VAT Measures Enacted by Legislation 27th March

The measures

The actual amendments to the legislation are made to the articles that impose penalties and interest. Specifically, the imposition of penalties and interest (including penal penalties) are waived with regards to the payment of any due VAT for the VAT quarters ending:

  • 29 February 2020 (due 10 April 2020);
  • 31 March 2020 (due 10 May 2020);
  • 30 April 2020 (due 10 June 2020),

but only if

(i) The VAT declaration is submitted by the due date, and

(ii) Any VAT payable is paid by 10 November 2020.

 

The application of the amendments does not apply to certain categories of businesses as follows:

  • Producers of electricity
  • Collection and distribution of water (for water supply)
  • Groceries and supermarkets that are mainly for food • Convenience stores and mini markets
  • Retailing of a variety of goods in department stores where food, beverages and tobacco are not predominant
  • Retail of fruit and vegetables - fruit shops
  • Retail sale of meat and meat products including poultry
  • Retail sale of fish and seafood-fish
  • Retail sale of bread, other bakery and confectionery products
  • Retail sales of fuel
  • Retail sale of computers, peripherals and software
  • Retail sale of books
  • Retail sales of newspapers and stationery
  • Retail sales of toys of all kinds except video games
  • Pharmacies
  • The Cyprus Telecommunications Authority (“CYTA”)
  • Internet services • Satellite telecommunications services
  • Other telecommunication services except CYTA

 


COVID-19: Measures by the Government of Cyprus

The World Health Organization (WHO) has declared the COVID-19 outbreak to be a pandemic. In Cyprus, the Government has announced several measures to support the economy of the country and restrict the spread of COVID-19. These measures include:

 

TAX

  • Extension of the submission deadline of income tax returns for two months i.e. the new deadline TD. 4 (Corporate Tax Returns) and TD. 1 (Personal Income Tax) for 2018 is now 31 May 2020.
  • Suspension of the rise in the General Health System (GESY) contributions by the employer and the employee for two months (April 2020 and May 2020).
  • There will be special arrangements for the taxpayers who have been included in the scheme regarding the settlement of overdue taxes.

 

VAT

  • Reduction in the Standard VAT rate from 19% to 17% for two months.
  • Reduction in the Reduced VAT rate from 9% to 7% for 3,5 months.
  • Suspension of the obligation for the VAT payment without any penalties for two months. This applies for:
    1. Businesses with turnover less than €1 million based on the VAT returns during 2019
    2. Businesses whose turnover has been reduced by more than 25%

 

Other Adjustments

  • Four weeks ‘special’ parental leave who work in the private sector with children aged up to 15. A parent with a salary of up to €2.500 for the first €1.000 will receive a 60% special leave allowance, while for the next €1.000 a 40% allowance will be paid. In the case of single-parent families, the ratio will be 70% and 50%, respectively. If the salary exceeds €2.500 then no special leave allowance is given.
  • A €750 allowance to students who will remain abroad during the Orthodox Easter holidays because of the measures.
  • The public service will operate with a safety staff and work will be done from home wherever possible. This comes into effect on Tuesday 17th March.
  • A price ceiling on items such as face masks and antiseptics to prevent profiteering.
  • Sick leave for those required to self-isolate or quarantine.

 

The following businesses were closed from Monday 16th March for four weeks:

  • Department stores and shopping malls. The same applies to shops irrespective of their nature or size inside shopping malls. Supermarkets inside shopping malls may remain open provided that special health safety measures are applied.
  • Restaurants, cafes (except those offering delivery services)
  • Clubs, cinemas, theatres, other entertainment centres, and amusement parks
  • Libraries
  • Museums and archaeological sites
  • Casinos and betting shops
  • Sporting establishments
  • Hairdressers and beauty salons
  • Hotels (operations suspended until 30 April 2020)

 

The following businesses will remain open:

  • Supermarkets (assuming no more than 1 person (including employees) per 8 square meters is present within the same area)
  • Pharmacies
  • Private medical centres
  • Food markets
  • Bakeries and confectionaries
  • Petrol stations
  • Kiosks

 

It is noted that retail businesses that do not fall under the category of businesses that must close, can continue their operations, as long as there are less than 5 employees in the workplace. Furthermore, for serving the public, all businesses of the private and public sector must ensure that no more than 1 person per 8 square meters is present in the reception area.

***The current situation regarding COVID-19 in Cyprus is subject to change. All the above amendments can be altered at any time by the Government.

For any questions or clarifications on the above announcements please contact us.

 


Traveling Measures by the Government of Cyprus

Larnaka & Pafos International Airports are open and operate on a 24/7 basis. However, as of 17 March 2020, all Food & Beverage outlets will be closed at both airports based on the latest regulations by the Republic of Cyprus. Passengers are requested to contact their airline directly for any changes in the airlines’ flight schedule.

 

Latest Measures

Based on the measures taken by the Government to confine the coronavirus pandemic and aiming to safeguard Public Health, flights from the following countries to the airports of Larnaka and Pafos will be banned as of 3a.m. 21 March 2020 for a period of 14 days (with the exception of cargo flights):

Bahrain, Belarus, Belgium, Bulgaria, Egypt, Estonia, Germany, Hungary, Ireland, Israel, Jordan, Latvia, Lebanon, Lithuania, Malta, the Netherlands, Norway, Poland, Qatar, Romania, Russia, Serbia, Slovakia, Sweden, Switzerland, Ukraine, United Kingdom and Greece.

 

It is also added that flights to the Republic of Cyprus without passengers will be allowed for those wishing to leave the island.

  1. Up until 21stMarch 2020, 3 a.m local time entry to the republic of Cyprus is strictly allowed to individuals possessing a medical certificate issued within the last four days prior their travel date, indicating negative results to COVID-19. The abovementioned certificate must be issued by a state medical laboratory or an authorised laboratory by the state at the country of departure for individuals that fall into the following categories:

(a) Cypriot citizens
(b) Legal residents in the Republic of Cyprus
(c) European nationals or third-country nationals working in the Republic
(d) Nationals of countries who are in a designated diplomatic service or mission under bilateral or international conventions
(e) Individual cases of European nationals or third-country nationals for unavoidable professional obligations, provided that the relevant authorization has been obtained from the competent Ministry
(f) European or third country citizens attending educational institutions in the Republic of Cyprus

  1. The following groups are exempted from the medical certificate submission measure:

(a) People who travelled for health reasons
(b) People that are on short professional/business trips
(c) People that are under the terms of the Vienna convention

Note: People falling within the categories above may be accompanied by individuals they were accompanied by during their departure and during their treatment abroad.

Individuals falling within the categories above, instead of possessing a health certificate, they have to possess a certificate issued by the diplomatic missions of Cyprus, which is going to be issued if those individuals present to the diplomatic missions of Cyprus the necessary documentation proving the reasons mentioned in categories 2(a) and 2(b) (e.g. departure tickets from Cyprus or doctor’s notes from the medical facilities they were treated by).

  1. As of the 21stof March 2020, 3 a.m. and for a period of 14 days all flights are prohibited and if necessary, the Republic of Cyprus is going to charter special flights from Athens and London for those falling within the categories 2(a) and 2(b) above wishing to return to the Republic of Cyprus.
  2. Individuals falling within the categories above entering the Republic of Cyprus will still need to go to a 14-day compulsory isolation (quarantine) in places indicated by the government with the exception of people staying abroad for health reasons. The latter are going to remain in self-isolation in order to carry on with their treatment uninterruptedly.

 

Airlines must ensure strict adherence to the above measures before boarding.

 

Contact info:

In case of an emergency, Cypriot citizens may contact the following numbers:

  • Diplomatic Missions of the Republic of Cyprus abroad: Their contact details could be accessed at the website of the Ministry of Foreign Affairs www.mfa.gov.cy under Cyprus Diplomatic Missions Abroad.
  • Consular Affairs Department of the Ministry of Foreign Affairs: +357 22651113 (08:30 - 15:00, Monday - Friday)
  • Duty Officer of the Ministry of Foreign Affairs: +357 99660129 (outside working hours*)
  • Crisis Management Department of the Ministry of Foreign Affairs: +357 22801000 (24/7)

* The Duty Officer’s line is reachable outside office hours and is intended to provide assistance in emergency situations. For non-urgent questions, please contact the relevant Department of the Ministry during normal office hours via the switchboard +357 22-651000.

***The current situation regarding COVID-19 in Cyprus is subject to change. All the above amendments can be altered at any time by the Government.

 


GHS Payments to be Increased on The 1st March 2020

Taxation for the first phase of the General Health System (GHS) in Cyprus commenced on 1st March 2019 and from 1st June 2019 all beneficiaries were able to access the care services such as doctor visits, medicine and laboratory examinations.

The first taxation phase introduced the payments from the employee and employer to the General Health System fund.

The percentages from 01/03/2019 up until 29/02/2020 and from 01/03/2020 and onwards are as follows:

Contributor’s Category 01/03/2019-29/02/2020 01/03/2020 onwards
(1) Employees/ pensioners/income earners/persons holding an office 1,70% 2,65%
(2) Employers 1,85% 2,90%
(3) Self-employed 2,55% 4,00%
(4) The Republic or natural/legal person responsible for the remuneration of Officers 1,85% 2,90%
(5) The Republic 1,65% 4,70%

 

The contributions are calculated based on the gross emoluments of each employee (including benefits in kind).

The second phase of the taxation of the GHS in Cyprus is due to commence on 1st March 2020. This will therefore mean that employees will contribute 2,65% of their salary and employer will contribute 2,90% of the salary of each employee. The increase being 56% for employees and 57% for employers from the first phase.

For the purposes of calculating the contributions, gross emoluments are limited to €180.000 per annum (except for categories (2), (4) and (5).

The contributions will increase in order of the General Health System to be able to commence its full operations by 1st June 2020.

 

For any questions or clarifications on the above amendment please contact our team of tax and payroll advisors.

 

 


Benefits in Kind

According to the Article 5 of the Income Tax Law, as from 1st January 2019 the benefits provided to an employee from holding an office or employment are subject to tax. These include benefits provided to a member of his family either in cash or otherwise.

Benefit in Kind (“BIK”) is considered to be the benefit that is, or is deemed to be, granted in connection with any employment or the holding of an office.

Categories of BIKs

  • Benefits in kind in relation to cars
  • Accommodation and use of assets
  • Other benefits in kind

Exemptions as a general principle apply to the extent where the payment or reimbursement to the employee or officer is made against actual costs incurred supported by receipts.

Other more specific exemptions include:

  • Computer equipment
  • Telephone services
  • Childcare facilities
  • Goods consumed in the workspace
  • Newspapers
  • Awards for long-term service
  • Christmas parties and events
  • Subscriptions to professional bodies
  • Training courses/scholarships
  • Uniforms and specialised attire
  • Relocation expenses

 

The value of the benefits in kind is taxed the same way as the gross earnings, through the submission of TD7. Employers are required to declare the benefits in kind provided by them or by their connected companies.

For any questions or clarifications on benefit in kind tax and rules please contact our team of tax advisors.


Income Tax Law Amendment

The House of Representatives has amended the Income Tax Law published in the Government Gazette on 20th December 2019 and will have immediate effect for the 2019 tax year.

Although in the Gazette is not clearly stated, this is applicable from the tax year 2019 onwards.

The amendment increases the limit of allowances from 1/6th to 1/5th of an individual’s taxable income before such allowances.

The allowance consists of the following aggregated contributions and premiums:

  • Social Insurance Fund
  • Approved Pension and Provident Funds
  • General Healthcare System (GHS)
  • Life Insurance policies (maximum 7% of the insured amount)
  • Medical and other approved funds (maximum 1,5% of remuneration)

 

Employers should therefore re-consider their payroll calculations moving forward based on the above amendment.

 

For any questions or clarifications on the above amendment please contact our team of tax advisors.