Cyprus tax reform introduces higher fines to tackle evasion

Cyprus’ tax reform has revised rates and deductions and also substantially raised financial penalties, with the changes entering into force on January 1.

According to Philenews, the objective is to make fines more deterrent and strengthen tax compliance.

The administrative fine for breaching the decree on card payments has increased to €6,000 for businesses that do not accept credit cards.

Previously it stood at €4,000, while during the first implementation phase it was €2,000. The obligation, in place since autumn 2021 across retail, services, catering and leisure venues, forms part of efforts to combat tax evasion, protect public revenues and facilitate consumers.

Financial penalties have also risen for refusal or failure to submit declarations, statements or data, or for breaching duties under the certification and collection law.

The daily charge for a continuing violation is now €20 from €17.

Meanwhile, the fine for unjustified omission of income from a tax return has increased to €5,000, compared with £2,000 previously.

Non-compliance with invoicing and receipt regulations set by the Council of Ministers is also punishable by €5,000, up from £450.

Charges for late submission differ by taxpayer category. They are set at €150 for individuals, €250 for small companies with turnover below €1 million and €500 for large entities.

Higher charges apply when non-compliance continues after a deadline set by the tax commissioner, including cases involving third-party obligations. These are €300, €500 and €1,000 respectively.

However, when the commissioner grants an extension, typically to July 31 or January 31, no charge applies if both the return and self-assessment tax are submitted within that extended period.

In cases where the tax department seals premises due to failure to issue legal receipts or because of tax debts, violating the sealing constitutes a criminal offence punishable by a fine of up to €30,000 and/or imprisonment of up to two years.

An executive director, board member or other official responsible for financial management becomes criminally liable in the event of non-payment of tax.

Penalties have also increased for the extraordinary defence contribution. Upon first conviction, the offender faces a fine of up to €5,000 and payment of up to double the contribution due.

A second conviction carries a fine of up to €100,000, imprisonment of up to two years and payment of four times the contribution. For other violations of the law, the fine is €1,000, previously £500.

Finally, offences linked to procurement or financial benefit for defence-related purchases carry fines of up to €30,000, rising to €100,000 when a public official or a person serving the Republic is involved.