The Law Regulating the Settlement of Overdue Taxes

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In February 2017, the House of Representatives passed a law on the procedure for settling tax arrears. Baker Tilly published a document explaining the procedure. The taxes covered are the following:

(a)  Income tax

(b)  Special contribution for the defense

(c)  Immovable property tax

(d)  Capital gains tax

(e)  Inheritance tax

(f)  Special contribution for employed, retired and self-employed in the private sector

(g)  Special contribution for refugees

(h)  Stamp duties

(i)   Value Added Tax

On 23 June 2017, the Tax Commissioner issued a notice on how to implement the relevant law, the main provisions of which are set out below.

 

Submission of application for regulation

An application for inclusion in a regulatory plan   must   be   submitted within   three months from the effective date of the law, which is 3 July 2017 (i.e. by 2 October 2017) via a specific website application. Both the Tax Commissioner’s decision and the taxpayer’s statement of acceptance are made through the website application.

 

Tax liabilities subject to regulation

This regulation relates to the following tax liabilities:

(a)  All taxes in arrears up to and including 31 December 2015 which at the date of the application have been assessed by the Tax Department and appear as payable, irrespective of the manner in which they are repaid either by agreement with the Tax Department or pursuant to a court order.

(b)  Amounts which become payable as a result of the submission of a self- assessment in respect of tax years up to 31 December 2015 where the tax returns for the relevant tax year have already  been  submitted  by  3  July 2017, but without payment of the tax due.

(c)  Tax liabilities which are assessed after 3 July 2017 by the Tax Commissioner relating to tax years until 31 December 2015. In such a case, an application for regulation shall be made within three months from the date on which the tax becomes payable, on the basis of the tax assessment which has been issued.

 

No. of monthly installments and percentage of exemption

Overdue taxes may be subject to the exemption of a percentage of penalties and interest due to non-payment of taxes due as follows:

 

Monthly installments (%) of exemption

(a)  one off payment         95%

(b) from 2 to 8                  90%

(c)  from 9 to 15               85%

(d) from 16 to 21              80%

(e)  from 22 to 28             75%

(f)  from 29 to 35              70%

(g) from 36 to 42              65%

(h) from 43 to 49              60%

(i)   from 50 to 56             55%

(j)   from 57 to 60             50%

 

Payment of the agreed installments is made through the financial institutions.

 

Various other provisions

(a)  Tax liabilities subject to regulation are no longer subject to penalties or interest for late payment, which is otherwise provided under the relevant legislation.

(b) The regulation is terminated in specific cases of non-compliance by the taxpayer with his obligations set out in the notification, resulting in the obligatory immediate settlement of the outstanding balance of the tax liabilities.

(c) Where criminal proceedings against a taxpayer are pending before the court and the taxpayer applies for a regulation which is approved, the proceedings are suspended.