Tax and financial measures associated with COVID-19

24 April 2020

The Parliament implemented a number of legislative amendments in response to the COVID-19 outbreak in Cyprus and its impact on the Cyprus economy. The aim of the measures voted is to alleviate businesses from the negative cash flow impact of the coronavirus outbreak. Additional measures affecting the banking sector are expected to be voted on. We outline below a summary of the main measures that have been voted.

Tax measures

VAT measures – Obligation to pay VAT

Introduction of a temporary suspension of obligation to settle VAT for reasons of business liquidity, without penalties and interest for periods ending 29 February 2020, 31 March 2020 and 30 April 2020, until 10 November 2020, provided that relevant VAT returns are submitted within the prescribed deadlines.

The temporary suspension of the obligation to pay VAT will apply to all taxable persons, established and non established in Cyprus, with the exception of taxable persons whose activities fall within the prescribed trading codes as specified below:

  1. 35111 producers of electricity
  2. 36001 collection and distribution of water
  3. 47111 supermarkets and grocery stores
  4. 47112 mini markets
  5. 47191 retail sale of a large variety of goods of which food products, beverages or tobacco are not predominant
  6. 47211 retailers of fruit and vegetables
  7. 47221 bucheries including poultry retailers
  8. 47231 retailers of fish and seafood
  9. 47241 bakeries
  10. 47242 Retail sale of cakes, flour confectionery and sugar confectionery in specialised store
  11. 47301 retailers of fuel
  12. 47411 retailers of computers, peripheral equipment and software including video games
  13. 47611 retailers of books
  14. 47621 retailers of newspapers and stationery
  15. 47651 retailers of toys except video games
  16. 47731 pharmacies
  17. 61101 Cyprus Telecommunications Authority
  18. 61201 web based services
  19. 61301 satellite services
  20. 61901 other telecommunication services

Direct Tax Measures
The Minister of Finance has been given power to extend submission of tax returns, tax liabilities deadlines. The Assessment and Collection of Taxes Law, on 9 April 2020, the Minister of Finance has issued a decree No 155/2020 which replaces decree No 132/2020 issued on 30 March 2020.

The revised decree refers only to the granting of an extension with regard to the submission of the 2018 income tax returns of:

  • Companies (form TD4)
  • Self-employed persons whose turnover is in excess of Euro 70.000 and have an obligation to prepare audited accounts (Form TD1 self-employed) by 1st June 2020.

Law for the settlement of overdue taxes:
Settlement of overdue taxes was amended on 14 February 2020, and tax returns up to and including 2015 may be submitted until 30 June 2020 in order to qualify for a payment plan.

Social security measures

The General Health System has suspended an increase for special contribution. This increase in special contribution to the General Healthcare System has been suspended for three months without an impact on the implementation of the second phase of the General Healthcare System. The suspension will apply for the months of April, May, and June 2020. March 2020 month has been excluded and this increase contribution rates will apply.

Business support

Teleconferences and electronic notices for members of administrative organs
The General Principles of Administrative Law (Law 158(I)/1999 as subsequently amended) has been amended to allow the administration (government, local authorities, and all other organs that qualify as a public authority) to call and hold meetings by way of teleconference. This amendment has been introduced to allow the administration to continue to be functional in all circumstances.

Law on emergency measures taken by the Ministry of Labour, Welfare and Social Insurance
The Minister of Labour, Welfare and Social Insurance has been granted power, for the period from 16 March 2020 to 16 May 2020, to determine, with relevant decisions to be published in the Official Government Gazette, conditions, amount and method benefits will be granted under the emergency measures taken in response to Coronavirus, such as special sickness benefit, special leave for care of children, special unemployment benefit as well as other emergency measures that may be decided.

Amendment to the Statutory Tenants Law
The amending law adopted today by the House of Representatives provides that any eviction process shall be suspended (and new eviction orders will not be issued) until 31 May 2020. The law only applies to premises built before 31 December 1999. The suspension of eviction provided by the amendment law does not affect the right of the owner to bring legal action against a tenant for unpaid rents (tenants remain fully liable to settle rent for the months of March, April and May). The suspension of eviction provided in the amendment does not apply to tenants who have defaulted on previous rental payments until 29 February 2020.

Accounting implications

The Minister of Finance has extended deadline for submission of corporate income tax returns (forms TD4) and for personal income tax returns (forms TD1) of individuals preparing audited financial statements for financial year 2018, from 31 March 2020 to 1 June 2020.

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