Reporting of a Cyprus company: terms and forms

Cyprus is an extremely popular country for registering a company, providing its residents with some of the most favorable tax conditions, but along with this benefit comes obligations. In this article, we will take a detailed look at what obligations and within what timeframes a Cyprus company must fulfill.

This article will only consider the reporting that a company without employed employees must submit, as this is a much more complex process.

Submission of preliminary tax returns

The first and most important thing to remember is that in Cyprus the fiscal year is the same as the calendar year. This makes life much easier for anyone who is afraid of forgetting when they need to file their reports.

Along with this, one of the main features of Cyprus reporting is the submission of an estimate of your company’s preliminary income for the year and the corresponding preliminary payment of tax. What does this mean? In essence, this means that at the beginning of the reporting year, your company must submit a report on the approximate amount of income you expect to receive for the current year, after which you will have two deadlines: July 31 and December 31. On each of these dates, you must pay 50% of the expected income.

Let’s consider a simple example, let’s say your company was incorporated on January 1, 2023. Accordingly, information about your company’s expected income must be submitted on July 31.

Let’s say you plan to earn $100,000 in the first year of your company’s existence. Accordingly, by July 31, the company must file a report on the planned income of $100,000 and pay preliminary tax on it at a rate of 15% ​​= $6,250. The second part of the tax will need to be paid on December 31.

It is important to note that you will not be able to underestimate your expected financial indicators too much, because if during the audit, which we will talk about below, it turns out that the financial indicators were underestimated by 70 percent or more, the company will face a fairly significant fine. The fine is applied to the difference between the tax finally determined and the expected tax calculated based on the assessment. The amount of the fine is 10% of this difference.

However, if within a year after paying the first part of the expected tax, you realize that your income will be significantly higher or lower than initially indicated as expected, you can change the tax amount at any time, after which you will pay the difference.

Preparation and submission of annual reports (HE32)

Every company must prepare and file an Annual Declaration (Form HE32) with the Registrar of Companies once a year, which must include, among other things, information about the company’s registered address, shareholders, debt obligations, information about directors and secretary.

The company must prepare an Annual Return (HE32) which must be approved by the Annual General Meeting (AGM) and uploaded to the Registrar of Companies within 28 days of the date of preparation. In fact, the Annual Return must be completed and filed with the Registrar of Companies within 42 days of the company’s Annual General Meeting.

When to submit financial statements?

The financial statements for the previous year must be filed with the Companies Registry together with the annual return for the current year. Assuming that the company was incorporated on 01.01.2023, you will have 18 months for the first year of existence to file the final annual report for 2023, i.e. the filing deadline is 1 July 2024.

It is important that each annual financial statement is prepared by an independent auditor. It is best to allow at least 2 months for the preparation of the audit, and to prepare it, you will need all incoming and outgoing invoices for the reporting period, contracts, as well as bank statements for all company accounts. The requirement to submit reports and conduct an audit applies to all companies, even if the company has not actually conducted any activities.

If the Cyprus company has subsidiaries, the Cyprus company must consolidate its audited financial statements with the financial statements of its subsidiaries.

Filing the final declaration and paying the final tax

The final reporting and payment of tax for the entire company’s profit (form IR4) is submitted two years after the reporting one. In our example, the deadline for submitting the form will be 02/31/2025. In fact, this reporting is a duplicate of the financial statements that your company prepared for submitting the form HE32.

VAT reporting

If the company is registered for VAT, VAT returns must be filed quarterly.

Documents that must be provided:

• Bank statement for the relevant period;
• All incoming and outgoing invoices of the company.

N.B! In case of failure to comply with the above obligations, the income tax authorities may initiate criminal proceedings against the company and its directors, and the company will be penalized for failure to file or late filing of reports.

We also emphasize that if the company is registered under the VAT VIES system, reporting must be submitted on a monthly basis.

Additional fixed fees

In addition to mandatory reporting, there are also fixed fees that every company incorporated in Cyprus must pay.

Tax collection

All registered Cypriot companies are required to pay an annual levy (Levy Tax) of €350.

The company has a deadline for paying this fee, which must be paid by June 30 of each year.

Certain penalties are imposed for late payment:

• In case of delay of up to two months, a penalty of 10% is charged.
• In case of a delay of two to five months, a fine of 30%.

If the company fails to fulfill its obligation to pay the above-mentioned fee within the specified time limits, the Registrar of Companies may proceed to remove the company from the Register of Companies after appropriate publication in the Official Gazette of the Republic of Cyprus.

Exceptions

According to the Registrar of Companies, the annual fee of €350 does not apply to the following companies:

A company that owns property located in territories not controlled by the Republic of Cyprus, for example, in the Turkish-occupied territories of Cyprus.

Municipal tax

Municipality Tax is applied by each local municipality to the owners of real estate. Tax rates vary from 0.1 to 0.2%. Municipal taxes are payable to the local municipal authorities on an annual basis from October to December.

Short calendar of dates

• June 31 Levy Tax payment;
• July 31st, filing of preliminary estimated income and payment of the first half of the tax;
• November 31 – payment of Municipality Tax;
• December 31st payment of the second part of the preliminary tax;
• by January 31 of the following reporting year – holding of the AGM;
• February 31 of the following reporting year – submission of the final income statement;
• +quarterly submission of VAT reports.

Conclusions

A Cyprus company can offer its owner a large number of legal and tax advantages. However, in order to be able to enjoy these advantages, it is necessary to fulfill all annual obligations. Despite the fact that Cyprus is considered an offshore tax jurisdiction – simple annual maintenance of the company will cost relatively expensive, but the advantages that you get with it are difficult to overestimate.