Cyprus tax department to seal businesses with unpaid debts

Cyprus’ Tax Department is set to begin sealing the premises of businesses with unpaid tax debts during the summer, using powers introduced under the country’s new tax framework that came into force earlier this year.

The measure forms part of the broader tax reform package approved by parliament and effective since January 1, 2026.

According to a report from Philenews, the suspension of business operations and sealing of premises is one of several additional enforcement tools granted to the department under the new legislation.

For the measure to be activated, at least one of the three conditions set out in the revised legal framework must apply.

Information obtained by the newspaper indicated that during the summer months the Tax Department intends to intensify pressure on taxpayers, both individuals and companies, with outstanding tax liabilities exceeding €20,000.

The debts triggering the legislation will include the total amount owed together with surcharges and will cover direct taxes such as income tax, special defence contribution and capital gains tax, as well as withheld taxes, contributions and VAT.

The measure will also apply to cases involving self-assessment or final tax assessments issued by the Tax Commissioner, meaning all deadlines for objections will have expired or any administrative and judicial procedures will have been completed.

In addition, outstanding debts must not be under objection and must not be pending before the courts.

The Tax Department is also expected to launch a broader compliance campaign targeting debtors, beginning with large-scale offenders.

At the same time, tax officials will focus on active businesses for which there is evidence of ongoing commercial activity.

Following the identification of tax debtors and the issuance of an initial warning, the department’s aim will be to push debtors towards settling their obligations through repayment arrangements and instalment schedules.

Businesses entering into such repayment agreements will avoid closure measures, the report explained.

Under this approach, the state is expected to recover unpaid revenues while debtors will be given the opportunity to repay their obligations through structured timetables.

Officials are currently carrying out internal assessments and categorising debtors according to the size of their tax liabilities in order to determine enforcement priorities and the procedures to be followed.

The sealing of business premises will take place only after three separate warnings have been issued and once 25 days have passed from the department’s initial contact.

From the summer onwards, taxpayers owing more than €20,000 or businesses failing to issue receipts and invoices will first receive an initial notice from tax authorities.

Taxpayers will then have ten days to settle their obligations. If they fail to do so, a second warning will be issued, giving debtors another ten days to comply.

Should there still be no response, department officials will deliver a third notice granting taxpayers five days to present their positions.

If no compliance follows, authorities will be able to seal the business premises for up to ten days.

The sealing order will be lifted once taxpayers comply with their obligations and obtain the relevant certificate from the Tax Commissioner.

Where taxpayers continue to refuse compliance, the commissioner will have the authority to seal the business premises for a further period not exceeding 20 days.