TaxLegi 31.08.2021
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Tax treatment of Covid-19 government grants and allowances
The Ministry of Finance – Tax Department, issued two circulars (no. 48 and no. 49) on 20 July 2021 with regard to the tax treatment of government grants and allowances that are given to companies, self-employed and employees by reason of Covid-19.
Specifically, the two circulars provide the following:Tax circular no. 48
Government grants provided by the Ministry of Finance to companies and self-employed individuals by reason of Covid-19, to cover for their rent and other operational expenses are not be subject to income tax.
In addition, it is noted that such government grants should form part of the profits subject to deemed / actual dividend distribution and consequently subject to withholding of Special Defence Contribution (“SDC”) and General Healthcare System (“GHS”) contributions, without any exception.Tax circular no. 49
Tax circular no. 49 confirms that the provisions of circular no. 44 issued on 22 June 2020 are still applicable. The said provisions provide that, allowances which are granted to individuals, by the Ministry of Labour, Welfare and Social Insurance by reason of Covid-19 (e.g. the operations of the company employing them have been partially or fully suspended, or in the case of self-employed their operations have been partially of full suspended, etc), do not fall under the provisions of article 5 of the income tax law and hence should not be treated as taxable in the hands of the recipient.
In addition, circular no. 49 clarifies that the above tax treatment is also applicable even if the Ministry of Labour, Welfare and Social Insurance has changed the procedure for the payment of these allowances and instead of remitting the allowances directly to the beneficiaries, these are paid to them through their employer.
EY Cyprus is at your disposal for any information and/or clarifications required.
Herodotos Hadjipavlou - Manager | Direct Tax Services
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Extension of the Deadlines for the Payment of 2020 Final Tax Liability and for the Submission of the 2020 Personal Income Tax Returns
Deadline for the payment of the 2020 final Tax Liability, via self -assessment.
The Minister of Finance, exercising the powers conferred to him by the provisions of Article 5 (1) of the Assessment and Collection of Taxes Law, issued a decree, which was published on 30 July 2021, in the Official Gazette of the Republic (Decision No. 5578 - K.Δ.Π. 343 / 2021), which extends the deadline for the payment of the tax year 2020 income tax liability of Companies and Self-Employed individuals with turnover above EUR 70,000 and who have the obligation to submit audited accounts.
Specifically, the said decree provides an extension to the payment of the 2020 income tax liability, as per the submitted 2020 TD4, via self-assessment by 30 September 2021 (previously 1 August 2021).Extension to the deadline for submission of personal Income tax returns and payment of the due liability.
Further to our previous Tax Alert issued on 23rd of July 2021 relating to the intention of the Minister of Finance to extend the deadline for submission of 2020 personal Income Tax Return (Form T.D.1), we would like to inform you that the relevant decree has now been issued and has been published on 30 July 2021, in the Official Gazette of the Republic (Decision No. 5878 – Κ.Δ.Π. 342/2021).
Specifically, the relevant decree states that the deadline for the electronic submission of the 2020 personal income Tax Returns (FormT.D.1) for employees and pensioners, whose total gross annual income exceeds €19.500 as well as for self-employed (Form T.D.1 self-employed), with turnover below EUR 70,000 and who do not have the obligation to submit audited accounts, has been extended from 30 September 2021 to 30 November 2021.
EY Cyprus is at your disposal for any information and/or clarifications required.
Michalis Karatzis - Senior Manager Business Tax Compliance Services
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Cypriot Tax Department announces update of XML Schema for DAC6/MDR submissions
On 29 July 2021, the Cypriot Tax Department (CTD) issued an announcement regarding a new XML Schema that enters into force on 5 August 2021. The new XML Schema is for the submission of information on reportable cross-border tax arrangements under the European Union (EU) Directive on the mandatory disclosure and exchange of information (referred to as DAC6 or the Directive).
In particular, the new XML Schema should be used from 5 August 2021, so that the XML files submitted to the electronic service DAC6 of the Government Gateway Portal (Ariadni) are acceptable.
It was also announced that all the relevant updated files bearing the title “from 05 August 2021” have been posted on the CTD’s website under the following link.
In addition, on 30 July 2021, the CTD also announced that the existing (old) XML Schema can only be used for DAC6 submissions to the “Ariadni” portal up to 3 August 2021.
The second announcement clarifies that the electronic service DAC6 will not be available for use on 4 August and 5 August 2021 (i.e., there will be a downtime of the system), in order to facilitate the transition to the new XML Schema.EY has developed the DAC6 Wizard tool to enable streamlined submissions, taking into account all updates and developments on the relevant XML Schema format.
For additional information with respect to this Alert or the new tool, please contact our experts.
Stavros Karamitros - Assistant Manager | International Tax and Transaction Services
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Circulation of a new versions of residence documents for EU citizens and their families
The Civil Registry and Migration Department announces that from 02/08/2021, the new versions of residence documents for EU citizens and their family members are put into circulation. The new versions comply with the requirements of EU Regulation 2019/1157 of the European Parliament and of the Council of 20 June 2019, on strengthening the security of identity cards of Union citizens and of residence documents issued to Union citizens and their family members exercising their right of free movement.
The commencement of the issuance of the new residence documents does not affect the procedures followed, applications and fees.
For residence documents, issued before 02/08/2021, according to the above Regulation, the following apply:
(a) The Certificates of Registration and Certificates of Permanent Residence of Union citizens and their family members who are also Union citizens, remain valid and their replacement is not required.
(b) Residence Cards and Permanent Residence Cards of family members of Union citizens who are not themselves Union citizens, which expire after 3 August 2023, will cease to be valid on that date and their holders must replace them in due course by submitting a relevant application.
CIVIL REGISTRY AND MIGRATION DEPARTMENT - Announcements (moi.gov.cy)How we can help:
Our Immigration experts can assist you through the whole process of applying and issuing such residence documents. Whether you want to know if you are affected by this change or if you are eligible for applying, our Immigration Services team, remains at your disposal.
Panayiotis Thrasyvoulou - Associate Partner, Head of People Advisory Services
Riginos Polydefkis - Senior Manager, Head of Immigration Services
Costas Anastasiou - Manager, Immigration Services
