Tax Rulings by the Cyprus Income & VAT Office. Do you need one?

Over the last few years Tax Rulings introduced by the Cyprus Income and VAT Offices are becoming very popular and to be frank serve both; the applicant and the government which receipts a significant amount of funds per application. 

In this short article we explain what the tax ruling is, how much it costs and our approach.

What is a tax ruling?

A tax ruling is an enquiry to the Income or VAT offices about a specific tax treatment for a specific company. The applicant (tax experts like our firm) will submit the application and specific enquiries which must be answered in a simple and straightforward format (less is better). The application will be escorted by with the payment of disbursements of Euro 1,000 or Euro 2,000 for speed up process. 

The income tax office will respond to the specific tax or vat queries within 2 or 3 months depending on the disbursements paid.

What is the advisable approach before / during the tax ruling request?

Before we apply for a tax ruling we discuss the business and questions in place with the client as we must firstly assess if a tax ruling is really needed not so much for cost purposes but primarily because if issued it is binding to the Company activities tax application.

Consequently we will assess based on our knowledge the tax treatments in question and if required we will also discuss them with the Income Tax Office Examiners to get a feel of the overall consensus of how the specific transaction will be taxed. Such instances occurred for instance during Crypto Trading enquiries which are now clarified by the Cyprus Income Tax Office (see our previous articles on Cryptocurrency trading). In other words, had we reached a consensus on a tax treatment of a grey zone transaction we would inform the client of the outcome and then their approval if they wanted to verify our results with a tax ruling, as such results would then be binding to the specific company and had to be adopted.

Our Approach

See below an extract, a real life example we offered to one of our clients:

"Following our call and information provided kindly find below our quotation for tax advisory requested:

a) Review existing tax treatment for 2020 & Assessment if a tax ruling would be necessary  - Euro 3,000 + VAT

b) Obtaining a tax ruling for the accurate treatment of the tax computations of the company - Euro 4,000 + VAT + Disbursments*

c) Performing (a) and then (b) above - Euro 4,500 + VAT + Disbursements

Notes:

1. Disbursements:

Euro 1,000 which takes <3 months for the tax ruling to be issued by the Cyprus Income Tax Office or Euro 2,000 for a response within the month.  From experience both can be delayed by an additional month.

2. Tax Ruling Request: 

It is binding on the company and can not be challenged by the authorities once issued.

Our practice: We usually examine the tax treatment, we discuss it with senior income tax officers to get assurance of the tax treatment so that the outcome of the tax ruling is the expected one and then we apply for it so that we do not bind the Company with an unfavorable tax treatment. 

3. Next Steps 

Once the quotation is approved we will issue you with our engagement letter and request of 50% of deposit to commence work. 

Final settlement of our fees will be once the report is issued.

Thank you in advance.

Kyriakos Tramountanellis | BSc, FCA, Director "

Need Assistance with Tax Rulings

If you need an independent pair of eyes to assess specific transactions you are not certain of their tax treatment we would be more than happy to assist you; our approach would be offcourse the same:

1. Understand the business and the issue in question

2. Agree a proposed fee and signed the engagement letter

3. Ascertain a consensus of what we believe the tax treatment should be

4. Agree with you whether to get a tax ruling or not

5. Obtain a tax ruling and explain it to you and how it should be applied to your business.

CYAUSE Audit Services

Our firm services more than 300 clients from various backgrounds and industries. In our capacity of auditors, business consultants and tax experts we are required on a frequent basis to provide tax rulings or tax advice to complicated tax structures and transactions. Our long term experience in the field and frequent communication with the local Income and VAT offices enables us to give solutions and opinions fast and reliably. 

Feel free to learn more about us by viewing our website www.cyprusaccountants.com.cy.

If you require a tax ruling send me an email directly at kt@cyprusaccountants.com.cy