The Process of Adjustment of Tax Arrears Law of 2017, Law 4(I) of 2017, was published in the official gazette on 3 February 2017. It will take effect on a future date to be determined by the Commissioner of Taxation and establishes a procedure for settling arrears of taxes which arose prior to that date by monthly instalments. It covers all nationally-imposed taxes including income tax, value added tax, special contribution for defence (commonly known as SDC tax), capital gains tax, stamp duty and special contribution to be paid by employees, pensioners and the self-employed. The law will not apply in cases involving undeclared funds, deposits or transfers.
Taxpayers must submit their application for arrears to be dealt with under the law no later than three months after the law takes effect. The tax department is required to respond to within a prescribed time, failing which the application is deemed to be accepted, provided that the applicant has submitted all necessary statements for all periods included in the arrangement.
The arrangement for payment by instalments will become binding as soon the first monthly payment has been made, provided that it does not create any new overdue current debt.
Arrears of debt of up to €100,000 may be settled in 54 equal monthly instalments, and larger amounts may be settled in 60 equal monthly instalments. The tax department may apply to the Attorney General to suspend any enforcement proceedings if an agreement for payment by instalments is reached.
The first instalment must be paid no later than the last day of the month in which the applicant indicates its agreement to the tax department’s acceptance of the proposal for payment by instalments. Each of the remaining instalments must be paid not later than the last day of the month to which it corresponds. If a debtor misses a payment it must be paid with the following instalment, failing which it the missed payment is spread over the remaining instalments of the arrangement. Instalments are allocated against the oldest debt on a first-in, first-out basis.
The arrangement is automatically terminated if the debtor is more than two months late in paying an instalment, or if the debtor misses three instalments or fails to submit a return or to pay a current tax debt. If an arrangement is terminated, the tax department will take steps to collect any outstanding balance in the usual manner.
The new law does not affect existing arrangements for tax debts to be repaid by instalments, apart from giving the debtor the right to apply for the balance of the debt to be dealt with under the new law.