Cyprus tax officials are finalising strict new enforcement measures that will allow them to shut down businesses and seize corporate shares from taxpayers who fail to meet their obligations.
The measures are part of a broader tax reform that took effect on 1 January. Sources told Phileleftheros that officials have recently held meetings to establish the exact protocols for these actions to ensure they are legally watertight against potential court challenges.
While originally planned for the first quarter of the year, the implementation of business closures was delayed due to the economic impact of the Middle East crisis. Officials are now considering launching the measures during the summer months.
When businesses will be sealed
Under the new legislation, the Tax Department can suspend operations and seal premises for several specific violations including the failure to submit at least two tax returns or twelve withholding tax and contribution statements. Authorities may also act if a taxpayer fails to submit three VAT returns or if tax debts exceed €20,000 across income tax, defence contribution, capital gains tax, and VAT. The measures also apply to those who fail to issue invoices or receipts, issue inaccurate ones, or obstruct tax officials during an audit. The debt threshold applies only to final assessments where all deadlines for appeals or court challenges have expired.
The 30-day lockdown countdown
Closing a business is not an immediate action as the process takes approximately 30 days once a violation is identified. The taxpayer first receives a notice giving them ten days to comply. If non-compliance continues, a second ten-day warning is issued. This is followed by a third notice providing a final five-day window for the taxpayer to submit their views. Once a final decision is made, it is published in the Government Gazette and executed ten days later. Officials can then seal the premises, using police assistance if necessary.
Premises will be marked with Tax Department tape and can be sealed for up to ten days, with a possible extension of another twenty if the owner remains non-compliant. Breaking a tax seal is a criminal offence punishable by a fine of up to €30,000 or two years in prison.
Seizing shares for large debts
For tax debts exceeding €100,000 that remain unpaid for more than 30 days, the Tax Commissioner can now freeze corporate shares. The Commissioner is currently coordinating with the Registrar of Companies to streamline this process. Under the rules, the state can freeze shares worth up to double the amount of the debt plus interest. These shares cannot be transferred while the freeze is in effect.
Finance Minister Makis Keravnos is expected to issue a decree soon to formally outline the administrative steps for share seizures. Taxpayers will have 30 days to contest a notice of intent to freeze shares before the Commissioner notifies the Registrar of Companies to register the lien.