With the ever increasing regulation and reporting requirements in Cyprus, it is essential to ensure that your Company fulfills statutory and reporting obligations.
We outline below the main obligations, repercussions of non-compliance and how best to avoid any penalization.
Requirements of the Board of Directors – Reporting
- Annual General Meetings (AGM): A Company must hold its first AGM within 18 months of the date of incorporation. Thereafter, an AGM must be held each year and the time between them must not exceed 15 months.
- Annual Returns: The Company must annually submit within 42 days of the AGM Audited Financial Statements together with the Annual Return (H.E. 32) with the Registrar of Companies (ROC). Non-compliance will result to financial penalties.
- Annual Company Levy: Every Company must pay an annual levy to the ROC in the amount of €350 (Three hundred fifty Euros) for the company to be in good standing order and to remain on the Register of Cyprus companies. Failure to pay such levy will result in financial penalties 10% for a delay of 2 months, 30% between 2-5 months.
In case the abovementioned b & c requirements are not met the ROC will initiate procedures to strike-off the company where they will initially send a 3 month warning letter to comply with the above requirements and in the event that the company does not comply, the ROC will proceed to stick off the company.
A company may be reinstated in the Registry of Companies if it applies to the District Court of its jurisdiction, provided that it meets certain criteria, read more in our Publications section on the matter.
Tax registration & compliance
- A company must register with the Cyprus Tax Authorities within 60 days from its incorporation. Any changes that may affect the records of the Inland Revenue register must be submitted within 60 days from the date of change. (Failure to comply will result to heavy financial penalties).
- All companies registered in Cyprus are required to pay Corporate Tax and Special Contribution for Defense.
- The Company’s Tax Returns from IR4 must be filed no later than 31st December of the year ended. Continued non-compliance will lead to legal actions against the company and its officers.
- Companies that meet the criteria for VAT registration must register with the VAT Authorities within 30 days from the date at which the requirement to register exists. VAT returns are submitted on a quarterly basis.
- The VAT Information Exchange System (VIES Form) must be submitted every month for those companies that provide goods or services within the 15th day of every following month.
- Social Insurance contributions must be paid monthly for all employees working in the Republic of Cyprus.
All Minutes and decision making of the company must be kept at the Registered Office Address of the company and shall be open for inspection by any person during normal business hours.
Changes to the Corporate Structure, Board or Members of the company need to be submitted and updated at the ROC within a specific deadline as per the Law regulating Companies, Cap. 113. In the event that the relevant deadlines are exceeded the company shall need to obtain a court order for an extension of time that shall be submitted with all other relevant documents.
Audit & Accounting obligations
- All Companies must prepare and maintain accounts as per the International Financial Reporting Standards & International Auditing Standards. In the event of non-compliance criminal charges may be brought against the firm and its officers.
- For income tax and VAT purposes, companies are obliged to keep accounting records for six years from the year ended.
By monitoring all corporate deadlines, we safeguard your company’s interests from incurring needless and potentially heavy fiscal penalties.Read More
On the 28th of July 2017, the Parliament approved an amendment of the Cyprus Income Tax Law 119(I)/2017 (herein after referred to as the “Law”) extending the definition of an individual that can become a tax residence in Cyprus.
The 183 day rule shall be effective from the 1st of January 2017 and replaces with the below mentioned three criteria which must be met cumulatively for an individual to be considered a tax resident of Cyprus:
- Remains in Cyprus for at least sixty (60) days during the tax year
- Carries out any business in Cyprus and/or is employed in Cyprus and/or holds an office to a person resident in Cyprus at any time during the relevant tax year,
- Maintains a permanent residence in Cyprus which includes leasing.
The main purpose of the proposal is to allow an individual to become a tax residence in Cyprus provided that the individual does not stay in any other country for one or more periods, which exceed 183 days in total and who is not a tax resident in any other Country within the relevant tax year.
Cyprus Tax Rates
A tax residence of Cyprus will be taxed on their worldwide as per the below rates:
Tax Base (EUR) Tax rate (%)
Up to €19.500 0%
€19.501 to €28.000 20%
€28.001 to €36.300 25%
€36.301 to €60.000 30%
Over €60.000 35%
Contribution to Special Defence
Cyprus tax residents which are not domiciled in Cyprus will be exempt from special defence contribution which is levied on dividends, interest, and rental income.
Cyprus/ Russia Tax Treaty and Protocol
The Government of the Republic of Cyprus desiring to conclude an agreement for the avoidance of double taxation on income and capital and with the view of promoting economic cooperation between the Republic of Cyprus and the Government of the Russian Federation signed an agreement on the 5th of December 1998 which was followed by a Protocol effective in 2013.
The link to the Double Tax Treaty and Protocol here.
Removal of Cyprus from the Russian “Blacklist”
The signing of the Cyprus – Russian Tax Treaty resulted in the abolition of Cyprus from the Blacklist of the Russian Federation. This meant that the dividends received by the Russian Companies with Cyprus Registered subsidiaries would qualify for Russia’s dividend participation exemption.
Amendment of Article 13 of the Cyprus-Russia Double Tax Treaty
The Government of Cyprus and Russia came to an agreement for postponing the application of the Protocol amending Article 13 of the Double Tax Treaty between Cyprus and Russia for the Avoidance of Double Taxation with respect to taxes on income and on capital.
The Protocol signed on the 7th of October 2010 provided for taxation of capital gains upon disposal of shares of companies deriving more than 50% of their value from immovable property, in the country where the immovable property is located.
It has been established that over the years Cyprus and Russia have developed strong ties in political, economic, cultural and religious level as Russia is remains a major economic partner.Read More
The Cyprus Companies Law, Cap 113 provides for three methods for winding-up a company.
- Involuntary winding-up by its creditors
- Voluntary winding-up by the members
- Voluntary winding-up by and/or under the supervision of the Court
Alternatively, a company can be also struck-off the Register of Companies as per Section 327 of the Companies Law, Cap 113.
The 3 ways of voluntarily winding-up a company are:
Advise the Registrar that the company has terminated all activities, does not have any assets or liabilities and does not intend to carry on any business in the future. A declaration is submitted by the directors of the company where the Registrar of Companies will then publish in the Official Gazette the intention of the company to be stuck-off and within three months the company will then be removed from the records of the Registrar of Companies. Any member or creditor of the company can apply to the Court for reinstatement within a period of 20 years.
2. Shareholders’ voluntary liquidation through Court
A liquidator is appointed that replaces the Board of Directors of the company and proceeds with all the required procedures to liquidate the company. The liquidator will coordinate with the lawyers and apply to the Court obtaining its supervision for the liquidation. Once the liquidation procedure is completed, which takes about 7 months the Court will issue a Judgement approving the liquidation of the company. This is the costliest method but once the company is dissolved it is very unlikely that a Court will reinstate the company. Any member or creditor of the company can apply to the Court for reinstatement within a period of 2 years.
3. Shareholders’ voluntary liquidation
A liquidator is appointed that replaces the Board of Directors of the company and proceeds with all required procedure to liquidate the company. This procedure is not done through Court and takes around 6 months. Any member or creditor of the company can apply to the Court for reinstatement within a period of 2 years.
In all 3 cases audited financial statements need to be prepared to the date of closure and the following need to be arranged:
a. Settlement of all taxes and creditors.
b. Closure of the company’s bank accounts.
c. Settlement of any outstanding balances due to our company and its associates.
d. The beneficial owner of the company must send an instruction to the company secretary to proceed with the company’s strike off or dissolution.
e. In cases where the closing company has another Cyprus company as shareholder, the net profits of the last 5 years should be distributed as dividend prior to closing to avoid Defence Contribution Tax.