Cyprus DAC6 Penalty Circular

Cyprus DAC6 Penalty Circular

What is DAC6?

EU Council Directive 2011/16 on cross-border tax treaties, known as DAC6, entered into force on 25 June 2018. DAC6 focuses on transparency and fairness in taxation.

DAC6 applies to cross-border tax treaties that meet one or more of the specified characteristics (characteristics) and which relate to either more than one EU country or an EU country and a non-EU country. It provides for a reporting obligation for these tax treaties if they come within the scope, regardless of whether such an arrangement is justified under national law.

Failure to comply with DAC6 could mean facing significant sanctions under local EU law and reputational risks for businesses, individuals and intermediaries.

Therefore, businesses need to understand the importance and significance of the directive and the need to act now to ensure compliance by the 2020 deadline.

The Hadjivangeli team will help you with taxation and financial business planning.

A circular was recently issued explaining the penalties imposed for non-compliance with DAC6 obligations in Cyprus.

Following the transposition of DAC6 into domestic law and the issuance of the relevant Guidelines in the form of a Decree on November 19, 2021, the Tax Department (TD) issued a Circular that sets out certain clarifications on administrative penalties imposed for non-compliance with the DAC6 reporting obligation.

Administrative fines are imposed on the basis of the law for the following violations:

• Up to € 20,000 for non-compliance / delay in submitting information for a cross-border accountability agreement (RCBA).
• Up to EUR 20,000 in case of refusal / delay in the notification of the application of the refusal.
• Up to € 10,000 for providing incomplete / misleading information.
• Up to 10,000 euros for failure to provide information on time.
• Increase to 20,000 euros for non-payment of an administrative fine and continuation of the violation.

The circular contains the following clarifications in relation to the aforementioned penalties subject to the conditions:

• Annual limit of EUR 120,000 per intermediary or taxpayer.
• In some cases, reduction of administrative fines by 50%.
• Incidents of misinterpretation of the law due to insufficient or late issuance of instructions.
• The minimum period of accounting and the imposition of administrative fines.

In addition, the Circular describes the method of imposing administrative fines as well as a hierarchical appeal process.

We would also like to inform you that the Ministry of Finance has announced that there will be no administrative fines for filing the following tax returns until December 6, 2021:

• Electronic submission of the 2019 corporate income tax return (TD4).
• Electronic filing of the 2019 personal income tax return (TD1A) from audited financial statements (FS) preparers.
• Electronic submission of the 2020 personal income tax return (TD1 form).

We draw your attention to the fact that this article is for informational purposes only. For more advice, contact us at the contacts listed on the site.