The Process of Adjustment of Tax Arrears Law 2017 (Law 4(I) 2017) was published in the Official Gazette on February 3 2017. It will take effect on a future date to be determined by the commissioner of taxation and establishes a procedure for settling tax arrears which arise before that date by monthly instalments. The law covers all nationally-imposed taxes, including:

  • income tax;
  • value added tax;
  • special contribution for defence;
  • capital gains tax;
  • stamp duty; and
  • special contributions to be paid by employees, pensioners and the self-employed.

The law will not apply in cases involving undeclared funds, deposits or transfers.

Taxpayers must submit their application to have arrears dealt with under the new law no later than three months after it takes effect. The Tax Department must respond within a prescribed time, failing which the application will be deemed to be accepted, provided that the applicant has submitted all necessary statements for all periods included in the arrangement.

The arrangement for payment by instalments will become binding as soon the first monthly payment has been made, provided that it does not create any new overdue debt. Debt arrears up to €100,000 may be settled in 54 equal monthly instalments; larger amounts may be settled in 60 equal monthly instalments. The Tax Department may apply to the attorney general to suspend enforcement proceedings if an agreement for payment by instalments is reached.

The first instalment must be paid no later than the last day of the month in which the applicant indicates its agreement to the Tax Department's acceptance of the proposal for payment by instalments. Each of the remaining instalments must be paid no later than the last day of the month to which it corresponds. If a debtor misses a payment, it must be paid with the following instalment, failing which the missed payment will be spread over the remaining instalments. Instalments are allocated against the oldest debt on a first-in, first-out basis.

The arrangement is automatically terminated if the debtor:

  • is more than two months late in paying an instalment;
  • misses three instalments; or
  • fails to submit a return or pay a tax debt.

If an arrangement is terminated, the Tax Department will collect any outstanding balance in the usual manner.

The new law does not affect existing arrangements for tax debts to be repaid by instalments, apart from giving the debtor the right to apply to have the balance of the debt dealt with under the new law.

For further information on this topic please contact Philippos Aristotelous at Elias Neocleous & Co LLC by telephone (+357 25 110110) or email ([email protected]). The Elias Neocleous & Co LLC website can be accessed at