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Tax Amnesty to settle Overdue Taxes
To boost the revenues of the state funds, the House of Representatives, voted a law that provides for write-off of interest and penalties on taxes accrued up until 31 December 2008. The new law, which applies to most of the tax liabilities such as income tax, capital gains tax, immovable property tax and special defence contribution tax, provides that any interest or fines exceeding 5.0 per cent of the total amount due to the Inland Revenue Department is to be written off, if the amount overdue is settled in full by 30 March 2012. Taxand Cyprus discusses how this new law is likely to impact businesses with interests in Cyprus.
The tax amnesty period has now been extended by the Parliament for another 8 months, ending on 31 October 2012. The new provisions apply to both individuals and companies.
According to the new law, if a tax liability paid was based on tax returns submitted, but not assessed by the Inland Revenue Department, the Director of Inland Revenue has the right at a later stage to proceed with a tax assessment. In these cases, the additional amount assessed by the Tax Authorities will be subject to interest and penalties according to the relevant tax laws.
It must be noted that the Attorney General raised concerns about the constitutionality of the new law. His concerns are based on the decision of the Supreme Court of Cyprus in 2007, which ruled that the tax amnesty is considered to be discriminatory.
The law entered into force on 12 December 2011, published in the official gazette and will be in force until 31 October 2012. Any possible further extension has not yet been proposed.
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