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Pay-As-You-Earn (PAYE) - Electronic Payment

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What is the PAYE?

A Pay-As-You-Earn tax (PAYE) is a withholding tax on the income of employees. Amounts withheld are treated as advance payments of income tax due. They are refundable to the extent they exceed actual tax that will be determined during the submission of personal tax return of the employees.

Under the PAYE system, the employer calculates the tax burden of the employee and deducts the PAYE on a monthly basis.

 

How does it work in practice?

  1. At the beginning of each year, every employee must complete the employee’s income declaration (IR59 form) which details all his emoluments and his personal allowances. This must be then returned to his employer.
  2. The employer calculates the tax obligation for each employee based on his IR59 declaration.
  3. The employer withholds on a monthly basis the relevant tax from the salaries of the employee and pays it to the tax authorities, on behalf of the employee.

Who is responsible?

It is the employer’s responsibility to make the proper PAYE deductions and make the payment to the tax authorities.

Deadline

PAYE should be paid by the end of the following month.

Penalties on late payment

In the case of late payment of the tax due, a penalty of 5% is imposed on the unpaid tax. An additional penalty of 5% is imposed if the tax remains unpaid 2 months after the payment deadline.

The interest rate applicable on late payment of taxes is set by the Minister of Finance through a Decree and it is applicable for the whole year. The rate for 2018 is 3,5%.

The Cyprus Tax Department has announced that as from 1st March 2018 the monthly payments of tax deducted by employers’ from employees’ remuneration under PAYE can ONLY be made through the JCCsmart electronic payments service, unless the payment includes interest or penalties due to late payment.

Payments which include interest or penalties must be made through the District Tax Offices.

Please bear in mind that you will need a Mastercard or VISA card in order to be able to make the payment online. 

Although personal debit/credit cards are accepted, we strongly advise to always use debit/credit cards registered on your Company’s name. 

 

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