Cyprus Parliament has enacted legislation providing for the partial write-off of interest and penalties on overdue tax, provided that the balance is settled by the 31 March 2012.

The newly enacted legislation applies to individuals and companies alike and affords a waiver of interest and penalties in excess of 5% of the principal amount owed. The law applies to income tax, SDC tax, immovable property tax, stamp duty and capital gains tax for periods up to 31 December 2008.

The law was enacted despite warnings from the office of the Attorney General`s office that it is unconstitutional. In a letter to the House Finance Committee, the Attorney General warned that the legislation contravenes articles 24 and 28 of the Cyprus Constitution, which provide that all persons are equal before the law and that every person is bound to contribute according to their means towards public burdens.

The Attorney General warned that the legislation would have the same effect as a similar law passed in December 2007, which was ruled as being discriminatory by the Supreme Court. In its May 2008 decision, the Supreme Court held that the 2007 law was unconstitutional since it discriminated against taxpayers who comply with their obligations in favour of those who refuse to assume and fulfil the same obligations.

Pekris & Theodorou LLC is a Cyprus law firm with Cyprus lawyers and other legal experts on legal matters involving Cyprus law, EU law and international law. The above should be used as a source of general information only. It is not intended to give a definitive statement of the law and is subject to the disclaimer.

Further Tax Law related information is available here.