Cyprus is an extremely popular country for company registration, providing its residents with some of the most favorable tax conditions, however, along with this benefit comes also obligations. In this article, we will consider in detail what obligations and in what time frame a Cyprus company must fulfill.
This article will only consider the reporting that a company without registered employees in Cyprus itself must submit, since this is a much more complex process.
The first and most important thing to remember is that in Cyprus the financial year is equal to the calendar year. This greatly simplifies the life of everyone who is afraid of forgetting when to file reports.
Along with this, one of the main features of Cyprus reporting is the submission of an assessment your company’s preliminary income for the year and, accordingly, the payment of preliminary tax. What does it mean? Specifically, this means that at the beginning of the reporting year, your company must provide a report on what approximate amount of income you expect to receive for the current year, after which two deadlines will await you: July 31 and December 31. On each of these dates, 50% of the expected income must be paid.
Let’s look at a simple example, suppose your company was incorporated on 01/01/2023. Accordingly, your company’s expected income statement must be filed on July 31st.
Let’s assume that in the first year of the company’s existence, you plan to earn $100,000. Accordingly, by July 31, the company must file a report on the planned income in the amount of $100,000 and pay provisional tax for it at a rate of 12.5% = $6250. The second part of the tax must be paid on 31-st of December.
It is important to note that it will not work to underestimate your expected financial indicators too much, because if during the audit, which we will discuss below, it turns out that financial indicators were underestimated by 70 percent or more, the company will have a fine. The penalty applies to the difference between the tax finally determined and the expected tax filed. 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 understand that the income will be significantly higher or lower than initially expected, then you can change the expected tax amount at any time, and then pay the difference.
Each company is required to prepare and file with the Registrar of Companies an Annual Return (HE32 Form) once a year, which must include, among other things, information about the company’s registered address, shareholders, debentures, directors and secretary.
The company must prepare an Annual Report (HE32), which must be approved by the annual meeting of shareholders (AGM) and uploaded to the Registrar of Companies within 28 days after the date of compilation. In fact, the Annual Return must be completed and filed with the Registrar of Companies within 42 days of the AGM of the company.
When to file financial statements?
The financial statements for the previous year must be filed with the Registrar of Companies along with the annual return for the current year. Based on the calculation that the company was incorporated on 01/01/2023, then for the first year of existence, you will be given 18 months to file the final annual financial statements for 2023, that is, the filing deadline is July 1, 2024. All subsequent financial statements after the first must be submitted in a year, after submitting the previous one.
It is important to note that each annual financial statement must be prepared by an independent auditor. It is better to allocate at least 2 months for the preparation of the audit, and for its preparation 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 file accounts and conduct an audit applies to all companies, even if the company did not actually conduct any activity.
In the event that a Cypriot company has subsidiaries, the Cypriot company must consolidate its audited financial statements with those of its subsidiaries.
Final reporting and payment of tax on all company profits (form IR4) is submitted two years after the reporting year. In our example, the deadline for submitting the form will be 02/31/2025. In fact, this statement is a duplication of the financial statements that your company prepared for submission to the HE32 Form.
If the company has a VAT (VAT) number, VAT returns (VAT) must be submitted quarterly.
Documents to be provided:
N.B! In case of non-compliance 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 note that if the company is registered under the VAT VIES system, reporting must be submitted on a monthly basis.
In addition to mandatory reporting, there are also fixed fees that every company incorporated in Cyprus is required to pay.
Levy Tax
All registered Cypriot companies are required to pay an annual fee (Levy Tax) of €350.
Companies have a deadline to pay this fee, which must be paid by June 30 of each year.
There are certain penalties for late payment:
If the company fails to comply with the obligation to pay the above fee within the above time limits, the Registrar of Companies may proceed with the deletion of the company from the Registrar of Companies after the relevant publication in the Official Gazette of the Republic of Cyprus.
Exceptions
At the discretion of the Registrar of Companies, the annual fee of €350 does not apply to the following companies:
A company that owns property located in territories that are not controlled by the Republic of Cyprus, for example, in the Turkish-occupied territories of Cyprus.
Municipality Tax
Municipality Tax is applied by each local municipality to real estate owners. Tax rates range from 0.1% to 0.2%. Municipal taxes are payable to the local municipal authorities on an annual basis between October and December.
A Cyprus company can offer its owner a large number of legal and tax advantages. However, in order to be able to enjoy these benefits, all annual obligations must be met. Despite the fact that Cyprus is considered an offshore tax jurisdiction – a simple annual maintenance of a company will be relatively expensive, but the benefits that you get with it can hardly be overestimated.
+ quarterly submission of VAT returns.
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