Indirect Tax Update Payment of outstanding VAT Indirect Tax Update Payment of outstanding VAT

On October 30, 2020 the House of Parliament passed an amendment to the VAT Act according to which the payment for the outstanding amounts arising from the VAT returns submitted for the periods ending 29/2, 31/3 and 30/4 of 2020 is extended.

The repayment of the amounts due can be made in six (6) equal installments the first of which must be made on or before 10/11/20 and the final one on or before 10/4/21. It is noted that the initial deadline given for the payment of the said outstanding amounts was until 10/11/20.

Therefore, based on the amendment, if a taxable person who timely submitted his VAT return for the period e.g. which expired on 29/2/20 but did not pay the amount due, will be able to pay it in six (6) equal installments without the imposition of additional charges and interest.

Example 1

The taxpayer submits his VAT return for the period 1/12/19 - 29/2/20 on 10/3/20. The amount due as per the submitted VAT return amounts to €6.000. The taxpayer, based on the directive issued due to the pandemic, does not pay the amount due and opts to pay it on 10/11/20.

As a result of the amendment, the taxpayer may, if he so wishes, instead of paying the amount due by 10/11/20, to pay it in six monthly equal installments of €1.000 until 10/4/21.

Example 2

A taxpayer whose last VAT period ended on 29/2/20, received a notification by email to submit monthly instead of quarterly returns beginning in March 2020. The notification also stating that the taxpayer is required to pay at least 30% of the amount due from the monthly return as well as 30% of the amount due for the period ended 29/2/20 at the time of submission of the monthly return which was set the 27th day of the following month i.e. 27/3/20.

The table below shows how to calculate the balance that will be paid in installments for the tax period that ended on 29/2/20:

Calculation of balance which can be paid in 6 equal instalments   €            

Initial amount due on 29/2/20                  20.000  

Less 30% payable on 27/4/20                    6.000     (20.000X30%)

Balance after the payment of 27/4           14.000  

Less 30% payable on 27/5/20                    4.200     (14.000X30%)

Balance after the payment of 27/5/20     9.800    

Less 30% payable on 27/6/20                    2.940     (9.800X30%)

Balance after the payment of 27/6/20     6,860    

Less 30% payable on 27/7/20                    2.058     (6.860X30%)

Balance after the payment of 27/7/20     4.802    

At the end of the submission of the monthly returns and the payment of 30% of the respective balance, the balance of 29/2/20 ends up in the amount of €4.802 which can now be paid in six (6) equal installments, i.e. €800,33 (4.802/6).

The same methodology will be followed for the amounts due for the periods that ended in March and April 2020, whereupon the balance of the outstanding amounts due of these monthly periods also can be made in six (6) equal installments.

Please note that the balances due for the monthly tax returns of May and June must normally* be paid at the time of submission of the next quarterly or two monthly return which covers those months.

* The final position of the ΤΔ is expected as to whether it will allow all the balances arising from all the monthly returns to be paid in six equal installments such as those of February, March and April.

 

How can KPMG assist?

Should you like to further discuss the content and potential impact of the Circular to your business, please contact one of our trusted advisors from the Indirect Tax Department at KPMG Cyprus.

KPMG’s Indirect Tax team provides advice and assistance at the Cyprus and international level. We structure our effort to dovetail with your business issues and strategy. Our focus is on supplying value adding and pragmatic advice rather than just a list of recommendations.

Our tax professionals are able to review your company’s current tax position and provide relevant advice and planning on a range of indirect taxes, including VAT, customs duties and excise taxes (such as tax audits, reorganizations and acquisitions, etc.). Furthermore, we can help your company with its administrative obligations and contacts with administrative bodies.