Harris Kyriakides
Harris Kyriakides

New guidelines from the Tax Department on certification of company reorganisation plans

Posted on 4 December 2024 | 3 mins read

The Cyprus Tax Department has released a circular clarifying procedures for the certification of company reorganisation plans, detailing the requirements and deadlines for obtaining tax exemptions under Part VI of the Income Tax Law.

Background

In July 2024, the Ministry of Finance issued a new circular aimed at companies involved in reorganisations. This circular clarifies the procedures for obtaining tax opinions and certificates of exemption from tax payments due to company reorganisations. It outlines the requirements for companies seeking tax exemptions in relation to such restructuring activities, providing a clearer framework for compliance.

Current position of the Law

Under the existing provisions of Part VI of the Income Tax Law, companies undergoing a reorganisation may apply for tax exemptions. This process traditionally required companies to submit the necessary forms and supporting documentation to the respective District Offices. In some cases, companies could request a tax opinion from the Tax Department on whether their reorganisation plan qualifies for exemptions. These requests followed the procedures outlined in prior circulars issued in 2015 and 2016.

Changes in the Law

The latest circular reiterates the steps companies must follow to apply for these tax exemptions. It stresses the importance of submitting Form E.Pr.88 along with relevant documents to the Tax Department before the tax return deadline for the year in which the reorganisation took place. The circular also introduces more flexible provisions, allowing companies to file applications after the standard deadlines if justified and if the submission is made before a tax audit or examination begins. However, for cases involving the dissolution of companies, late applications will not be accepted. The circular also provides a transitional period for late submissions related to reorganizations that occurred before the 2023 tax year, with a final deadline of 31 December 2024.

Consequences and impact on the Cyprus market

This development is crucial for companies involved in restructuring, as it provides a clear and streamlined process for obtaining tax exemptions. By reinforcing the application procedures and introducing flexibility for certain late filings, the Tax Department aims to ensure that companies can benefit from these exemptions without undue administrative burden. This will likely have a positive impact on the business environment in Cyprus, promoting smoother reorganisation processes and offering companies greater certainty when planning their financial strategies.

For companies involved in reorganisations, the timely submission of the required forms and compliance with these new guidelines will be critical to avoid penalties and ensure their transactions remain tax-exempt.

For more information or any inquiries, please feel free to contact the members of the Harris Kyriakides Corporate team or email us at [email protected].