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Fair Taxation: EU updates list of non-cooperative tax jurisdictions

On 18 February 2020 the EU Finance Ministers updated the EU list of non-cooperative tax jurisdictions. Four countries/territories – Cayman Islands, Palau, Panama and Seychelles – have been added to the list of non-cooperative tax jurisdictions, as they failed to comply with the required standards within the deadline. These joined the eight jurisdictions – American Samoa, Fiji, Guam, Samoa, Oman, Trinidad and Tobago, Vanuatu and US Virgin Islands – that were already on the list and remain non-compliant. By contrast, over half of the countries covered by the 2019 listing exercise have been completely delisted, as they are now in line with all of the tax good governance standards.

 

Next steps

The Commission and Member States will continue the dialogue with those jurisdictions on the list and the annex II (jurisdictions with pending commitments) in advance of the next update of the EU list in October 2020. Another priority is to monitor countries that have been cleared to ensure that they apply tax good governance in practice. The EU listing remains a dynamic process, which will continue to develop in the years ahead to keep pace with international developments. 

Following the update, Paolo Gentiloni, Commissioner for the Economy said: "The EU list of non-cooperative tax jurisdictions is helping to deliver real improvements in global tax transparency. To date, we have examined 95 countries' tax systems and the majority of these now comply with our good governance standards. This process has led to the elimination of over 120 harmful tax regimes worldwide – and dozens of countries have started to apply tax transparency standards. Our citizens expect the wealthiest individuals and corporations to pay their fair share in tax and any jurisdiction that enables them to avoid doing that must face the consequences. Today's decisions show that the EU is serious about making that happen.”

 

Objectives of the EU List

The overall goal of the EU list is to improve tax good governance globally, and to ensure that the EU's international partners respect the same standards as EU Member States do.

 

 

The listing process

The list is a result of a thorough screening and dialogue process with non-EU countries, to assess them against agreed criteria for good governance.

These criteria relate to tax transparency, fair taxation, the implementation of OECD BEPS measures and substance requirements for zero-tax countries.

 

The criteria were agreed by Member States at the November 2016 ECOFIN and used as the basis for a screening "scoreboard".

 

The EU-List

The countries in the list below are those that refused to engage with the EU or to address tax good governance shortcomings (situation on 7 November of 2019).

 

EU Member States will continue to monitor the situation, to ensure that jurisdictions implement their commitments.

Listed jurisdictions will be removed from the list once they have addressed EU concerns.

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We would like to remind you that the collection of the contributions for the second and final stage will start on March 1st, 2020 and will include the complete implementation of the GHS.

*Contribution for employees will increase to 2.65% and for employers to 2.90%

 

The General Healthcare System (GHS) is modern, patient-centric healthcare system with the aim of delivering quality healthcare services to the Citizens of the Republic of Cyprus and Permanent residents of the areas controlled by the Republic of Cyprus.  

 

The main features of the system are:

  • Universal coverage of the population
  • Equal and equitable treatment of all beneficiaries
  • Provision of a comprehensive package of healthcare services
  • Freedom of choice of provider by the beneficiaries
  • Social reciprocity

For the implementation of the GHS, a special fund was established for purposes of gathering the relevant contributions, and from which all payments to providers of healthcare services will be made. The GHS fund will be administered by the Health Insurance Organisation (HIO). 

 

When will the GHS be implemented?

According to the provisions of The General Healthcare System (Amending) Law of 2017, that the GHS shall be implemented in two stages.  

The first stage of GHS implementation, has already started on June 1st 2019, which provides for the introduction of outpatient healthcare, i.e. the provision of healthcare services by personal doctors and outpatient specialists, pharmacists and laboratories.

The second and final stage of GHS implementation, beginning June 1st, 2020, includes introduction of all the remaining healthcare services, i.e. inpatient healthcare and services, services offered by allied health professionals (clinical dieticians, occupational therapists, speech pathologists, physiotherapists, and clinical psychologists), nurses and midwifes, the accident and emergency departments, ambulance services, dentists, palliative healthcare services and medical rehabilitation services.

 

Who is paying for this?

The main GHS source of financing is contributions.  The payment of the contributions for the first phase has already started on 1 March 2019 and full implementation will follow on 1 March 2020.

 

The Contributors’ Categories are:

  • Employees
  • Employers
  • State
  • Self-employed
  • Pensioners
  • Income-earners
  • Government Officials
  • Persons responsible for the payment of remuneration to Government Officials 

The contribution rates for each category of contributors as they have been set by the General Healthcare System (Amending) Law of 2017 are the following:

 

 

For every natural person, the total maximum annual amount on which contributions will be paid is €180,000.

 

In case that the natural person is not a tax resident of Cyprus, he/she will pay contributions only for the income, earnings and pensions that derive from the Republic of Cyprus, excluding dividends and interest.

For more information you can visit the official site which is available both in English and Greek language.

 

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The Income Tax Amending No. 6 Law has been approved from the House of Parliament and is increasing the limit of certain allowable deductions from 1/6th to 1/5th of an individual’s taxable income. 
 
As per article 14 of the income tax law the allowable deductions includes life and private medical insurance premiums, contributions to social insurance, pension and provident funds as well as the National Health System (NHS).
 
The above change applies as of the tax year 2019.
 
Please note that tax deductions in certain cases are subject to further restrictions. 
   
We are at your disposal to assist you with the relevant calculations and any further information or clarification you need.
 
With our best wishes for a happy, healthy and prosperous 2020.
 
 

Contact persons

Leonidas Papadopoulos                          Pavlos Tsiaklides

This email address is being protected from spambots. You need JavaScript enabled to view it.              This email address is being protected from spambots. You need JavaScript enabled to view it.
+357 22 100 192                                        +357 22 100 192
Head of Accounting                                    Head of Audit

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We would like to remind you of the Special Defence Contribution tax on the Deemed Dividend Distribution on 2017 accounting profits which must be paid to the Cyprus tax authorities by 31 January 2020.

 

Tax provisions on deemed distribution of dividends.

The tax provision applies to the profits of Cyprus tax resident companies that are attributable directly to Cyprus tax residents and domiciled shareholders. It also applies to tax resident corporate shareholders, the ultimate or immediate physical shareholders of which, are tax resident individuals domiciled in Cyprus.

These provisions do not apply to the proportion of profits attributable directly or indirectly to non-Cypriot tax resident shareholders or to Cypriot tax resident that are not Cypriot-domiciled.

 

When do the deemed distribution of dividends provisions apply?

Any Cyprus tax resident company which has not distributed at least 70% of its profits within two years from the end of the year in which the profits are attributable, is subject to the provisions of deemed dividend distribution. In such a case, the undistributed part of such profits is subject to Special Defence Contribution (SDC) at the rate of 17%.

 

Payment of Special Defence Contribution Tax

Companies with accounting profits for tax year 2017 that fall within the Deemed Distribution of Dividends provisions, would have to declare an appropriate amount of dividend in order to meet the 70% threshold of distributed profits on or before 31st of December 2019 and where applicable, pay the relevant SDC only electronically via JCC smart (category 603: Contribution for Defence deducted from dividends).

Otherwise, on 31st of December 2019, 70% of the undistributed profits of 2017 will be treated as dividends payable to the Cyprus tax resident shareholders (individuals or corporations) (deemed dividends) and will be subject to Special Defence Contribution (SDC) at the rate of 17%. The SDC will need to be paid on or before the 31st of January 2020 only electronically via JCC smart (category 623: Special contribution for Defence on deemed dividends).

 

We are at your disposal to assist you with the relevant calculations and any further information or clarification you need.

 

Contact persons

Leonidas Papadopoulos                          Pavlos Tsiaklides

This email address is being protected from spambots. You need JavaScript enabled to view it.              This email address is being protected from spambots. You need JavaScript enabled to view it.
+357 22 100 192                                        +357 22 100 192
Head of Accounting                                    Head of Audit

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We would like to remind you for the requirements of the Cyprus Tax Legislation (Assessment and Collection Law as amended in 2002, article 24) regarding the filing of temporary tax returns and relevant temporary tax payments for the year 2019.

Please note that a Temporary Tax Assessment of the estimated net taxable profit for the year 2019 (if any), should be submitted to the Tax Authorities by 31st of July 2019. The resulting tax is payable in two equal installments as per the following deadlines:

  • 1st instalment: 31st of July 2019
  • 2nd instalment: 31st of December 2019

Any final resulting tax liability for the year 2019 should be settled by 1st of August 2020.

 

Your estimation of the taxable profit (if any) must be as close as possible to the actual net taxable profit of the company and any taxes underestimated may be liable to a 10% surcharge. If you require assistance in calculating your estimated taxable profit, then please provide us with an estimated income statement (detailed) for the year and we will provide you with a forecast income tax computation together with our advice as to whether you should proceed with the filing of a Temporary Tax return or not. It is important to note that companies with no taxable profits do not need to deal with the submission of this return.

 

Revision of the Temporary Assessment form

Following the submission of the provisional income tax return you may submit a revised declaration (upwards or downwards), at any time before 31 December 2019. However, submitting a revised provisional tax declaration with a decreased estimated taxable profit may not result in an immediate refund of the provisional tax already paid until the final tax computations are filed and agreed with the Cyprus tax authorities.

 

Interest and Penalties

  • An administrative penalty of 5% is imposed on each instalment if the company fails to pay the declared tax by the due dates stated above.
  • Interest on an overdue instalment of the tax is calculated at an annual interest rate of 3,5%, on the basis of completed months.
  • If the provisional tax declared is lower than the 75% of the actual tax payable for the year, then an additional 10% tax is imposed on the difference of the two.

 

As the temporary tax relies on the management’s best estimate, it is our recommendation that this should be dealt with only by companies which have their accounting records up to date and are in a position to accurately estimate what the expected taxable profits will be at the end of the year.

 

For any further information, or if you would like us to proceed with assisting you with the above, please do not hesitate to contact us.

 

You could proceed with the payment of the provisional tax through the web directly* at:

https://www.jccsmart.com/e-bill/merchants/4888/outlets/723/invoices/classified?node=4

* (Registration to JCC is required)

 

Alternatively, we can take over of the above responsibility. The estimation of profits and transfer of funds in our client’s bank account should reach our office by the 15th of December 2019, otherwise we will consider it as an assumption by you of the responsibility to comply with this obligation.

 

Please bear in mind that our fees for the above will be €50 plus VAT (total €59,50).

 

Our client’s bank account details can be found below:

 

CosmoCo Ltd (Clients A/C)

Bank of Cyprus Public Ltd

Account Number: 357003572612

IBAN: CY18002001950000357003572612

Swift Code: BCYPCY2N

On the transfer details please indicate your Company name and "Temporary Tax for 2019".

 

We remain at your disposal for anything you may need in connection with the above.

 

Contact persons

Leonidas Papadopoulos                          Pavlos Tsiaklides

This email address is being protected from spambots. You need JavaScript enabled to view it.              This email address is being protected from spambots. You need JavaScript enabled to view it.
+357 22 100 192                                        +357 22 100 192
Head of Accounting                                    Head of Audit

 

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