Tax and statutory reporting obligations of a Cyprus company

Posted on 17 Jan 2019, by Maria Georgiou

In an environment with increasing regulations and reporting requirements, it is of great importance to ensure that our Cyprus Companies comply with all their obligations (statutory and other reporting).

We need to be continually alerted in order to avoid possible penalties or investigations by the authorities.

We summarize below the main statutory and financial obligations of a Cyprus Company.

Statutory Obligations

  1. Annual General Meetings (AGM)

All Cyprus incorporated companies must hold an AGM in each year. The first AGM must be held within a period of 18 months from the date of its incorporation. Thereafter, an AGM must be held each calendar year and the time between each AGM must not exceed 15 months.

  1. Annual Returns

Annual Return (HE32 form), together with the audited financial statements of the previous year, must be submitted to the Registrar of Companies annually.

The deadline for the submission of the Annual Return is within 42 days from the AGM. The Annual Return contains the statutory information of the Company, as at the date of the AGM.

Delay in the submission of the Annual Return results in a monetary penalty of €20.00.

  1. Annual Levy

Every company must pay an annual levy to the Registrar of Companies, amounting to €350.00, in order to be maintained in good standing and be kept in the Registrar of Companies. Deadline for payment of annual levy is the 30th June of each calendar year.

For a two-month delay, 10% penalty is imposed. For a delay, from two to five months, 30% penalty is imposed.

In case a company is not compliant with the abovementioned requirements (b. and c.), the Registrar of Companies may initiate the strike-off of the company.

Tax Compliance Obligations

Registration with the Cyprus Tax Authorities

Cyprus Companies are required to pay Corporate Tax and Special Contribution for Defence.

Companies have an obligation to register with the Cyprus tax authorities and obtain a tax identification code (TIC) within 60 days from the date of their incorporation.

Tax authorities need to be informed on any changes that may affect the records of the tax register of the Companies, within 60 days from the date of the relevant change occurred.

Failure to comply with the above will result in financial penalties.

Tax returns

Corporate Tax Returns (Form T.D. 4) should be filed by 31st March of the subsequent year of the year following the relevant tax year. The forms are submitted electronically through Taxisnet.

Companies who fail to submit their tax returns on time are subject to penalties amounting to €100.00 or €200.00.

Penalties are also imposed in the case of non-submission of documentation requested by the Commissioner of Taxation.

Legal actions can be initiated against the company and its directors for continued non-submission of tax returns.

Payment of tax and refunds

Cyprus operates a system of self-assessment for corporation tax. Companies have to pay provisional tax on the current year's taxable profit in two equal instalments on 31st July and 31st December. The provisional tax assessment may be revised by the taxpayer at any time before 31st December of the tax year to which it relates.

Any underpayment may be corrected by self-assessment by 1st August of the following year to avoid interest being charged, at a rate of 3.50% annually from that date.

If the taxable profit declared for the payment of the provisional tax is lower than 75% of the taxable profit as finally determined, the taxpayer must pay, in addition to the normal tax, an amount equal to 10% of the difference between the final and provisional tax.

Overpaid tax is refunded and carries interest at a rate of 3.50% annually.

Record Keeping

All minutes and resolutions made by the company’s officers or shareholders must be kept at the Registered Office of the company.

Any changes to the officers, shareholders, share capital or other statutory information of the company, need to be submitted to the Registrar of Companies within the specified deadlines (as specified by the Law regulating Companies, Cap. 113). In case the specified deadlines are exceeded, the company shall obtain a court order for an extension of time that shall be submitted to the Registrar of Companies.

Audit and Accounting Obligations

Companies must prepare and maintain proper accounting records as per the International Financial Reporting Standards (IFRSs).

It is the responsibility of the company's directors to ensure that all records that are necessary for the preparation of the financial statements are properly maintained. All records must be kept at the registered office of the company and are subject to inspection.

Accounting records must be kept for 6 years from the end of the relevant year to which they relate, and shall be ready to be presented to the Tax Department, if requested.

Financial statements of the companies have to be audited by an authorized local auditor, based on the IFRSs and IASs (International Auditing Standards).

Criminal charges may be brought against the company and its directors in case of non-compliance with the above.

If any statutory returns are not submitted or are not submitted within the specified deadlines, monetary penalties and interest will be imposed. However, the company, its directors and the beneficial shareholders may also come under the spotlight of the relevant authorities.

For any further information, please contact Maria Georgiou at maria.georgiou@kyprianou.com