The Process of Adjustment of Tax Arrears Law 2017 establishes a procedure for settling tax arrears by monthly instalments (for further information please see "New law for payment of tax arrears by instalments"). It covers all nationally imposed taxes, including:

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

When the law was enacted, it was announced that it would take effect on a future date to be determined by the commissioner of taxation once the necessary administrative arrangements had been put in place.

The required notification was published in the Government Gazette on June 23 2017 and the law entered into effect on July 3 2017. The notification provides details of the process, the years to which the scheme will apply and waivers of penalties.

The law covers all taxes assessed by the Tax Department for tax years up to and including 2015, as well as all amounts payable as a result of the submission of a self-assessment in respect of those tax years in which the tax returns for the relevant tax year have already been submitted but no tax payment has been made. It also covers tax liabilities concerning tax years up to and including 2015 assessed by the Tax Department after July 3 2017. Taxpayers must submit their applications in relation to existing arrears no later than October 3 2017. For tax liabilities assessed after July 3 2017, the application should be submitted within three months of the date on which the tax becomes due.

A percentage of the interest and penalties on overdue taxes will be waived, determined on a sliding scale according to the number of monthly instalments over which the payment is spread. If the arrears are settled in one instalment, 95% of the interest and penalties will be waived; if they are settled in 60 instalments (the maximum allowed), half of the interest and penalties will be waived. No additional charges will accrue.

Any 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 to pay an existing tax debt.

If an arrangement is terminated, the tax department will take steps to collect any outstanding balance in the usual manner.

For further information on this topic please contact Philippos Aristotelous at Elias Neocleous & Co LLC by telephone (+357 25 110 110) or email ([email protected]). The Elias Neocleous & Co LLC website can be accessed at