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Indirect Tax update:Changes to the VAT appeal procedure

Changes to the VAT appeal procedure

The purpose of the present newsletter is to inform taxpayers of the recent amendments to the Cyprus VAT Act in relation to the procedure that they will have to follow when submitting an appeal against an assessment issued by the Tax Department.

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Board Member, Indirect Tax Services

KPMG in Cyprus

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The applicable procedure prior to the amendments to the Cyprus VAT Act

In accordance with the legislation that was in force until recently, taxable persons, whether legal entities and/or physical persons, had the right to submit written objection against VAT assessments resulting from VAT audits performed by the Tax Authorities to their books and records to the:

  • Commissioner of taxation, within 60 days from the date of receiving the notification for the assessment by the relevant taxable person
    (pursuant to Article 51A of the Cyprus VAT Act).
  • Minister of Finance, within 60 days from the date of receiving the notification for the assessment by the relevant taxable person (pursuant to Article 53 of the Cyprus VAT Act).
  • High Court, within 75 days from the date of receiving the notification for the assessment by the relevant taxable person or from the date the decision is made for the appeal to the Minister of Finance or to the Commissioner of Taxation (pursuant to Article 164 of the Cyprus Constitution).

Prior to the submission of a VAT appeal to the Minister of Finance in relation to VAT matters listed in Article 52 (amended by article 52A) of the Cyprus VAT Act, the taxpayer should have:

a)   Submitted all VAT returns· and

b)   Paid the total of the disputed VAT amount.

Changes in the Cyprus VAT Act

Amendments to Articles 50 and 51A of the Cyprus VAT Act

According to the recent amendments, the right to appeal to the Minister of Finance is replaced with the right to submit hierarchical appeal to the Tax Tribunal (eforiako symvoulio). Also, there is a replacement of the phrase «High Court» to that of «Administrative Court» since the role of the first party is now assigned to the Administrative Court.

Replacement of Article 52 of the Cyprus VAT Act

Taxable persons, whether legal entities and / or physical persons, before submitting an appeal to the Administrative Court can submit a hierarchical appeal to the Tax Tribunal, within 45 days from the date of notification of the Commissioner's decision to the applicant, for the following matters:

  • VAT imposed on the supply of goods or services, the intra-community acquisition of goods (acquisition of goods from other EU Member
    States) or importation of goods from outside the EU
  • The amount of any input VAT a taxable person is eligible to claim
  • VAT assessment pursuant to Articles 49 or 49A (omission of the submission of VAT returns or certificates in connection to the acquisition of certain goods from non-taxable persons)
  • Issuance of VAT assessment pursuant to Article 50 (limitation period and supplementary assessments)
  • Any directive or supplementary directive issued pursuant to Paragraph 2 or Part I of the Schedule One (artificial segregation of businesses)
  • Any decision taken pursuant to Paragraph 1 of Part I of Schedule 4 (transactions between related parties when no VAT is claimable)

Addition of Article 52A of the Cyprus VAT Act

Taxable persons, whether legal entities and / or individuals have the right to submit objections to the Commissioner of Taxation, but not to the Tax Tribunal, in relation to VAT matters included in the amended Article 52 of the Cyprus VAT Act, such as the registration and deregistration of a taxable person for VAT purposes, any request for claiming input VAT as per Article 12D etc.

Replacement of Article 53 of the Cyprus VAT Act

Preconditions for appealing to the Tax Tribunal:

  • He has submitted the necessary documents and evidence to substantiate his claim
  • All VAT return forms have been submitted and VAT payable has been paid or arranged to be paid
  • He has paid the undisputed VAT amount or has given a relevant guarantee to the Tax Tribunal

Addition of Article 54A of the Cyprus VAT Act

The Tax Tribunal has the right within 12 months of the submission of an appeal to:

  • Cancel or confirm the whole or part of the Commissioner’s
    decision
  • Amend the Commissioner’s decision
  • Issue a new decision replacing the previous decision of the Commissioner of Taxation (the new decision should be issued within a 6 month period from the date of the submission of the appeal)
  • Refer the case back  to the Commissioner of Taxation giving him instructions to perform specific actions

It should be noted that the taxpayer reserves the right to submit an appeal to the Administrative Court following the final decision of the Tax Tribunal but not the  Commissioner of Taxation.

The amendments are applicable since 7 July 2017.

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