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.
Dear Clients,
The Council of Ministers issued regulation ΚΔΠ.367/2016, as published in the Cyprus Gazette on 16/12/2016, amending the main regulations to the Cyprus Value Added Tax (VAT) Laws.
The amendment adds paragraph 6A to regulation 17 of ΚΔΠ.314/2001 which indicates that all taxable persons, as per the provisions of the Cyprus VAT Laws, are obliged to submit their VAT returns electronically. Returns should be submitted via the on-line TaxisNet portal.
The above regulation is put into effect on May 02, 2017 which means that electronic submission of VAT returns will be obligatory for all taxable persons*.
*According to article 6(1) of the VAT Act, a taxable person is every person who is registered or is liable to register under the VAT Act.
Withdraw of low profit margin scheme – Introducing of Transfer Pricing
Back-to-Back loans between related companies was a tax regime agreed between the Institute of Certified Public Accountants of Cyprus (ICPAC) and the Tax Commissioner in 2011.
As per the regime in order to qualify as an intra group Back-to-Back loan, the minimum acceptable net margins for tax purposes ranged between 0,35% (on loans less than €50m) and 0,125% (on loans more than €200m). This allowed funding to go through Cyprus between related parties.
On the 8th of February 2017, the Cyprus Tax Department (CTD) has informed the Institute of ICPAC of their intention to abolish the above practice of accepting pre-agreed minimum set profit margins of 0,125% - 0,35% on intra-group and related party financing arrangements that were in the form of back-to-back loans. As stated in the relevant announcement, the withdrawal of the scheme is the result of the international tax developments (OECD/G20 initiative – BEPS) as well as the review of the scheme in the context of both the Code of Ethics for the taxation of the companeis and of the State Aid perspective.
It is expected that as from the 1st of July 2017, all financing arrangements and their interest rates / profit spreads entered between related and/or connected parties should now be concluded on an arm’s length basis and will now have to be supported by Transfer Pricing Studies which were prepared by independent experts and be based on the OECD principals.
In addition from the 01st of July 2017 onwards, any tax rulings that have been issued in relation to back-to-back financing will become void and shall need to follow the new rules.
It is further expected that the CTD will issue more specific guidance on the implementation of the above, at which time we will inform you accordingly.
With the above in mind, it is strongly adviced that the clients and any other interested parties should review their current group structres and contact us for more infromation in order to assess the potential impact of the upcoming changes and to take corrective action, if required. For new transactions of this type, companies should consider having a transfer pricing study in place.
How can CosmoCo assist - Our Services
We can provide expert high level services through our experienced and dedicated team in the following areas:
- Reviewing your existing financing structures and report with suggestions on the implication of the new procedure.
- Provide assistance in the preparation of the Transfer Pricing Studies required by the new procedure.
The Cyprus Parliament has recently approved and voted the bill proposed by parliamentary parties which regulates the payment of overdue taxes in various monthly installments.
The Law was published in the Cyprus Gazette newspaper on 03/02/2017.
This new Law gives the Tax Commissioner the right to reduce the interest and penalties applicable to overdue income taxes, capital gains tax, stamp duties, SDC and VAT provided the taxpayer meets certain obligations.
The Law provides that any amounts owed to the Tax Office which are under €100.000 will be payable in 54 monthly installments (with a minimum payable installment being €50) whereas amounts in excess of €100.000 will be payable in 60 monthly installments (with a minimum payable installment being €1.850).
Persons wishing to enter such arrangements must submit an application. The Tax office is expected to issue guidance on the application, requirements and conditions in the following weeks.
It should be noted that the Law excludes companies and individuals who are under examination by the Tax Office in respect of any undeclared transfers or deposits held outside Cyprus.
End of each month
- Payment of tax deducted from employees salary (PAYE) in the preceding month.
- Payment of special contribution for defence withheld on payments of dividends, interest or rents (when the tenant is a company, partnership, the state or local authority) made to Cyprus tax residents in the preceding month.
- Payment of tax withheld in the preceding month on payments to non-Cyprus residents.
- Payment of social insurance contribution in the preceding month.