DAC 6 – Tax Circular Providing Clarifications on Penalties

As we have reported recently a Decree was issued by the Cyprus Ministry of Finance, which provides practical guidance with respect to the reporting process and gives further clarifications on the main provisions of the law, through which DAC6 was introduced in to Cyprus legislation (the “Law”).  On 19 November 2021 the Cyprus Tax Department issued a Circular providing clarifications on the administrative fines imposed for non-compliance with DAC6 reporting obligations.

The Circular provides for the following clarifications in relation to the fines:

  • There is an annual cap of €120.000 per intermediary or taxpayer for all Reportable Cross-Border Arrangements (RCBAs)  having a reporting deadline within a calendar year, unless the penalty arises because of wilful default or fraud by the intermediary or taxpayer.
  • A 50% reduction of administrative fines applies when failure to report or incomplete or misleading reporting or omission to notify takes place before any DAC6 audit is carried out by the Cyprus Tax Department, provided that a filing in order to rectify the situation happens before the statutory deadline for the submission of the tax return of the relevant intermediary/taxpayer for the calendar year for which the reporting should have taken place.
  • Where intermediaries/relevant taxpayers have an inaccurate interpretation of the Law, which is applied on multiple arrangements, multiple penalties will not apply provided that such interpretation was reasonable and resulting from insufficient guidance from the Cyprus Tax Department. The above does not apply to cases of wilful default or fraud.
  • Intermediaries/relevant taxpayers must keep books and records relating to a RCBA for at least 6 years from the end of the tax year to which the RCBA relates. A penalty may be imposed within the tax year to which the RCBA relates, or within 6 years from its expiration. In case of wilful default or fraud, the period of 6 years shall be increased to 12 years.

The Circular also clarifies the method of imposition of administrative fines as well as the relevant appeal options and process.

It is reminded that the Law provides for the following administrative fines:

  • Up to €20.000 for failure/delay to submit information for a RCBA
  • Up to €20.000 for failure/delay to notify for the application of a waiver
  • Up to €10.000 for submission of incomplete/misleading information
  • Up to €10.000 for failure to submit information within the prescribed deadlines

A fine can be increased up to €20.000 for failure to settle it on time and for continuation of the infringement.

View all news