1. Audited Financial Statements submitted with the Companies’ Registrar
Financial Statements in accordance with International Financial Reporting Standards (IFRS) must be prepared and submitted to the Registrar of Companies yearly, displaying the truthful and fair picture of the company’s activities and explaining its transactions. Even if the company has no activities for a given year, it is required to prepare and file financial statements as well as tax returns as outlined below, and Dormant Financial Statements must be filed in this instance.
Consolidated Financial Statements
Cyprus companies having subsidiaries must consolidate their audited financial statements with their subsidiaries’ financial accounts in accordance with IFRS.
If the group satisfies the legal conditions to be classified as a small or medium group, the aforementioned duty does not apply.
2. Returns submitted with the Income Tax Authorities
Annual Tax Return
The company is required to prepare and submit annual tax returns with the Income Tax Authorities, which are prepared by local qualified auditors.
The Income Tax Authorities urge that tax returns be audited, and in practice, they reject tax returns that have not been prepared and authorized by qualified local auditors. Audited financial statements must be provided before auditors can proceed to prepare the audited tax returns required by the Income Tax Authorities.
Vat Refunds
A company that is required to register with the VAT Authorities must do so within 30 days of the day when the duty to register arises.
For VAT investigations, the company must keep adequate records as required by law.
VAT returns must be submitted every quarter.
Documents to be submitted
To satisfy the time constraints for preparing and submitting the relevant financial statements and tax returns, full disclosure of the company’s operations/activities for the year under consideration must be given to the company’s accountants and auditors on time.
Non-compliance with the aforementioned obligations
In the event of noncompliance with the aforementioned requirements, the Income Tax Authorities may initiate criminal court actions against the company and its directors, and the company may incur fines for failure to file or filing late.
3. Tax Resident Companies’ Obligations
Provisional Income Tax Declaration
- Every year on the 31st of July,
Provisional income tax declaration for the current assessment year must be submitted. The provisional tax obligation is divided into two equal payments.
The first installment of provisional income tax liability is paid by 31st July. The second installment is due in December.
- Every year on August 1st
Submission of self-assessment declaration of final income tax due for the preceding year, based on financial accounts and income tax returns.
The self-assessment procedure is used to pay the final corporate tax of the preceding year.
- Every year, on December 31st
Payment of the provisional tax liability’s second installment.
Financial statements and income tax returns for the prior year must be submitted.
Special Defense Contribution Tax
If interest and dividends are received gross, without any deduction at source, any amount due is payable at the end of the month following the month in which they were received or credited.
Only passive interest income is covered by the above.
4. Company Obligations if they have an office in Cyprus
PAYE (Pay As You Earn) Tax
Employees’ tax is withdrawn immediately from their salaries at the end of each month (PAYE). The deductions are based on the previous month’s wage – for companies with a physical office in Cyprus and employees.
Contributions to Social Insurance and the General Health System (GHS)
All employees working in Cyprus are required to pay monthly contributions to the Social Insurance and General Health Systems. Employees of Cyprus-based companies who work outside the country are not required to register or pay Social Insurance and GHS contributions.
Employer’s Return
Electronic filing of Employer’s return on total payroll and employees’ information for the preceding year (TD7 and TD7 Analysis) – till May 31st – for companies with a Cyprus office and employees in Cyprus.
Employer Liability Insurance
Employer’s Liability Insurance is a type of liability insurance that protects businesses from lawsuits. Employees must be covered by insurance in the event of an accident on the job.
GHS and Withholding Tax on Rent
The property’s lessee is subject to a withholding duty, which requires any company paying rent on the property in Cyprus to withhold defense and remit the tax to the tax authorities.
The SDCT rate on rents is 3% on the gross rent sum of 75%, and it is paid in monthly instalments between June and December.
If the landlord is an individual, the Company (as a lessee) must withdraw GHS at a rate of 2.65% on behalf of the landlord and submit the contribution in monthly instalments in June and December.
5. Annual General Meeting (AGM)
Every year, a company must convene an Annual General Meeting. Between one AGM and the next, no more than 15 months shall pass.
The first Annual General Meeting (AGM) must be convened within 18 months of the company’s establishment. If a company has its first AGM within 18 months of its formation, there is no requirement to hold it within the year of incorporation, and depending on whether the company was established in the first half or second half of the year, there may even be no duty to hold an AGM the following year.
6. Annual Return (FORM HE. 32) submitted to the Companies’ Registrar
Once a year, each company must prepare and file an Annual Return (HE. 32) with the Registrar of Companies, which must include information about the company’s registered office, Registered Shareholders, Liabilities, Directors, and Secretary, among other things.
The company must prepare its Annual Return (HE.32) within 14 days of the Annual General Meeting and submit it to the Registrar of Companies within 28 days of the drafting date. In effect, within 42 days following the company’s Annual General Meeting, the Annual Return must be prepared and filed with the Registrar of Companies.
Annual Return submitted with its corresponding Financial Statements
In addition to the current year’s Annual Return, the prior year’s financial accounts must be filed with the Registrar of Companies. Companies must meet their legal obligations to prepare financial statements and yearly tax returns on a timely basis. The Registrar of Companies has the authority to refuse to issue certificates based on facts included in the company’s Annual Returns, thus timely submission of the Annual Returns, together with the relevant corresponding financial statements, is critical.
7. Fixed Annual Fee
All registered Cyprus companies must pay an annual fee of €350,00 in order to stay in good standing and on the Registrar of Companies’ Register of Cyprus Companies.
Companies have a deadline for paying this fee, which is June 30th each year.
The following penalties are enforced for late payment:
- There is a 10% penalty for delays of up to two months.
- There is a 30% penalty if the delay is between two and five months.
If a company fails to comply with the duty to pay the aforesaid fee within the time restrictions specified, the Registrar of Companies may proceed with striking the company from the Register of Companies after making the necessary publications in the official gazette of the country.
Exemptions
The yearly payment of €350,00 shall not apply to the following companies, at the discretion of the Registrar of Companies:
A company that owns property in territories that are not controlled by the Republic of Cyprus, such as Turkish-occupied areas of Cyprus.
CONCLUSION
A Cyprus company can provide its owner with several legal and fiscal advantages. However, in order to take advantage of these benefits, all yearly responsibilities must be met.