes are included under the term 'corporation tax' and are deductible from accounting profits for the purpose of calculating the deemed distribution for special defence contribution tax.
The Tax Department recently extended the deadline for the submission of country-by-country reports to be filed by the end of 2017. The deadline for reporting entities to submit country-by-country reports for multinational groups for the fiscal year ending December 31 2016 has been extended by two months, while the deadline for Cyprus-resident constituent entities to file their notifications for the fiscal year ending December 31 2017 has been extended to January 15 2018.
Cyprus and India recently signed a new reciprocal agreement on merchant shipping. Among other things, the agreement requires each country to treat the other country's vessels in the same way as it treats its own vessels engaged in international voyages. Further, the taxation of income of any kind derived from the use of vessels in international traffic is governed by the double tax agreement.
A recent case has affirmed that only completed actions can be subject to administrative review, and that an applicant must possess a legitimate interest at three crucial stages in order to pursue an action in the Administrative Court. The case concerned a complaint that a third party had been promoted unfairly in preference to other applicants. However, the applicant had filed his action before the third party accepted the promotion, so that when the action was filed there was no promotion to complain about.
With the extended deadline for the submission of applications for inclusion in the deferred settlement scheme for tax arrears established by Law 4(I)/2017 now less than one month away, the Tax Department has issued a further reminder of the scheme's main features. For example, all tax returns due must have been submitted and all tax liabilities for periods after December 31 2015 must have been settled or be in the process of being settled in accordance with an agreed payment schedule.
Since November 2015 the government has subsidised practical training on board ships for deck and engine cadet officers. The Department of Merchant Shipping recently announced changes to this scheme and the procedure for claiming reimbursement. The scheme has now been extended to cover vessels managed by companies located in other EU member states and a new requirement of at least 750 kilowatts of propulsion power has been introduced.
The Supreme Court recently reaffirmed the long-established principle that when contracting parties agree to amend or replace an agreement, the new agreement will replace the old one and define all of their rights and obligations. Accordingly, in a case where a settlement agreement is agreed between the parties, but not fully complied with by one of them, the other party cannot reinstate any of its rights under the initial agreement.
The Income Tax Law was amended in 2012 to introduce accelerated capital allowances for tax purposes on assets purchased between 2012 and 2014, inclusive. For plant and machinery acquired up to the end of 2018, the annual writing-down allowance rate will be 20% or any higher rate applying to the category of assets concerned. For industrial buildings and hotels acquired up to the end of 2018, the annual writing-down allowance will be 7%.
The Supreme Court recently issued its decision in a case concerning the Cyprus Securities and Exchange Commission's imposition of a €100,000 fine on Marfin for buying shares in Marfin Popular Bank Plc on the Athens Stock Exchange during a closed period, which had contravened the Insider Dealing and Market Manipulation (Market Abuse) Law 2005 and the Code of Conduct for Advisers and Related Persons issued thereunder.
The Tax Department recently opened a public consultation on proposed legislation to implement the EU Anti-tax Avoidance Directive, which extends the rules to hybrid mismatches. The consultation period will last until December 8 2017. The consultation documents, which are in Greek, are available on the Tax Department's website.
The Merchant Shipping (Fees and Taxing Provisions) Law 2010 imposes a surcharge on the tonnage tax payable by qualifying vessels registered in countries which appear on the grey or black list of the Paris Memorandum of Understanding. On the basis of the 2016 Paris Memorandum of Understanding annual report, the Department of Merchant Shipping recently determined which flags are included in the relevant grey or black list for the purposes of calculating tonnage tax for 2017.
The Process of Adjustment of Tax Arrears Law 2017 established a procedure for settling tax arrears by monthly instalments, providing a waiver of up to 95% of interest and penalties and covering all nationally imposed taxes. The Tax Department recently issued an announcement informing taxpayers who have applied to participate in the scheme that strict compliance with the agreed terms is essential. In particular, payments must be made on or before the due date or penalties will be applied.
Law 123(I)/2017 has upgraded the Department of Merchant Shipping to a deputy ministry under the direction of the newly created post of deputy minister of shipping with effect from March 1 2018. The new Deputy Ministry of Maritime Affairs will assume the Department of Merchant Shipping's powers and responsibilities. This upgrade reflects the importance of the shipping sector in Cyprus and the significance that the government places on its development.
In December 2015 Cyprus's tax laws were amended to provide a temporary tax exemption for loan restructurings in order to facilitate and encourage the restructuring of non-performing loans. The exemptions introduced in 2015 were intended to be valid for two years from the date on which the various amending laws entered into force and were therefore set to expire on December 31 2017. However, a number of new laws recently extended the exemptions for a further two years.
The Process of Adjustment of Tax Arrears Law 2017 established a procedure for settling tax arrears by monthly instalments and provided a waiver of interest and penalties of up to 95% for all nationally imposed taxes. The law was recently amended by Law 129(I)/2017, which has extended the deadline for submitting applications from three months after the law took effect to six months.
The Income Tax Law provides for a notional interest deduction for tax purposes on new equity capital injected into companies and permanent establishments of foreign companies on or after January 1 2015 to finance business assets, calculated by applying a reference rate to the new equity. The Tax Department recently announced the bond yields for Greece, Italy and Kazakhstan which will be used to calculate the notional interest deduction for the 2016 and 2017 tax years.
Law 97(I)/2017 has amended the Assessment and Collection of Taxes (ACT) Law 1978. One of the principal changes introduced by the amending law is that the six-year limitation on raising assessments provided for in Articles 21 and 23 of the ACT Law does not apply if the assessment is issued following a court decision. In addition, an administrative fine of up to €20,000 may be imposed for a breach of the ACT Law.