05.03.21
LEGAL & TAX ANNUAL OBLIGATIONS OF A CYPRUS COMPANY
Audited financial statements filed with the Registrar of Companies

1. AUDITED FINANCIAL STATEMENTS filed with the Registrar of Companies

The company must prepare and submit annually to the Registrar of Companies, Financial Statements according to International Financial Reporting Standards (IFRS) showing the true and fair picture of the affairs of the company and explaining its transactions. Even if the company had no operations for a particular year it is obliged to prepare and file financial statements AND tax returns as specified below and in such case, Dormant Financial Statements must be prepared.

Consolidated Financial Statements

Cyprus companies which have subsidiaries must consolidate their audited financial statements with the financial statements of their subsidiaries according to IFRS.

The above obligation does not apply if the group meets the requirements of the law to be qualified as a small or medium group.

 

 2. RETURNS filed with the Income Tax Authorities

 

Annual Tax Return

The company must prepare and file annually with the Income Tax Authorities tax returns prepared by local licensed auditors.

The Income Tax Authorities request that tax returns are audited and in practice they reject tax returns that are not prepared and approved by qualified local auditors. In order for the auditors to prepare the audited tax returns demanded by the Income Tax Authorities, audited financial statements must be prepared.

Vat Returns

The company who has obligation to registered with the VAT Authorities needs to register with the VAT Authorities within 30 days from the date at which the requirement to register exists.

The company needs to maintain proper records as required by law for VAT Investigations.

The VAT Returns must be submitted on a quarterly basis.

Documents to be provided

Full disclosure of the operations / activities of the company for the year under consideration must be submitted to the accountants / auditors of the company in time, in order to meet the time limits for the preparation and filing of the relevant financial statements and tax returns.

Non-compliance with the above obligations 1 and 2

In case of non-compliance with the above obligations, the Income Tax Authorities may take criminal court proceedings against the company and its directors and the company will face penalties for no or late filings.

 

3. TAX OBLIGATIONS for Tax resident companies

 

Provisional Income Tax Declaration

31st July of each year

  • Submission of provisional income tax declaration for the current year of assessment. The provisional tax liability is payable in 2 equal instalments.
  • Payment of the first instalment of provisional income tax liability. (Second is paid in December)

 

1st August of each year

  • Filing of self – assessment declaration of final income tax liability for the previous year as determined by the financial statements and income tax returns.
  • Payment of the previous year’s final corporation tax under the self-assessment method.

 

31st of December of each year

  • Payment of the second instalment of the provisional tax liability.
  • Submission of the financial statements and income tax returns for the previous year.

 

Special Defence Contribution Tax

For Special Defence Contribution, 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.

The above applies only to passive interest income.

 

4. OBLIGATIONS for companies having an office in Cyprus

 

PAYE – Pay as You Earn System

  • End of each month the payment of employees’ tax is effected which is deducted directly from the employees’ salary (PAYE). The deductions made are related to the salary of the previous month - For companies having a real office in Cyprus with employees.

 

Social Insurance & General Health System Contributions (GHS)

  • Social Insurance and General Health System contributions are paid monthly for all employees working in Cyprus. Employees of Cyprus companies working outside Cyprus are not obliged to be registered and pay Social Insurance and GHS contributions.

 

Employer’s Return

  • Until the 31st May electronic submission of Employer’s return as to the total payroll and employees’ details of the previous year (TD7 and TD7 Analysis) – for companies having an office in Cyprus and employees in Cyprus.

 

Employer’s Liability Insurance

  • An insurance covering the employees for possible accidents during work must be maintained.


Withholding tax and GHS on Rent

The lessee of the property has a withholding obligation under which any company paying rents on property situated in Cyprus is obliged to withhold defence and submit such tax to the tax authorities.

The SDCT rate on rents is 3% on the 75% of gross rent amount and is paid in two six monthly instalments in June and December.

In case the landlord is an individual, the Company (as a tenant) is obliged to withhold GHS on behalf of the landlord at a rate of 2,65% and submit the contribution in two six monthly instalments in June and December.

 

5. ANNUAL GENERAL MEETING (AGM)

The company must hold an Annual General Meeting each year. No more than 15 months must lapse between one AGM and the following one.

The first AGM may be held within a time limit of 18 months from the incorporation of the company. If a company holds its first AGM within 18 months from its incorporation, then there is no need to hold this first AGM during the year of its incorporation and depending on whether the company was incorporated during the first half or second half of a said year there may even not be an obligation to hold an AGM in the year following the incorporation of the company.

 

6. ANNUAL RETURN (form HE. 32) filed with the Registrar of Companies

Every company must prepare and file with the Registrar of Companies an Annual Return (HE. 32) once a year which must include, among others, information as to the registered office of the company, Registered Shareholders, debentures, liabilities, directors and secretary.

The company must prepare its Annual Return (HE.32) within 14 days after the Annual General Meeting and within a time limit of 28 days from such drafting date it must submit it to the Registrar of Companies. In effect, the Annual Return must be completed and filed with the Registrar of Companies within a time limit of 42 days from the Annual General Meeting of the company.

Financial Statements filed with Annual Returns

The financial statements of the previous year must be filed with the Registrar of Companies together with the Annual Return of the current year. Companies must be up to date with their legal obligation to prepare financial statements and annual tax returns.  The Registrar of Companies may refuse to issue certificates connected with information included in the Annual Returns of the company so it is very important to ensure timely filing of the Annual Returns accompanied by the appropriate financial statements.

For more details as to the above, please refer to our publication “Cyprus Companies Tax Diary & Compliance Issues” which can be found here

 

7. ANNUAL FIXED CHARGE

All registered Cyprus companies are obliged to pay an annual charge of €350,00 in order for the companies to be in good standing order and to remain on the Register of Cyprus companies at the Registrar of Companies.

Companies have a time limit for the payment of this charge which is payable by the 30th of June of each year.

Certain penalties are imposed for late payment as follows:

  • In case of a delay up to two months there is a 10% penalty.
  • In case of a delay between two and five months there is a 30% penalty.

If a company does not comply with the obligation for the payment of the above charge within the aforementioned time limits, the Registrar of Companies may proceed with striking off the company from the Register of Companies after making the appropriate publications in the official gazette of the Republic of Cyprus.

Exemptions

Subject to the discretion of the Registrar of Companies, the annual charge of €350, 00 shall not apply to the following companies:

  • A company which owns property located in areas which are not controlled by the Republic of Cyprus, e.g. Turkish occupied areas of Cyprus.

 

8. CONCLUSION

A Cyprus company can offer to its owner a great number of legal and tax advantage. However, in order to be able to enjoy these advantages, all annual obligations must be fulfilled.

 

9. DISCLAIMER

This publication has been prepared as a general guide and for information purposes only. It is not a substitution for professional advice. One must not rely on it without receiving independent advice based on the particular facts of his/her own case.  No responsibility can be accepted by the authors or the publishers for any loss occasioned by acting or refraining from acting on the basis of this publication.

 

March 2021

 

Authors        

CHARALAMBOS MEIVATZIS
Partner – Head of Accounting Division
Charalambos.Meivatzis@kinanis.com

 

MARIOS PALESIS
Partner – Tax Department
Marios.Palesis@kinanis.com

 

OUR FIRM

We are a Law Firm with offices in Cyprus and Malta and a representative office in Shanghai China comprising of more than 50 lawyers, accountants and other professionals who advise, international and local clients.

The Firm has been offering legal and consulting services since 1983 evolving from a traditional law firm to an innovative cutting-edge multidisciplinary law firm combining exceptional expertise in law, tax, vat and accounting.

From its establishment the Firm’s focus has been heavily business oriented and always abreast with the latest global developments and innovations. Drawing from our pool of experienced professionals we provide our clients’ businesses full legal and accounting support on an everyday basis as well as customized solutions in today’s global financial and legal challenges.

We consider ourselves as ‘traditional pioneers’ and our motto is to foresee and anticipate any issues that may potentially impact our clients’ business and to offer effective advice and solutions proactively.

 

Kinanis LLC
Lawyers’ Limited Company
12 Egypt Street, 1097, Nicosia
P.O. Box 22303, 1520 Nicosia, Cyprus
Tel: + 357 22 55 88 88 – Fax: + 357 22 66 25 00
E-mail: KinanisLLC@kinanis.com – Website: www.kinanis.com

 

Kinanis
Civil Partnership, Law Firm
Kinanis Fiduciaries Limited
Suite 20, The Penthouse, 4th Floor, Ewropa Business Centre,
Dun Karm Street, Birkirkara, BKR 9034, Malta
Tel: + 356 27 54 00 24, Fax: + 356 27 54 00 25
E-mail: malta@kinanis.com - Website: www.kinanis.com

 

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China Representative Office
Unit 661, 6/F CIROS PLAZA,
388 Nanjing West Road, Huangpu District,
Shanghai City, 200003, China
Tel: + 86 18 410 072 690
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