On 22 November 2021, the Cypriot Tax Department (CTD) announced (pdf) a further extension to 31 January 2022 of the non-application of administrative fines for submissions with respect to information on reportable cross-border arrangements under the Cypriot DAC6/Mandatory Disclosure Rules (MDR)1 Law (Law 41(I)/2021 of 31 March 2021, amending Law 205(I)/2012 on Administrative Cooperation in the Field of Taxation of 2012, hereinafter referred to as the Law).2
The CTD previously issued an announcement (pdf) in September 2021 extending the non-imposition of administrative fines for DAC6 submissions until 30 November 2021.
In its latest announcement and following the formal extension of reporting deadlines for DAC6 submissions until 30 November 2021, as provided for in the DAC6 Guidelines (i.e., Ministerial Decree No 438/2021 of 29 October 2021), the CTD has now announced its intention not to impose administrative fines for submissions of information under DAC6 until 31 January 2022, for the following cases:
- Reportable cross-border arrangements that have been made (i.e., of which the first step of implementation has taken place) between 25 June 2018 and 30 June 2020 (i.e., within the transitional period of DAC6) and that had to be submitted by 28 February 2021.
- Reportable cross-border arrangements that have been made (i.e., that were made available for implementation, or were ready for implementation, or the first step in the implementation has been made, or for which aid, assistance or advice has been provided by a secondary intermediary) between 1 July 2020 and 31 December 2020 (i.e., within the six-month deferral period of DAC6) and that had to be submitted by 31 January 2021.
- Reportable cross-border arrangements made or to be made between 1 January 2021 and 1 January 2022 (i.e., within the normal application period of DAC6) that had (or have) to be submitted within 30 days beginning on the day after they were/will be made available for implementation, or were/will be ready for implementation, or when the first step in the implementation has been/will be made, whichever occurred/will occur first.
- Reportable cross-border arrangements for which secondary intermediaries provided/will provide aid, assistance or advice, between 1 January 2021 and 1 January 2022 (i.e., within the normal application period of DAC6) and had to submit information within 30 days beginning on the day after they provided/will provide aid, assistance or advice.
- The periodic reports for marketable arrangements.
Administrative penalties
The Law provides for penalties for non-compliance which are listed below. It is relevant to note that the DAC6 Guidelines, which were issued in the form of a Ministerial Decree3 on 29 October 2021, do not include any additional provisions with respect to the administrative penalties.
| Breach | Penalty (one-off administrative fine per entity and arrangement) |
| Failure to report a Reportable Cross-Border Arrangement (RCBA) | €10,000-20,000 |
| Delay in reporting an RCBA | Up to 90 calendar days: €1,000-5,000 |
| More than 90 calendar days: €5,000-20,000 |
|
| Filing inaccurate or incomplete or misleading report of an RCBA | €1,000-10,000 |
| Failure to notify other intermediaries or the relevant taxpayer by the intermediary regarding the exemption due to Legal Professional Privilege (LPP) | €10,000-20,000 |
| Delay in the notification of other intermediaries or the relevant taxpayer by the intermediary regarding the exemption due to LPP | Up to 90 calendar days: €1,000-5,000 |
| More than 90 calendar days: €5,000-20,000 |
|
| Failure to provide the CTD with information or documents for an arrangement within 14 days from the date of reception of written notice | €1,000-10,000 |
| Failure to pay the administrative fines imposed/Continuance of the relevant breach | Increase of imposed fine up to €20,000 |
On 10 November 2021, the CTD issued Circular EE 55 (the Circular), on the imposition of administrative fines for non-compliance with reporting obligations under the Law.
The Circular states that the CTD may impose penalties within a period of six years from the end of the relevant year to which the reportable cross-border arrangement relates. However, the right to impose penalties is extended to twelve years in the case of willful default or fraud. Moreover, intermediaries and relevant taxpayers are required to maintain books and records for a period of six years from the end of the year to which the reportable cross-border arrangement relates.
Additionally, the Circular makes it clear that penalties will also be imposed on intermediaries and relevant taxpayers for failing to comply with their reporting and notification obligations during the transitional period of DAC6 (i.e., period between 25 June 2018 and 30 June 2020).
The Circular clarifies that there will be a cap of €120,000 annually on the penalties for relevant taxpayers and intermediaries for all their reportable cross-border arrangements that have a reporting deadline within a calendar year unless the penalty arises because of the intermediaries’ or relevant taxpayers’ willful default or fraud. It is also clarified that in the case of Cypriot intermediaries of the same group or associated legal entities, this cap will apply only to one of the Cypriot intermediaries and not to each one of them (per entity).
Further details are provided regarding the imposition of DAC6 penalties in Cyprus with respect to the possibility for a 50% reduction on applicable penalties under certain conditions. In addition, as per the Circular, under certain conditions, the CTD may not impose multiple penalties to a relevant taxpayer or an intermediary in case they rely on a wrong interpretation of the Law and they apply such interpretation on different arrangements, provided however that such interpretation was reasonable and resulted from the absence of guidance or the delay in issuing the DAC6 Guidelines.
Finally, the Circular also clarifies the procedure to appeal against the CTD’s decision to impose administrative fines before the Tax Tribunal or the Cypriot Administrative Court.
For additional information with respect to this Alert, please contact the following:
Ernst & Young Cyprus Limited, Nicosia
- Petros Krasaris
- Panayiotis Tziongouros
- Stavros Karamitros
For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.
