Double Taxation Dispute system inoculated in Cyprus relates to a double taxation dispute between Cyprus and one or more member state as to the taxing rights over the same profit. Cyprus On the 5th of December 2019 transposed EU Directive 2017/1852 of 10 October 2017 on tax dispute resolution mechanisms in the European Union . The EU-wide system:
Ensure that businesses and citizens can resolve disputes related to the interpretation and application of tax treaties more swiftly and effectively. The new rules also cover issues related to double taxation which occurs when two or more countries claim the right to tax the same income or profits of a company or person. This can happen, for example, due to a mismatch in national rules or different interpretations of the transfer pricing rules in a bilateral tax treaty. There are currently around 900 double taxation disputes in the EU and they are, estimated to be worth €10.5 billion. As such, taxpayers now enjoy enhanced legal certainty when it comes to seeking a solution to their cross-border tax disputes. In particular, a wider range of cases is covered and Member States have to comply with clear deadlines in order to agree on a binding solution, giving citizens and companies more timely decisions.
Law 151(I)/2019 Law amending the Income Tax Law of Cyprus introduces adjustments to the definitions sections of the law by defining:
“Dispute” means a dispute which arises between member states as to the interpretation and application of agreements aiming to eliminate double taxation.
“Double Taxation” means the application of taxes by two or more member states, which are covered by an agreement for the avoidance of double taxation.
Furthermore a new part IX is added to the Cyprus Income tax Law whereby the appeal process is inserted.
Frequent Q&A Regarding Double Taxation Dispute in Cyprus
What is the Competent Body to receive a Double Taxation Dispute in Cyprus?
An aggrieved party may apply to the Cyprus department of taxation and any competent authority of an interested member state.
What is the time limitation to submit an appeal for a Double Taxation Dispute?
Section 36C provides that an aggrieved party may appeal within 3 years from the date receiving of the first notice of the measure leading to a Double Taxation Dispute.
Do i have to submit the appeal to a Double Taxation Dispute in other Member States?
Section 36C(2) provides that the appeal must be submitted to the other interested member states simultaneously along with all the relevant information and documentation.
What is the language of the appeal to the Double Taxation Dispute?
The appeal is submitted to the Department of Taxation in the Greek or English language.
How long does it take the Department of Taxation to respond to an Appeal?
The Department of Taxation informs the aggrieved party within 2 months of the submission of the appeal (Section 36C(4)). Thereafter the Cyprus Department of Taxation must respond within 6 months the acceptance or rejection of the appeal or within 6 months from the date of receipt of any additional information or document.
What happens if the Department of Taxation does not respond within the legal time frames?
If the Department of Taxation does not respond within the legally required time frames then the appeal is deemed accepted.
What forms need to be submitted?
The department of taxation has not yet published any forms regarding the appeal however it will do so at a latter time.
When is this law effective?
The provisions of the amending law are deemed to have effect as of the 1st of July 2019 and relate to any dispute arising for tax matters commencing on the 1st of January 2018 or after that date.
Harris Sharpe
Author - Photographer
For many years he has worked and devoted his skills and efforts towards building a successful career as a leading executive. From humble beginnings, his aim has always been to yield results; with a keen focus to attention to detail and client satisfaction. His experience has always been varied and not specific, at times he preferred it. With that in mind, he has dealt with CySEC on licensing and ongoing regulation, international private equity and credit fund managers, NASDAQ and NYSE listed companies occasional millionaires as well as self-made millionaires. His passion though is difficult transaction work organizing and deploying people for a common goal. Harris enjoys reading and studying the Cyprus law and sharing that information on this website.
Cyprus Kazakhstan Tax Treaty
The Cyprus Kazakhstan Tax Treaty has entered into force as of the 17th of January 2020. As a result, the Treaty shall have effect as of the 1st of January 2021
Other Publications on Cyprus Tax Law
EU Blacklist
The EU Blacklist is the newest tool to tackle the risks arising from tax abuse and unfair tax competition. It targets jurisdictions that do not meet and do not intend to meet EU tax good governance criteria. The idea was that a single EU list would hold more weight than several national lists. The EU Blacklist was officially launched on the 5th of December 2017
Cyprus 2019 NID rate
The Cyprus Department of Taxation has published the rates applicable for the 10-year government rate of each state, which once increased by 3%, constitutes the reference rate for the purposes of the Cyprus Notional Interest Deduction (NID) for the year ended 2019.
Cyprus Kazakhstan Tax Treaty
The Cyprus Kazakhstan Double Tax Treaty has entered into force as of the 17th of January 2020. As a result, the Treaty is now in force and shall have an effect as of the 1st of January 2021. As of the day of writing this publication Cyprus is not mentioned as a country that has an agreement for the avoidance of double taxation with Kazakhstan.
Cyprus Notional Interest Deduction (NID)
In September 2015, Cyprus introduced the Notional Interest Deduction (“NID”) regime. A new and powerful tax tool provided to business enabling them to create a return on new equity injected into a local business. The return is achieved by deducting a ‘notional’ interest expense from their taxable income subject to the value and the applicable reference rate.
Cyprus-Egypt Double Tax Agreement
On the 8th of October 2019 the Republic of Cyprus and the Arab Republic of Egypt signed a new protocol for the Elimination of Taxation with Respect to Taxes on Income and the Prevention of Fiscal Evasion and Avoidance (“Double Tax Agreement”). The news comes from an announcement on the website of the Cyprus Ministry of Finance.
Related Party Transactions to be at arm’s length in Cyprus
The Cyprus income tax law forbids related party transaction to carry out on preferential terms. Effectively disallowing any preferential treatment afforded due to the relation of the parties. The Cyprus Income Tax Law taxes any income which would arise in the absence of such special treatment.
Recent Publications
Foss v Harbottle Rule in Cyprus
Learn about the rule in Foss v Harbottle and its exceptions in Cyprus, including the ultra vires rule and the fraud on the minority rule.
UBO Register ECJ Decision
UBO Register has been ruled as invalid by the ECJ since it is against Article 7 & 8 of the EU Charter of Fundamental Rights.
Annual levy strike-off
Unpaid annual levy for any year between 2012 and 2021 will strike-off companies as announced by the Cyprus department of companies
Publications on Cyprus Business Law
Cyprus Annual Return HE32 for Companies
Cyprus private companies limited by shares are required to prepare and submit to the registrar of companies an annual return HE32. The Cyprus annual return HE32 must be accompanied by (1) Audited Financial Statements (the “FS”) and (2) Declaration of the Director and Secretary (the “Declaration”) confirming that the FS submitted are those presented to the shareholder at an Annual General Meeting (“AGM”)
Cyprus Company Formation
A company is formed in Cyprus by way of law. The principal legal instrument giving such right is the Companies Law, Chapter 113 of the laws of the Republic of Cyprus, however the memorandum and articles play an equal important role in a Cyprus Company Formation. These two ‘constitutional’ documents are often called upon to deal with business matters of the Company and in other times to define the rights of the various parties.
Private Company Limited by Shares
A Cyprus Private Company Limited by shares is a class of private companies incorporated in accordance with the Cyprus Companies Law, Chapter 113 of the laws of the Republic of Cyprus. It is the most frequently used vehicle in Cyprus its numbers, statistics of the Registrar of Companies, being over 200.000 and on an annual basis around 14.000 new companies are incorporated every year.
Cyprus Registrar Forms legality issues and effect
Within the Companies Law, Chapter 113 of the Laws of the Republic of Cyprus the term “Prescribed Form” (καθορισµένο τύπο) which means the Cyprus Registrar Forms is mentioned several times. Although the Companies law requires information to be submitted in the Prescribed Form this does not create automatic legality of the said action (e.g. change of director) is not implied
Transfer of shares when is it effective?
In the case of Morsa Trading the district court held that a person becomes a registered member of a Cyprus company when that person’s name is registered in the register of members. Accordingly, the transfer of shares in a Cypriot Company requires, amongst other things, the registration in the register of members.
Company Migration to Cyprus
Migrating a company to Cyprus is not without its challenges, nevertheless if the foreign countries laws allow a company may redomicile and migrate to Cyprus. After which time it will be registered under the companies law.
