Delays in resolving tax disputes remain one of the most significant challenges facing Cyprus' tax justice system, affecting both the administration of justice and the country's attractiveness as an investment and financial hub.
The issue was at the centre of a conference titled "Tax Justice and Dispute Resolution Mechanisms," organised by the Cyprus Bar Association, Ernst & Young and the University of Nicosia, which was attended by Politis. Speakers highlighted delays in the adjudication of tax cases, their impact on the economy and the need for reforms.
Participants stressed that an effective tax system is particularly important during periods of economic uncertainty and that the prompt delivery of tax justice is a key factor in maintaining Cyprus' appeal as a business destination.
Simos Simou, Partner, Tax Controversy and Green Taxes at Koukounis Karaolis LLC (EY Law), noted that although Cyprus ranked third globally in the 2025 World Competitiveness Index, delays in tax litigation continue to affect its overall competitiveness.
The president of the Nicosia Bar Association, Stephanos Skordis, said tax disputes are among the most complex cases handled by lawyers because of both the complexity of substantive tax law and demanding procedural requirements.
Direct taxation and objections
Proceedings in direct taxation cases begin with a tax audit and the issuance of an initial tax assessment.
At this stage, taxpayers obtain their first opportunity to challenge the assessment by submitting a mandatory objection to the Tax Commissioner, according to Panayiotis Tziogouras, Partner, International Tax and Transaction Services (ITTS) at EY.
Through the objection process, taxpayers can present arguments and submit additional evidence before a final tax assessment is issued. This stage is often preceded by extensive correspondence between the taxpayer and the Tax Department.
If the dispute remains unresolved, taxpayers have 60 days to submit a formal objection to the Tax Commissioner.
Should disagreement persist after the review, they may file an administrative appeal with the Tax Tribunal within 45 days or alternatively challenge the decision before the Administrative Court within 75 days.
The process may subsequently proceed to the Administrative Court of Appeal and, in matters involving legal interpretation, to the Supreme Constitutional Court.
The Tax Tribunal
According to Simou, the objection process represents the first meaningful opportunity to settle a tax dispute without further escalation.
If no agreement is reached, the case may be referred to the Tax Tribunal, where it is examined on the basis of the audit report and material already submitted. New evidence is accepted only in exceptional circumstances, and decisions are typically issued within one year.
The tribunal may overturn or amend the Tax Commissioner's decision or refer it back for reconsideration with specific instructions.
Its decisions are final when they rule in favour of taxpayers.
By contrast, the Administrative Court examines both the legality and substance of a case, relying on oral and written testimony as well as other evidence to reach a fuller assessment.
In some disputes involving European tax legislation, referral to European institutions may also be possible.
How disputes arise
Tziogouras said tax disputes now arise from a wide range of domestic and international issues.
For businesses, particular emphasis was placed on transfer pricing rules. Following Cyprus' adoption of legislation aligned with OECD guidelines, disagreements frequently arise over methodologies used to document transactions and calculate taxable income.
Disputes also emerge over the deductibility of expenses, the taxation of income generated through the IP Box regime, and claims for foreign tax credits, often because of delays in obtaining tax certificates and determining whether foreign taxes correspond to Cyprus income tax obligations.
For individuals, the most common disputes concern special tax regimes and exemptions relating to employment income, the application of the 90-day rule, and questions of tax residency, particularly in cases involving returning Cypriots.
In the field of VAT, disputes often stem from failures to submit returns, inaccuracies in VAT, VIES or Intrastat declarations, poor record-keeping, incorrect VAT refunds or credits, registration issues and the tax treatment of high-risk activities.
In some cases, authorities attribute violations to deliberate omissions or fraudulent conduct.
According to EY's global survey presented during the conference, the most significant international tax risks currently involve digital taxes and tax incentives, followed by VAT, other indirect taxes and issues relating to permanent establishments.
Speakers argued that these developments make the rapid and effective resolution of tax disputes even more important.
Improving procedures
Photini Tsiridou, chairwoman of the House Legal Affairs Committee and a DISY MP, said tax justice has a direct impact on the economy.
She argued that, particularly following Cyprus' tax reform efforts, dispute-resolution procedures must be improved in order to strengthen the country's credibility and attractiveness as an investment destination.
Klelia Papadopoulou, Senior Tax Officer, said tax justice encourages voluntary compliance among taxpayers.
She noted that approximately 6% to 7% of initial tax assessments result in objections.
Papadopoulou added that the Tax Department has established an independent team to review objections and ensure a fair and objective reassessment process.
For his part, Makis Georgiou, chairman of the Tax Tribunal, described administrative appeals as a fast and cost-effective process.
He said efforts are under way to reduce the average completion time from one year to between seven and eight months.
Georgiou also stressed that oral hearings allow decision-makers to gain a deeper understanding of complex tax matters and contribute to improved tax administration.
Retired Supreme Court judge Costas Pampallis attributed the substantial delays of previous years to the large volume of administrative cases handled by the Supreme Court.
He noted, however, that significant progress has been made in recent years to reduce the backlog and improve the efficiency of the system.
