Obligations of a Cyprus Company
Cyprus company incorporation is a simple and relatively quick procedure. But at the same time, it is necessary to remember about obligations under tax and compulsory reporting.
It’s crucially significant for every company to stick to local regulations. It will help to conduct business without fines and investigations by the authorities.
Companies Act, Chapter 113, Income Tax Laws and Social Security Laws say that whether the company is active or not, such tax and statutory commitments and reporting have to be executed.
The following annual commitments must be met:
Part 1: Statutory Obligations and Fillings with the Registrar of Companies
Annual General Meeting (AGM)
Companies are required to hold an annual general meeting (AGM) and must ensure that no more than 15 months pass between one AGM and the next. Additionally, the first AGM can be held within 18 months of the company’s incorporation.
Annual Company Levy (yearly fixed charge)
Starting in 2011, all registered companies in Cyprus must pay an annual fee of €350 in order to maintain their good standing status in the registry of companies maintained by the Registrar of Companies & Official Receiver. The annual fee must be paid on June 30th each year.
Annual Return (Form HE32)
The first annual return of the company, in the form of HE32, must be submitted within 18 months of the company’s formation. New companies are not required to submit this document in the year of establishment. The annual return must include information on the company’s registered office, shareholders, directors, secretary, debentures, and liabilities. Companies have 14 days after the Annual General Meeting to prepare the annual return and 28 days after the draft is prepared to submit it to the Registrar of Companies.
Financial Statements
As it is pointed in Companies’ Law, Cap. 113, the financial statements must consist of the “true and fair view” of the company’s activity.
Copy a Financial Statement for the past year has to be presented to the Registrar of Companies in conjunction with the Annual Return (HE32) of the running year.
Every established Cyprus company is commited to settle the Financial Statement annually and introduced it at the general meeting of shareholders.
The Financial Statements can be organized in any language that is convenient for the company’s representatives but for the Registrar of Companies, there is a compulsory requirement of using the only Greek language in the Financial Statement.
The above-mentioned document is submitted to the Registry of Companies as an attachment of the Annual Return (HE32).
The reporting period consists of 12 months, terminating on the date, established by the directors of the company.
Financial Statement must be arranged according to the International Financial Reporting Standards (“IFRS”) and stick to the Companies Law, Cap. 113, as amended occasionally.
The reporting end of the year is alleged to be 31st December unless another period is indicated.
Audit of Financial Statement
For the auditing of the Financial Statement, an independent auditor is appointed. Such an auditor in his work applies the International Standards of Auditing (ISA’s).
Record – Conducting & Good Practice
All registered companies must conduct a register of members, directors, and secretaries as well as a register of charges. These data have to be renewed on a regular basis which will help to track any changes in the company.
These records are keeping the registered company office.
The Secretary of the company must attend all general/extraordinary meetings of the company and carry out the minutes.
About any alterations in the company such as:
- change of share;
- change of capital;
- change of directors;
- change of secretary;
- amendment of articles, memorandum etc.,
The company must inform the Register of the Companies and provide it with the relevant forms in a set period.
Tax compliance obligations / filings with the tax department
Tax Department Registration
During 60 days after registration, the company has to arrange registration in the local tax department and get a Tax Identification Code (TIC).
This requirement applies to both types of companies, the ones incorporated outside Cyprus as well as the ones that conduct their business inside Cyprus.
Registered in the Tax Department companies must notify Authorized on Taxation representative about any alterations that can influence the data of the tax authorities.
These changes must be presented whilst 60 days from the date of the incurred change.
Corporate Annual Tax Returns (Form T.D. 4) are provided by 31st of March of the ensuing year of the year following the relevant tax year. T.D.4 Forms provided via the electronic Taxisnet system.
Corporation Tax
All Cyprus tax resident companies are taxed on their income accrued or derived from all chargeable sources in Cyprus and abroad. Non-Cypriot tax resident companies are taxed on profit accrued or derived from the business activity that is conducted through a permanent establishment in Cyprus and on certain income obtained from sources in Cyprus.
For the purposes of taxation, a company is considered to be resident in Cyprus if it is managed and controlled in Cyprus.
The running corporate tax rate is 12,5%., one of the lowest in the EU.
Payment of tax and refunds
There is a system of self-assessment for corporation tax in Cyprus. Companies need to provide payment for provisional tax on the running year’s taxable profit in two equal installments on 31st July and 31st December.
The provisional tax assessment may be reconsidered by the taxpayer before the 31st of December of the tax year to which it is concerned. Underpayments may be adjusted by self-assessment by
1 August of the next year in order to evade the accruing of interest at a rate of 3.50% yearly from that date.
If the taxable income indicated for the payment of the provisional tax is less than 75% of the taxable profit as finally defined, the taxpayer must, additionally to the normal tax, contribute, an amount equal to 10% of the difference between the final and provisional tax.
Overpayment is refunded and imposed interest at a rate of 3.50% annually.
Value Added Tax (VAT)
There are determined provisions in relevant VAT laws in Cyprus, where is said that companies have to register with the VAT Department.
Companies are liable for providing VAT returns on a quarterly basis and the payment of VAT must be rendered by the 10th day of the second month that follows the month in which the tax period ends.
VAT is charged for supplying goods and providing services in Cyprus as well as for purchasing goods from the EU and their import to Cyprus territory.
Social Insurance
If the company has employees, then such a company is obliged to make contributions to the employees, as well as employees must render such social insurance contributions.
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