TaxLegi 30.09.2021

On 21 September 2021, the Cypriot Tax Department (CTD) issued an announcement regarding a further extension to 30 November 2021 of the non-application of administrative fines for submissions with respect to information on reportable cross-border arrangements under the European Union (EU) Directive on the mandatory disclosure and exchange of information (referred to as DAC6 or the Directive).

In June 2021, the CTD issued an announcement extending the non-imposition of administrative fines for DAC6 submissions to 30 September 2021. In its latest announcement, the CTD confirmed its intention to not impose administrative fines for submissions of information under DAC6 until 30 November 2021, for the following cases:

• Reportable cross-border arrangements that have been made (i.e., of which the first step of implementation has taken place) between 25 June 2018 and 30 June 2020 (i.e., within the transitional period of the Directive) and that had to be submitted by 28 February 2021.
• Reportable cross-border arrangements that have been made (i.e., that were made available for implementation or were ready for implementation or the first step in the implementation has been made or for which aid, assistance or advice has been provided by a secondary intermediary) between 1 July 2020 and 31 December 2020 (i.e., within the six-month deferral period of the Directive) and that had to be submitted by 31 January 2021.
• Reportable cross-border arrangements made or to be made between 1 January 2021 and 31 October 2021 (i.e., within the normal application period of the Directive) that had to be submitted within 30 days beginning on the day after they were/will be made available for implementation or were/will be ready for implementation or when the first step in the implementation has been/will be made, whichever occurred/will occur first.
• Reportable cross-border arrangements for which secondary intermediaries provided/will provide aid, assistance or advice, between 1 January 2021 and 31 October 2021 (i.e., within the normal application period of the Directive), and had to submit information within 30 days beginning on the day after they provided/will provide aid, assistance or advice.
• The first periodic report for marketable arrangements that had to be submitted by 30 April 2021.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Cyprus Limited, Nicosia

• Petros Krasaris
• Panayiotis Tziongouros
• Stavros Karamitros

Stavros Karamitros - Assistant Manager | International Tax and Transaction Services

Endnotes:

¹ https://globaltaxnews.ey.com/news/2021-5970-cyprus-announces-further-extension-of-non-application-of-administrative-fines-for-dac6-submissions-to-30-november-2021

The Council of Ministers issued a set of regulations (Κ.Δ.Π. 378/2021), published in the official gazette of the Republic of Cyprus on 3 September 2021, announcing that the application of the Social Insurance (Contributions) (Amended) Regulations of 2017 (Κ.Δ.Π. 167/2017) shall become effective as of 13 September 2021. The said regulations will substitute the Social Insurance (Contributions) Regulations of 2010 (Κ.Δ.Π. 289/2010) as amended.

We set out below those regulations that have been amended:

Regulation 3 – Registration of employers: Employers should register, by submitting the relevant registration form at least one (1) day before becoming an employer.

It is noted that previously, employers had to register, by submitting the relevant registration form within one (1) month from becoming an employer.

Regulation 4 – Registration of employees and self-employed persons: Employees need to communicate to their employers their identity card (ID) and social insurance number at least one (1) day before the commencement of their employment. In case there are employees who are not registered with the Social Insurance Services, their employer must submit the relevant application form within seven (7) days from the commencement of their employement.

Self-employed persons need to register with the Social Insurance  Services at least one (1) day before the commencement of their employment.

It is noted that previously, the registration had to be completed within one (1) month from the commencement of the employment of the employee or the self-employed person.

Regulation 4A – Certificate of commencement of employment: It is noted that as of 13 September 2021 this certificate is abolished.

Regulation 5 – Communication of hiring employees: Employers must communicate the hiring of an employee by completing and submitting a relevant form at least one (1) day before the hire date.

The said form can only be submitted electronically via the system “Ergani” – please see relevant link https://ergani.mlsi.gov.cy.

Regulation 6 – Maintenance an employee hire register: Employers must maintain an employee hire register, apart from an emoluments register,  which includes the following information for each employee:

Sequence number of hiring / Name and surname / Identity Card (ID) number / Social Insurance number / Date of hire / Date of commencement of employment.

The register, which can also be maintained electronically, should be available for inspection at any reasonable time.

EY Cyprus is at your disposal for any information and/or clarifications required.

Katia Argyridou - Manager Payroll Services

The Minister of Finance, exercising the powers conferred to him by the provisions of Article 5 (1) of the Assessment and Collection of Taxes Law, issued a decree, which was published on 24th September 2021 in the Official Gazette of the Republic (Decision No. 5600 - K.Δ.Π. 394 / 2021), which extends the submission deadline of the Income Tax Return for companies and self-employed persons.

Based on the above, the submission deadline for the income tax return of  companies (Form T.D.4) and self-employed persons whose turnover exceeds the amount of €70,000 and have the obligation to prepare audited accounts (Form T.D.1 self-employed), for the tax year 2019, has been further extended from 30 September 2021 to 30 November 2021.

It should be relevant to note that the payment deadline of the final tax liability for the Tax Year 2020 remains the 30th of September 2021.

Our team remains at your disposal for any information and/or clarifications required.

Michalis Karatzis - Senior Manager, Direct Tax

It’s an undisputed fact that climate change is a reality that we are already experiencing. Our future, therefore, needs to be centred around mitigating it and the European Green Deal (EGD) is an important tool towards this goal.

Like all industries, shipping comes with its own share of Greenhouse Gas emissions (GHG). With about 90% of world trade transported by sea, the shipping sector is one of the major emitters, responsible for somewhere between 2% and 3% of the global total. If the industry was a country, its emissions would be equivalent to those of Germany. What’s also a certainty is that global trade is projected to increase in the coming years, so it is unwise to rely on controlling (let alone curbing) the sector’s emissions, simply by following a ‘business as usual’ line.

EU PLAN INCLUDES SHIPPING

The sector is seen as one of the most difficult to decarbonise, with industry groups arguing about the lack of commercially viable technologies. Even though intermediate targets to reduce emissions by 2030 can be met with available technologies and a mix of short- and medium-term measures (such as lower speeds, improvements in operational efficiency through data analytics, and energy-efficient designs of vessels), it is estimated that complete decarbonisation – by 2050 and beyond – will be much harder to achieve. To that end, the International Maritime Organization has been taking steps towards keeping the emissions in check, but the relatively slow progress achieved so far has prompted the EU to act. With the inclusion of the shipping industry in the EGD, the EU was hinting that solutions for controlling and limiting emissions need to be accelerated. It it has now put forward plans for the world’s first carbon border tax as part of a programme to minimise carbon leakages when emissions are generated in areas outside the union, and then imported into the EU. The idea is to apply the tax to those sectors of the European economy not covered by the EU Emissions Trading Scheme (ETS).

A carbon border tax should be in place no later than 2023 and it is believed by many economic commentators to be one of the most effective tools for emissions reductions. In addition, the EU has proposed to extend the scope of the ETS to cover emissions from ships. Under the revised EU plan, shipping routes within the EU would be gradually added to the ETS from 2023 and phased in over a three-year period; this would cover large ships (above 5,000 gross tonnage) regardless of the flag they fly. Ship owners and operators will have to buy allowances under the expanded ETS when their ships exceed their allotted quota or else face penalties and possible bans from EU ports.

TAX LEVY ON SHIPPING WILL PUSH FOR CHANGE

It is clearer than ever that the shipping industry can no longer sail under the radar when it comes to taking responsibility for its ongoing emissions and adopting the right mitigation strategies. This will require radical change throughout the maritime sector and its supply chain, from fuel to crews, suppliers and ports. A more generalised carbon tax and the ETS levy on shipping groups would incentivise ship owners and operators to invest in new technologies and give them a commercial imperative to move away from traditional fuels and into cleaner solutions.

The Tax Strategy of the shipping groups will now need to be considered in conjunction with their Environmental Social and Corporate Governance (ESG). This means that decisions around a company’s effective tax rate and the available tax incentives and credits for developing and adopting greener solutions should intersect with their sustainability efforts, as more stakeholders ask companies to disclose their strategies for responding to climate change.

In Cyprus, we have already seen things moving in this direction with the incorporation of such incentives in the new Tonnage Tax Regime (approved for another 10 years), providing a range of green incentives to reward owners of environmentally friendly vessels, while at the same time imposing administrative fines for non- compliance with environmental rules.

Tax Advisors will need to be in the room when shipping companies take their ESG-related decisions, to help them consider the tax implications of these decisions and plan better for the future.

Eleni Sofocleous - Director, Business Tax Advisory Services