The Cyprus tax authorities have always been forthcoming in issuing advance tax rulings. The advance ruling procedure helps achieve certainty for clients proposing to effect their transactions in or via Cyprus, eliminating uncertainty and establishing the circumstances and extent to which a transaction or series of transactions would be taxable.
In October 2015, Circular 2015/13 was issued by the tax authorities setting out the procedure and timeframe for advance ruling requests. In accordance with this circular, rulings would be issued with respect to transactions relating to tax years for which the due date for filing a tax return has not elapsed, and transactions falling after such date proposed to be undertaken by existing or new entities. Requests must be made in writing and include, other than a detailed factual summary of the proposed transaction and explanation of the tax issues at stake, the name and tax identification code of the parties involved and evidence of filing of the relevant tax returns. The application must outline the tax treatment which the applicant contends to be applicable with relevant references to the tax legislation and precedents, if any, and must pose a clear question on confirmation of such contention.
As a follow up to Circular 2015/13, the Cyprus tax authorities recently issued Circular 130/2016, which provides that fees will be applicable to ruling applications submitted from 16 May 2016 onwards (other than with respect to matters for which the tax authorities have an obligation to respond by law, being (i) requests for the exemption from taxation concerning reorganisations in accordance with s.30 of the Cyprus Income Tax Law; (ii) requests for the application of tax exemptions on loan restructurings processes, (iii) requests submitted by an employer in relation to the application or not of PAYE to a departing employee receiving an ex gratia payment, and (iv) requests concerning stamp duty):
- EUR1,000 for rulings without an expedition request
- EUR2,000 for rulings with an expedition request
Expedited requests will receive a response within 21 working days on the condition that all relevant facts and information relating to the case have been duly submitted. Unexpedited requests will be processed chronologically. Requests must be submitted electronically through the official gateway at: firstname.lastname@example.org containing the completed T.D.219/2016 form and a request and proof of payment. The new procedure has been implemented with a view to facilitate the automatic exchange of information on advance cross-border rulings and advance pricing arrangements in accordance with the provisions of the EU Council Directive 2015/2376 of 8 December 2015, which amends Directive 2011/16/EU Directive 2011/16/EU that obliges Member States to exchange tax rulings which are foreseeably relevant to tax administrations and collection in any other relevant Member State.
An advance cross border ruling is a communication interpreting the application of a legal or administrative provision contained in the Cyprus tax laws that satisfies all three of these conditions:
- It is addressed to a specific person or group of persons, who are entitled to rely on such communication
- It refers to a cross border transaction
- It is submitted in advance of the transactions to be carried out in that other Member State, or in advance of the filing of the tax return concerning the period in which the transaction is effected and is made with respect to an investment, the provision of goods or services or the use or financing of tangible or intangible assets
Rulings will be binding only with regard to the specific facts and concerning the taxpayers specifically mentioned in the relevant request, and for as long as there is no change in the tax law which would render the ruling outdated. On any change of facts or parties, a taxpayer should seek a renewed ruling.