GSL / Foreign Companies Audit / Audit Cyprus

Cyprus company audit, financial statements, accounting, consulting in Cyprus

The Republic of Cyprus has a number of advantages when choosing a jurisdiction to register a business: low corporate income tax, no tax on dividends, no tax on proceeds of sale of securities, an attractive VAT rate, as well as relatively low company administration costs and a number of other advantages that depend specifically on the activities of the company. Besides, Cyprus companies enjoy high-level audit and consulting services due to the great popularity of these companies among citizens of Russia and the CIS countries and, consequently, considerable experience in administration of Cyprus companies, which includes preparation of financial statements.

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Service packages Legislation Tax System Audit Services
Preparation and submission of dormant accounts (for a dormant company), audit
1 140 EUR
Preparation and submission of non-dormant accounts (for an active company), audit
EUR 100-350 per hour
Registration of a company for VAT
1 130 EUR
Preparation and submission of VAT / VIES / INTRASTAT returns

The minimum fee is EUR 470 for dormant companies or companies with fewer than 10 transactions in the reporting period

EUR 100-350 per hour
Registration for the OSS (Union One-Stop Shop) – for intra-EU distance sales of goods and services
595 EUR
Obtaining an EORI number for a company
730 EUR
Company strike off
from 1 500 EUR
Obtaining a tax residence certificate for a Cyprus company
410 EUR
Obtaining a Tax Ruling

Please note that 19% VAT may be added in invoices to the fees for services rendered.

 

from 2000 EUR
Apostille of financial statements (if necessary)
from 500 EUR

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General requirements

As a member of the European Union (EU), Cyprus complies with the accounting, audit and financial reporting requirements set out in EU regulations and directives transposed into national legislation.

Financial statements must be prepared in accordance with the International Financial Reporting Standards (IFRS) and must comply with national Companies Law Cap. 113.

All Cyprus companies must every year prepare financial statements and tax returns and submit them to the Cyprus Registrar of Companies (the Registrar) and the Tax Department.

The Companies Law requires all Cyprus-registered companies to annually file the following documents:

1) with the Registrar:

  • Financial Statements with Independent Auditor’s Report
  • Annual Return (Form HE32)

As Russian law does not have the concept of an Annual Return, we think it necessary to explain it. The Annual Return is a snapshot of the company’s current structure and is prepared annually. It normally includes: identification data (incorporation date, registered office address); details of directors and their resignations; details of secretaries and their resignations; information about the authorized capital of the company, nominal value of shares, number of shares issued; details of shareholders and transfers of shares.

2) with the Tax Department:

  • Tax return (IR4)

The statements can be in any language, but the Registrar will need to be provided with their translation into either English or Greek.

The Companies Law (section 142) requires all Cyprus companies to prepare financial statements in accordance with the standards approved by the European Union – International Financial Reporting Standards (IFRS).

The financial statements must be kept at the company’s registered office in Cyprus for a period of 6 years from the end date of the last statements.

Audit of financial statements

The Companies Law states that financial statements of all companies must be audited and signed by a registered auditor. A company must at each annual general meeting appoint a certified Cyprus auditor to hold office. The law requires that an audit be conducted in accordance with the International Standards on Auditing (ISA).

An audit is mandatory for all registered companies, regardless of the company size. Even if a company did not trade and is dormant, it must have an annual audit.

Period for preparing and filing financial statements

Financial statements must be submitted for approval at the annual general meeting and filed with the Registrar of Companies along with the annual return (Form HE32) within 28 days of the general meeting.

The annual return, together with audited financial statements, must be filed within 12 months of the previous annual return, disregarding the calendar year.

The reporting period for a company can be random, but the end date of the reporting period is usually linked to the end of the calendar year (in order to facilitate income tax accounting the reporting period for which is a calendar year). It should also be noted that the duration of the reporting period cannot exceed 12 months (for the first reporting period – 18 months).

Therefore, in practice:

  • if a company is incorporated in the first half of the year (before July), the first reporting period runs from the incorporation date to 31 December of the year of incorporation – the first reporting period is less than 12 months;
  • if a company is incorporated in the second half of the year (from July to December), the first reporting period runs from the incorporation date to 31 December of the year following the year of incorporation – the first reporting period is more than 12, but less than 18 months;
  • the following reporting periods coincide with calendar years.

Period for preparing and filing tax returns

Corporate Income Tax

An income tax return (IR4) must be submitted to the Tax Department within 12 months of the end of the reporting period, i.e. until 31 December of the year following the reporting one; this period is extended by 3 months if the return is filed electronically.

Special Defence Contribution

Special Defence Contribution (SDC) is administered separately from income tax although calculations of this tax must be included in the tax return IR4.

SDC has a separate tax return form which is filed if the company pays or receives income liable to this tax (chargeable income).

Where there is chargeable income arising from activities between two Cyprus resident companies, the tax must be withheld (paid at source) and the tax return must be completed within a calendar month following the month in which the chargeable income arose.

If a Cyprus resident receives income from foreign sources, the tax return must generally be filed with the Tax Department by 31 December of the year in which the company had chargeable income. The exception is rental income generated by the rent of property. The return for this type of income must be filed by 30 June and 31 December of the year in which the company had chargeable income.

Value Added Tax

The reporting period for VAT is 3 months (these can be random – for example, February, March, April, and then 3-month quarters) which are selected by the Tax Department. A company is obliged to prepare a tax return and pay tax within 1 month and 10 days (i.e. within 40 days) from the end date of the 3-month reporting period.

INTRASTAT data are submitted if a company buys or sells goods from/to companies registered in other EU member states. An INTRASTAT return must be submitted monthly within 10 days of the end of each month.

VIES information is submitted if a company buys or sells goods and SERVICES from/to companies registered in other EU member states. The reporting period is a month. A VIES return must be submitted within 15 days of the end of the month in which the sale was made.

Penalty for late filing of financial statements

Late filing carries penalties, and actions may also be taken against the directors of the company who have not fulfilled their duties.

Penalty for late filing of a tax return

Corporate Income Tax

In the case of late filing of a tax return, a company is liable to a fine of 5% of the amount of tax due; the company directors who failed to fulfil their duties can also face fixed fines and have actions taken against them. It should be noted that tax must be paid by 31 July of the year following the reporting year. Late payment of tax is subject to penalty interest.

Special Defence Contribution

Late filing of a tax return and late payment of tax carry the following penalties:

  • penalty interest of 3.5% per annum on the tax due;
  • a fine of EUR 100 for late filing of SDC return;
  • a fine of 5% on the tax due.

Value Added Tax

Late filing of a tax return and late payment of tax carry the following penalties:

  • late filing of VAT return – EUR 100 per return;
  • late filing of VIES return – EUR 50 per return;
  • late filing of INTRASTAT return – EUR 15 per return;
  • late payment of VAT – 10% of VAT due.

There are also penalties for late registration for and deregistration from VAT, as well as for non-compliance with the reverse charge mechanism.

Consolidated financial statements

If a Cyprus company has subsidiaries, it is required to prepare consolidated financial statements.

The following exemptions apply:

1. Small and medium-sized groups may be exempted from preparing consolidated financial statements.

Small groups are company groups consisting of parent and subsidiary companies subject to consolidation, which, when consolidated, do not exceed at least two of the following three criteria at the closing date of the parent company’s balance sheet:

  • total balance sheet (total value of assets without deducting liabilities): EUR 4 000 000;
  • net turnover: EUR 8 000 000; and
  • average number of employees in the reporting period: 50.

Medium-sized groups are company groups other than small company groups, consisting of parent and subsidiary companies subject to consolidation, which, when consolidated, do not exceed at least two of the following three criteria at the closing date of the parent company’s balance sheet:

  • total balance sheet (total value of assets without deducting liabilities): EUR 20 000 000;
  • net turnover: EUR 40 000 000; and
  • average number of employees in the reporting period: 250.

2. Groups whose holding or parent companies publish consolidated financial statements.

The exemption from consolidation does not apply to public companies whose shares are listed on a stock exchange. The consolidated accounts of such companies must be prepared in line with Generally Accepted Accounting Principles and accepted by members of the International Organization of Securities Commissions.

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