In order for a Cyprus company to enjoy all the benefits that the Cyprus legal and tax system have to offer, it must comply with its annual obligations. Below is an overview of the main statutory and annual tax obligations that a Cyprus tax company must follow, along with a tax calendar for 2021.
- Annual Government Levy: In 2011, a new legislation was introduced that states that all Cyprus tax resident companies must pay an annual government levy fee of €350. The deadline for payment of annual government levy is the 30th of June of each year. For group companies, the total amount of annual government levy payment is capped to €20,000, an amount that is evenly split between the group companies.
If a company’s incorporation date is after the end of June, then the newly incorporated company is not obligated to pay annual government levy for the first year. Similarly if a company is under the process of liquidation and procedure has commenced before the end of June, then the company does not have to pay levy for that year.
A penalty of 10% is imposed if payment of levy is made within 2 months of the due date. An additional penalty of 30% is imposed if payment delays between 2 and 5 months of the due date. Non-payment of annual government levy within a year of the due date, may lead to de-registration of the company by the Cyprus Registrar of Companies.
- Annual General Meeting (AGM): Companies Law (Cap.113) requires all Cyprus tax resident companies to hold an AGM annually. When a company is first incorporated in Cyprus, an AGM must be held within 18 months from the date of incorporation. It must be noted that the time frame between one AGM and the next one should not exceed a period of 15 months;
During the AGM the company’s board of directors discuss and agree on key issues such as:
- The review and approval of the company’s audited financial statements;
- The appointment/re-appointed of the company’s board of directors;
- The declaration of dividends to the shareholders if proposed;
All resolutions voted for during the AGM must be documented by the company’s secretary and minutes of the meetings should be kept at the company’s registered office. Any additional meetings taken during the year are called extraordinary general meetings.
- Any changes made to the current shareholders, other offices or any statutory information of the company must be disclosed and submitted to the Cyprus Registrar of Companies within a definite timeframe.
- Annual Returns: Form HE32 annual return must be submitted to the Cyprus Registrar of Companies on an annual basis along with the audited financial statements of the prior year. Annual returns must be submitted within 42 days of the AGM.
The annual return form includes statutory information of the company such as the date of the AGM, details regarding the directors, secretary and shareholders of the company along with any changes made to the company’s assets. Failure to submit form HE32 will have negative implications on the company such as imposition of penalties, the registrar refusing to issue certificates connected with the Annual Returns or even deregistration from the register.
- All Cyprus tax resident companies must register with the Cyprus tax authorities and obtain a Tax Identification Code (TIC) within a period of 60 days from the date of incorporation.
- A company’s tax return must be submitted to the authorities by the 31st of March of the year following the end of a tax year. Tax returns are submitted electronically through Taxisnet. Even if a company does not perform any activities during a specific year, the company is still obligated to prepare financial statements and submit a tax return. In the event that a company does not submit their tax returns for a number of years, legal charges may be imposed.
- A Cyprus tax company that holds subsidiaries must consolidate their financial statements with the financial statements of their subsidiaries. A set of consolidated financial statements will be submitted to the Registrar of Companies and a set of non-consolidated financial statements will be submitted to the Inland Revenue. It is important to note if the group meets the criteria to be categorised as a small or medium group of companies, a preparation of consolidated financial statements are not required.
- Tax payments in Cyprus operate under the self-assessment process. All tax payments by each Cyprus tax company are made provisionally in two separate instalments. The dates of the instalments are the 31st of July and the 31st of December each year. In the event that during the tax year a company reassess their tax liability and wishes to revise their provisional tax payments, this can be done before the date of the second instalment. It must be noted that if a company declares and pays provisional tax on taxable income that is 75% lower than the actual taxable income, then the company must pay 10% additional tax payment on the difference between the provisional tax and the actual final tax.
Audit and Accounting Obligations and recordkeeping:
- All Cyprus tax companies must prepare and hold accounting records that are in line with International Financial Reporting Standards (IFRS). As per law, the books of a company must be kept up to date and books should reflect transactions that took place no later than four months ago.
- Financial statements must be audited by an independent registered auditor that will perform their work in accordance with International Standards of Auditing (ISA’s). Financial statements must be filed with the Registrar of Companies. Below is a list of the different types of companies that must ensure that their financial statements are audited by qualified auditors:
- Public companies;
- All private Cyprus companies;
- Companies obligated to prepare consolidated accounts;
- At any given time the Cyprus Tax Department can request from a company to present accounting records that go back six years; therefore accounting records must be kept for a period of six years from the end of a tax year. All such records should be stored at the company’s registered office.
- The registered office of the company must hold all minutes of meetings and resolutions made between the company’s shareholders and other offices. Company’s Law (Cap.113) states that companies are obligated to hold records such as register of directors, register of shareholders and register of secretaries at their office.
Value Added Tax (V.A.T.) obligations:
A company or an individual must register for VAT if they meet any of the below conditions:
- At the end of any month, value of taxable supplies in the last 12 months, has exceeded the threshold amount of €15,600 or at any given time, the taxable supplies are expected to exceed the threshold amount in the next 30 days;
- If a taxable person provides services of any value to another VAT registered person within the EU Member States;
- At the end of any month, acquisitions of goods from other EU Member States in the last 12 months, exceeds the threshold amount of €10,250 or at any given time, the value of acquisitions in the following 30 days will exceed the registration threshold;
- If in a 12 month period, assuming period starts on 1 January, the value of distance sales to a non-VAT registered individual in another EU Member State exceeds the registration threshold of €35,000. As of 01/07/2021, the existing thresholds for distance sales of goods within the EU will be abolished and replaced by a new EU-wide threshold of €10,000.
- Offers zero rated supplies of goods or services;
Any registered person must submit their VAT return and pay VAT due to the Commissioner before or on the 10th day from the end of the month that is following the end of each VAT period. VAT returns must be submitted each quarter electronically through Taxisnet.
A taxable individual engaging in intracommunity supply of goods or services to taxable individuals in other EU Member States must register with VIES. VIES reports are submitted on a monthly basis electronically.
Tax Calendar 2021
|Submission of deemed distribution declaration of profits for 2018 (1)
|Electronic submission income tax for tax year 2019 for companies and individuals preparing financial statements
|First instalment of 2021 for payment of premium tax for life insurance companies
|Electronic submission of total 2020 payroll by employers
|Payment of Special Defence Contribution and GHS for the first 6 months of 2021 on rents (if not withheld at source by tenant) and dividends/interest from sources outside of Cyprus
|Payment of annual government fee of €350 to Registrar of Companies
|Electronic submission and payment of first instalment of 2021 provisional income tax
|Electronic submission of 2020 personal income tax returns by individuals and payment of tax
|Payment of 2020 income tax through self-assessment by companies and individuals that submit audited accounts
|Second instalment of 2021 for payment of premium tax for life insurance companies
|Submission of revised Temporary tax assessment for 2021, if necessary, and payment of second instalment
|Payment of Special Defence Contribution and GHS for the second half of the year on rental income (if not withheld at source by tenant) and dividend/ interest income from sources outside of Cyprus
|Third and final instalment of 2021 for payment of premium tax for life insurance companies
Penalties on the above deadlines:
- A penalty of 10% is payable on the difference between the actual tax due on final assessment and tax declared on temporary tax forms submitted, if the temporary tax is less than 75% of taxable income on final assessment;
- €100 or €200 penalty is imposed (depending on the case) for the late submission of tax return;
- 5% tax on the amount due is imposed if tax is not settled within 30 days of the payment date. An additional 5% is imposed if tax remains unpaid two months after the payment date;
- €100 penalty for late registration with tax authorities. A company must register and obtain a TIC within 60 days of incorporation;
Official interest rates set by Finance Minister on late payment of taxes:
For details regarding statutory and tax obligations of a Cyprus tax company, please contact our office.