Implementation of Directive (EU) 2017/1852 of 10 October 2017 on tax dispute resolution mechanisms

The Cyprus Tax Department has published draft legislation to implement Directive (EU) 2017/1852 for consultation. The draft legislation comprises an amending law, which adds two new articles to the Income Tax Law of 2002, and regulations to be issued under the second of those articles.

The draft law and regulations replicate the Greek language text of the directive almost verbatim. They allow taxpayers faced with double taxation disputes to initiate a procedure requiring the Tax Department and its counterpart in Cyprus and the other EU member state concerned to make efforts to resolve the dispute amicably within two years. If no solution has been found at the end of the two-year period, the two tax authorities must establish an advisory commission to arbitrate. If they fail to do so, the taxpayer can bring an action before the national court to enforce the obligation.

The advisory commission will comprise three independent members and representatives of the two countries’ tax authorities in question. It will have six months to deliver a final, binding decision. This decision will be immediately enforceable and must resolve the dispute.

The new law is intended to take effect from 1 July 2019. It will apply to any appeal submitted from that date on disputes relating to tax years beginning on or after 1 January 2018, and, if the tax authorities concerned agree, to appeals already in existence.

For further information on this matter please contact Natasa Polyviou or your usual contact at Elias Neocleous & Co LLC.