Cyprus

Cyprus companies must submit audited accounts on annual basis. Financial year applicable to all the companies is standard starting from January 1 and ending on December 31. The only exception is made for the first year of the company existence. Reporting period for companies incorporated before June 30 ends on December 31 of the same year. The Cyprus Inland Revenue requires that the accounts be made available for any year, and any delay to file the same is subject to penalty to the tune of EUR 100.00.

Reporting period for companies incorporated after June 30 ends on December 31 of the year to follow. The accounts are due within 12 months from the date of financial year end, i.e. by December 31.

Accounts must be prepared and audited regardless of the activities type; the requirement for filing audited accounts is also applicable to the dormant companies. Penalties are applicable in case a company fails to file its audited accounts timely; further such a company may be closed and struck off the Register of companies. The companies in default cannot maintain their good standing status as the result. Additionally Cyprus authorities would not issue to a company failing to file its accounts timely any documents, including Tax Residency Certificate, Certificate of Good Standing and any other documents pertaining to tax benefits based on Double Taxation Treaties. Besides that, one should bear in mind that as per the Cyprus Law directors of the companies are personally responsible for any failure to comply with applicable rules, and some cases of a gross negligence may constitute a criminal offence. Understandably, nominee directors are deeply concerned over such issues.

We can help you to:

-       arrange for the mandatory and voluntary audit of your accounts carried out by certified Cyprus auditors;

-       collect all relevant and requisite papers as might be required, necessary or conducive to the audit: to inspect and examine the company’s papers to make sure that they are in good order and fit and sufficient for the audit, and assist you in obtaining the documents that might be missing or inadequate for the purposes of audit;

-       evaluate potential consequences that might be entailed as the result of your business operations, prior to submitting the papers for the audit, and offer some tailor-made solutions as requested by you;

-       prepare financial statements, tax returns and management statements for any period.

 When Cyprus joined the EU on the 1^st of May, 2004, the new tax rates and tax procedures uniform for all the companies became effective.

All the companies are subject to Corporation Tax at the rate of 12,5% (as compared to 10% before 01.01.2013). However some of the income types are exempt from corporation tax, i.e. securities sale revenue and dividends received. At the same time some types of income are subject to a new tax named Special Contribution for Defense at the rate depending on income type and source.

Listed in the table below are tax rates applicable under the new legislation to different types of income received by Cyprus companies.

Tax payment period. Irrespective of any relief granted by the Cyprus authorities to the businesses filing their accounts within 12 months as of the ending of the financial year, i.e. 31^st of December, the corporate tax must be paid before 01^st day of August of the year following the reported year. Businesses failing to pay their corporate taxes before that date are subject to penalties and fine imposed by the Inland Revenue.

In case a company plans to receive any income during the current year, it has to make an advance tax payment in the amount of 10% of the estimated income; the advance payment is due by midyear. In case the amount of tax computed at the end of the year exceeds the advance payment by more than 25%, the company must pay a small penalty: 10% of difference between the amount of recalculated tax and the amount of paid tax (i.e. 1% of difference between the actual and estimated income). However, on practice most companies do not make advance tax payments paying tax at the effective rate of 11% (tax at the rate of 10% and 10% of the tax amount).

Withholding tax is not charged in Cyprus. This means that dividends (other than payable to Cyprus residents), interest payments and royalties (except for royalties for using assets in the territory of Cyprus) may be paid by a Cyprus company without any withholding tax.

VAT. Having become EU member, Cyprus adjusted its legislation to European rules. In cases when a Cyprus company operates in Cyprus or other EU countries or in case it has business relations with companies incorporated in the EU countries and purchases some types of services it may need to get registered as VAT payer and to obtain the corresponding tax number being different from the corporate tax payer ID number. The above activities include but are not limited to payment of royalties, payments for consulting, marketing and legal services rendered to foreign companies, purchase of goods from European suppliers for the purposes of further export. Once registered as VAT payer, the company must file quarterly VAT Reports that become due 1 month after the end of the quarter and, in case VAT is applicable, the company must pay it. Basic VAT rate as of 13.01.2014 is 19%. It is also worth mentioning that in many cases, including the above listed ones, the registration itself is needed, however VAT is not applicable.