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Introduction
As part of a broader tax reform framework currently under public consultation, the Cyprus government has introduced a series of draft tax bills aimed, inter alia, at strengthening enforcement mechanisms for the collection of taxes and addressing repeated non-compliance.
Among the legislative initiatives are proposed amendments to the Assessment and Collection of Taxes Laws of 1978 to 2025 (the “ACT Law”) and the Collection of Taxes Laws of 1962 to (No. 2) of 2024 (the “CT Law”). These proposals represent only one segment of a wider legislative agenda, which remains subject to further consultation and vetting. The full spectrum is expected to be assessed through the prism of maintaining Cyprus’s business appeal and competitive edge, while aligning efforts with international standards on transparency and tax evasion deterrence.
Set out below is a summary of the key provisions in the enforcement-focused bills forming part of the ongoing tax reform initiative.
Expanded Information-Gathering Powers (Amendment to Article 27 of the ACT Law)
A key amendment to Article 27 of the ACT Law broadens the Tax Commissioner’s authority to obtain information. Previously limited to requesting data related to a person’s own tax affairs, the amended provision now explicitly permits requests for information regarding third parties if relevant. Importantly, this overrides any confidentiality obligations, including banking secrecy and professional privilege, thereby removing legal barriers that previously restricted access.
Moreover, the Commissioner can mandate the form and method of information submission, including electronic formats designed for automated processing that support structured and automated processing by information systems.
Business Suspension and Premises Sealing (New Article 32A of the ACT Law)
The introduction of Article 32A grants the Tax Department the authority to seek judicial orders to suspend and seal business premises for serious and repeated tax non-compliance. Grounds include persistent breaches of tax obligations, failure to issue required invoices or receipts (in at least three transactions or one exceeding €500), and obstructing audits through threats or force. Initial suspension lasts 48 hours but can be extended.
This enforcement tool marks a significant departure from prior practice, introducing a public, quasi-criminal sanction within a civil tax framework. While such powers are relatively uncommon in the EU, comparable measures exist in Greece and Italy, targeting VAT fraud and failure to issue receipts.
Electronic Service of Tax Indictments (New Article 47A of the ACT Law)
Article 47A facilitates the electronic service of indictments in tax offence cases. For legal entities, service may extend to persons identified as responsible for the offence, whether the indictment concerns those persons personally or the legal entity, provided these persons have a registered account in the Tax Department’s electronic system.
Mandated Electronic Payments for Rent (New Article 48A of the ACT Law)
To improve traceability of large transactions, Article 48A requires that rent payments of €500 or more per month for immovable property in Cyprus be made via bank transfer, card, or other recognised electronic payment methods.
Broader Criminal Liability for Legal Persons (Amendment to Article 51A of the ACT Law)
The amendment to Article 51A expands criminal liability for tax offences committed by legal entities. Currently, liability applies to executive directors, board members, and financial officers where fraudulent intent is shown. The proposed addition introduces a “piercing the corporate veil” approach: where the director or officer (expanded to include any member of the board of directors, receiver, administrator, and liquidator) of the offending entity is itself another legal person, liability will also attach to the directors or managing officers of that second entity, continuing in this manner until a natural person is identified.
Furthermore, the proposed new subsection (3A) establishes that any individual found criminally liable under this provision will also be jointly and severally liable with the legal entity in any related civil proceedings.
Preventing Evasion via Deregistration and Officer Changes (New Article 53A of the ACT Law)
Article 53A aims to prevent legal entities from avoiding tax obligations by deregistering or changing their directors or officers in the Companies Registrar. Specifically, if a legal person owes taxes, has failed to file tax returns, or is under tax investigation or audit, any deregistration or change – including retrospective changes – of the legal person or its directors and officers in the Companies Registrar will not be recognized for the purposes of tax enforcement under this law.
Lien on Shares for Unpaid Taxes (New Article 9F (9ΣΤ) of the CT Law)
New provisions empower the Tax Commissioner to register a lien on shares owned by persons who fail to pay taxes exceeding €3,000 within 30 days of the due date, unless alternative arrangements apply. This lien, registered with the Companies Registrar, prevents share transfers until removed. Affected persons are notified and may object or apply to Court within 30 days. The Court’s review will exclude consideration of the tax’s validity or amount. Procedures for registering and removing liens will be prescribed by official notice, and the lien may be discharged through a negotiated settlement.
Transfer of Property in Lieu of Tax Debt (New Article 9Z of the CT Law)
For tax debts over €10,000, the Minister of Finance may, upon recommendation by the Tax Commissioner and approval by the Minister of Finance, accept unencumbered immovable property in settlement. The property is valued by the District Land Officer, whose assessment is final and binding on the owner. The transfer proceeds only if the value is within 20% of the debt; surplus amounts are refunded or retained (refundable after five years if unused) as credit for repeat offenders. If the value is lower, owners must cover the shortfall. Regulations will govern this process and the roles of the relevant authorities.
Effective Date
These amendments are proposed to enter into force on 1 January 2026 on condition that these are approved and voted in favour by the House of Representatives.
Conclusion
It is essential that the implementation of the broader powers granted to the Tax Department is guided by the principle of proportionality. While the objective is to target deliberate non-compliance, it is equally important to preserve legal safeguards and protect taxpayer rights. As these proposals are currently under public consultation, there is scope for dialogue and refinement, thus providing an opportunity for an appropriate balance to be struck between effective enforcement and fair treatment, ensuring that measures introduced are both robust and equitable.