Cyprus IR59 Employees

[Omega Arpha]

Hi,

I have few questions regarding IR59 form (from employee's perspective):

1. Is this form mandatory to submit for employees?
2. If I don't submit it, what are consequences? Do I understand correctly, that my employer will just not apply any deductions I might have, which are not known to him (for example charity donations), when calculating my GHS, Social Insurance and Tax amounts on salary received from this employer?

Thanks.

 

[Ready to discuss]

1. Employer has a legal obligation to calculate and deduct the PAYE therefore has the obligation to send you this form and suggest you to complete it.
2. Avoid to do it means that,
()a) you will lose the opportunity to request further tax deduction, because you can declare other personal expenses that your employer is not aware.
(b) you employer will assume that you have no any other income.
(c) if you earns extra income (other than salary) is considered tax avoidance since you are hiding income l.
(d) Maybe your employer will take it negatively (unprofessional behaviour).

 

[Omega Arpha]

Hello,

Thanks for your answers, though I have few clarifying questions:

a) You mean I will lose opportunity for more deductions for the income from that particular employer (and not the ones which are not related to him)?

c) But I'm not hiding it from IRS, I will still declare it in any other tax forms, I just do not want to declare it through IR59 with my employer.

Regards.

 

[Ready to discuss]

A) you can declare deductions (expenses) related to you as an employee/person (i.e. subscriptions to be an architect for example, life insurance etc). I can see that you have more than 1 source of income (as employee) Are you an employee and at the same time you have extra activities (on your free time) or are you employed with more than 1 employer? The extra activities are through a Company or as as self-employed?

C) Since you declare them, no issue.

 

[Omega Arpha]

A) Extra activities as self-employed. As far as I understand, that I can optionally use my deductions (not known to employer) through form IR59 to reduce my tax liabilities from the salary from that employer when he does his calculations.

C) Yes, I would declare them (and pay taxes if needed), just without IR59 form through employer.

However, this situation is theoretical one for me. I'm just researching different schemes.

It is possible that I would go with Company -> 12.5% tax -> non-domicle dividends, if government will not provide clarifications regarding crypto profits, tolerant tax rates and/or tax exemptions for individuals/companies (currently I have not converted into FIAT) in the next 1-2 years.

Of course, IR59 questions apply to both schemes if I will remain employed.

 

[Ready to discuss]

General speaking, in Cyprus you cannot be at the same time employee and self-employment. This is a big issue and tax authorities needs to fix this. I have the same problem. The solution is to have a separate company and issue invoices as for the extra activity.

Again there is another problem in that case. You need to be employed by your Company. Therefore you will employed by 2 companies.

In addition, you need to check your employment contract. Some companies are not allow you to work on another company without notice them and especially if you have similar activities.

 

[Omega Arpha]

I don't quite agree with you than you can't be employee of the company and self-employed (even though it is not a no-brainer as being just an employee).

TAXISnet also has instructions for salaried individuals in Part 4 I (Any Other Income), where it says:

If you have income from trade or trading income from a partnership and you will continue to have such income regularly after 2021 you must submit a declaration for self employed persons and not employees 2021. Contact the Department to change the type of electronic form for your 2021 declaration.

After that (I suppose) you will be filling TD1 for self-employed and in section I1 you can declare your salary. All other requirements for self-employed and obligations also apply in parallel (like accounting books if turnover exceeds 70k) as well as GHS/SI/Tax liabilities on total net income (profit).

 

[Omega Arpha]

Of course, employment by 2 companies simultaneously might be an issue in terms of following your obligations as an employee and with respect to terms of your employment contract (like non-compete or non-disclosure clauses and obligation to notify company).

In any case, I have decided that it will be easier to make employer aware of my other income through IR59 form in case I would been in such situation.

 

[Ready to discuss]

Great be Aware of the risk. I heard strange stories were employees have been terminated when their employer learn this.

Our discussion is not a professional advice.

Have a nice day.

 

[Omega Arpha]

Yes, I agree, safest setup is to work only for your company.