European Institute of Management and Finance | Criminal liability of Officers for their companies’ failure to comply with the provisions of the Cyprus VAT Law 95(I)/2000
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Criminal liability of Officers for their companies’ failure to comply with the provisions of the Cyprus VAT Law 95(I)/2000

04 Mar Criminal liability of Officers for their companies’ failure to comply with the provisions of the Cyprus VAT Law 95(I)/2000

We share with you a very interesting article written by one of our training team, Advocate Mary-Olive McCluskey. If you’re part of the senior management team, a Director or Board member you will find this an even more appealing read, as we are once again reminded of the importance of knowing and understanding the responsibilities and liabilities of such positions – the court cases speak for themselves!

 

Ποινική ευθύνη συμβούλων κ.λ.π

48.—(1) Όταν διαπράττεται ποινικό αδίκημα που αναφέρεται στον παρόντα Νόμο από νομικό πρόσωπο, την ευθύνη για το αδίκημα αυτό φέρουν εκτός από το ίδιο το νομικό πρόσωπο, οι σύμβουλοι ή οι διευθύνοντες αξιωματούχοι του νομικού προσώπου.

(2) Για τους σκοπούς του παρόντος άρθρου “διευθύνων αξιωματούχος”, σε σχέση με νομικό πρόσωπο, σημαίνει οποιοδήποτε διευθυντή, γραμματέα ή άλλο παρόμοιο αξιωματούχο του νομικού προσώπου ή οποιοδήποτε πρόσωπο που φέρεται ότι ενεργεί σε σχέση με οποιαδήποτε τέτοια ιδιότητα ή ως σύμβουλος.

 

Free translation by the Author:

Criminal liability of directors etc.

48.– (1)When an offence referred in the present Law is committed by a legal person, the liability for such offence lies in addition to the legal person itself, with the directors or the chief officers of the legal person.

(2) For the purposes of the present article chief officer, in relation with the legal person, means any director, secretary or other similar officer of the legal person or any person who appears to act in relation to such capacity or as a director.

Offences under the VAT legislation do not require proof of mens rea in respect of one or more elements of actus reus. In respect of these elements, the offence is one of strict liability.  In simple words this means that proof of intention to commit VAT wrongdoing is not necessary to substantiate the criminal offence. Criminal liability has been in essence attributed towards the Directors and the Secretary for their company’s failure to pay outstanding assessed VAT arising from failure to submit VAT returns and settle accrued VAT.

If a legal entity / company is guilty for any of the offences under the Cyprus VAT Law, liability for such an offence except from the company itself lies with (a) all the members of the Board of Directors of the company (b) the Secretary of the company; and (c) the general manager or the Director or the chief executive director of the company.

The above were confirmed and analyzed by the Supreme Court in its recent Judgment dated 18th December 2018 in Criminal Appeal no. 323/2015 (rel. with 324/2015 and 325/2015), Attorney General of the Republic v. XXX Solomonides. The Supreme Court in its interpretation of article 48(1) of the VAT Law, stated that the judgment of the Court of First Instance that the Director of the Company was not guilty for the reason that she was a “typical” director and she never to her knowledge received the tax return since she never signed the Tax Return, and neither was the tax disclosed formally at the registered office of the company, was wrong.

The Supreme Court referred to cases Markides v. Commissioner of Taxation (2002), Melas Linos v. Attorney General (2008), The Republic v Demetriou (2010), Attorney General v Spyrou, Criminal Appeal no. 276/2015 and to the wording of Article 48 (1) of the VAT Law and confirmed that for these types of offences no proof of mens rea is required. The Supreme Court also made clear that “there are no typical directors of a company”. From the moment a person is appointed as a Director of a company he/she has all the obligations and responsibilities defined in the Companies Law, Cap. 113, the relevant laws at each time and the legislation on the matter. The Supreme Court explained that the right to object the Tax Return is the company’s right and not a personal right for each one of the Directors of a company separately.

 

Disclaimer

The views and opinions expressed herein are those to the true and best knowledge of the author and are not to be relied as the basis for any decision. Each case is different, and consultation must be made applicable each time and in accordance with the laws and regulations in force at that time.

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