Annual Obligations of a Cyprus Company

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1 Annual Obligations of a Cyprus Company 1. ACCOUNTING RECORDS It is a legal requirement that every Cyprus Company should keep books of account to record its transactions and enable the preparation of financial statements. 2. VAT VAT is charged on every taxable supply of goods or services, that is on every supply of goods or services made within the Republic, by a taxable person in the course or furtherance of any business carried on by him, other than a supply exempted in accordance with the provisions of the Law. Additionally, VAT is charged on the importation of goods into the Republic. Thresholds and Penalties Registration threshold for taxable supplies in Cyprus Registration threshold for distance sales (sales of goods by suppliers resident in another EU Member State to persons not registered to Cyprus VAT) Registration threshold for acquisition of goods in Cyprus from suppliers resident in another EU Member State Registration threshold for intra-community supply of services ,61 no threshold

2 Registration threshold for receipt of services from abroad for which the recipient must account for VAT under the reverse charge provisions Penalty for late submission of VAT return for each return Penalty for not keeping books and records for a period of 7 years 341 Penalty for late submission of VIES return Penalty for late submission of corrective VIES return Omission to submit the VIES return for a period of over 3 months constitutes a criminal offence with a maximum penalty of Penalty for late registration with the VAT authorities 50 for each return 15 for each return per month of delay 3. TAX RETURNS Every company must have auditors who are appointed by the company to perform the annual statutory audit (see paragraph 3 below). A company needs to prepare annual audited financial statements which are used for the preparation of the Tax Returns (IR4). The audits are conducted in accordance with International Auditing Standards. In accordance with Cyprus tax laws, every company should submit a Tax Return on an annual basis. The Tax Return includes details about the company, its balance sheet and profit and loss account in Euro and its tax computation. The Tax Return must be signed by the company s auditors and Directors.

3 4. AUDITED FINANCIAL STATEMENTS 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 in paragraph 2 above and in such case, Dormant Financial Statements must be prepared. Consolidated Financial Statements The Companies Law imposes an obligation upon Cypriot Companies which have Investments in Subsidiaries (direct or indirect control) to prepare also Consolidated Financial Statements for their whole Group in accordance with International Financial Reporting Standards (IFRS). Exemptions The Board of Directors can claim an exemption from preparing Consolidated Financial Statements in cases where two of the following criteria are met: The Net Assets of the Group do not exceed 17.5m The Turnover for the Group does not exceed 35m. The Average Number of Employees in the Group during the year is below 250 persons. Subsidiaries held for sale within the following 12 months can be exempt from the above calculations.

4 An exemption is given also when the Subsidiary or Parent Company of the Cyprus Company prepares and files Statutory Consolidated Financial Statements in their Country of Jurisdiction. 5. ANNUAL RETURNS 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 that date 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. On the contrary, the Registrar of Companies will refuse to issue certificates connected with the Annual Returns of the company and information listed therein, as the Annual Returns will not be accepted for filing without the financial statements.

5 6. OBLIGATIONS for companies having employees and 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 Social Insurance 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. Employer s Liability Insurance An insurance covering the employees for possible accidents during work must be maintained. Law for special contribution by the employees of the private sector Under this new legislation, all private sector employees must pay a special contribution to the Republic on their salaries. This special contribution will be considered as tax deductible for both the employee and the employer and it will be applicable for a period of three years from January 2014 until December 2016.

6 The rate of this contribution will depend on the amount of monthly salary as indicated in the below table and this will be covered in equal proportions by both the employee and the employer: Gross Monthly Salary in Euro Special Contribution % Up to % % (min 10 euro) % and above 3.5% Withholding tax on Rent Following the 2010 amendments, 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 tax 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. 7. 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 or the subsequent year.

7 8. ANNUAL FIXED LEVY As from 2011, all registered Cyprus companies are obliged to pay an annual charge of 350 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 shall proceed with striking off the company from the Register of Companies. A company may be re-instated within two years from the date of strike off from the register automatically provided a fee of 500 (in addition to the outstanding amounts of the charge) is paid. A company may be re-instated within two years from the date of strike off from the register provided a fee of 750 (in addition to the outstanding amounts of the charge) is paid.

8 9. TAX CALENDAR 2016 End of each month 31 January 31 March 30 April 30 June Payment of tax deducted from employees salary (PAYE) in the preceding month. Payment of special contribution for defence withheld on payments of dividends, interest or rents (when the tenant is a company, partnership, the state or local authority) made to Cyprus tax residents in the preceding month. Payment of tax withheld in the preceding month on payments to non-cyprus residents. Submission of declaration of deemed dividend distribution (IR623) for the year ended 31 December Electronic submission of the 2014 corporation tax return (IR4) for accounting periods ending on 31 December 2014 (IR4). Electronic submission of the 2014 income tax return of physical persons preparing audited financial statements (Note 2). Payment of premium tax for life insurance companies - first instalment for Non-Electronic submission of 2015 personal tax returns of individuals whose incomes do not include income from a trade/ business, rents, dividends, interest, royalties nor income relating to trading goodwill (Note 1) Payment of special contribution for defence for the first six months of 2016 on rents if such tax is not withheld at source by tenant and on dividends or interest from sources outside Cyprus. Payment of 2015 personal income tax under the selfassessment method by individuals not preparing audited financial statements (Note 2). Non-Electronic submission of 2015 personal tax returns of individuals not required to prepare audited financial statements but whose incomes include income from a

9 31 July 1 August 31 August 30 September 31 December trade/ business, rents, dividends, interest, royalties or income relating to trading goodwill (Notes 1 and 2) Electronic submission by employers of the total 2015 payroll (Form IR7). Submission of the 2016 provisional tax return and payment of the first instalment. Electronic submission of 2015 personal tax returns of individuals whose incomes do not include income from a trade/business, rents, dividends, interest, royalties nor income relating to trading goodwill (Note 1). Payment of 2015 final corporation tax under the selfassessment method. Payment of 2015 personal income tax under the selfassessment method by individuals preparing audited financial statements (Note 2). Payment of premium tax for life insurance companies - second instalment for Payment of immovable property tax for 2016 with a discount of 10% on the tax due. Electronic submission of 2015 personal tax returns of individuals not required to prepare audited financial statements but whose incomes include income from a trade/business, rents, dividends, interest, royalties or income relating to trading goodwill (Notes 1 and 2) and payment of tax via the self-assessment method. Payment of immovable property tax for 2016 without a discount of 10% on the tax due. Payment of provisional tax - second and last instalment for Payment of special contribution for defence for the last six months of 2016 on rents if such tax is not withheld at source by tenant and on dividends or interest from sources outside Cyprus.

10 Payment of premium tax for life insurance companies - third and last instalment for VAT reporting deadline: 40 days following the end of the quarter to which the reporting relates to. VIES reporting deadline: 15th of the month following the calendar month to which the statement relates to. Notes: 1. Physical persons are required to submit personal tax returns only when their gross income exceeds A physical person is obliged to submit audited financial statements if his/her turnover exceeds annually. Interest and Penalties The official interest rate, as set by the Finance Minister, is 4% per annum for all amounts due after 1 January 2016 (4% for year 2015, 4.5% for year 2014, 4,75% for year 2013, 5% for years 2011 and 2012, 5,35% for the year 2010, 8% for the years and 9% up to 31 December 2006). Administrative Penalty 100 (Article 50A a) Administrative Penalty 200 (Article 50A b) Administrative Penalty 200 (Article 50A c) Late submission of tax returns or documents for which a deadline is imposed by the Law. Late submission of returns or documents for which no deadline is imposed by the Law but for which the Commissioner has requested compliance within at least 60 days and there has been no compliance. Late submission of returns or documents for which no deadline is imposed by the Law but for which the Commissioner has duly served a written notice

11 Administrative Penalty 100 (Article 50A d) Additional Tax 5% (Article 50A e) on such person requesting the compliance with a deadline expressly mentioned in the notice. Non submission of returns or documents in respect of another tax payer for which no deadline is imposed by the Law and the Commissioner has requested compliance within at least 60 days and there has been no compliance. Late payment of tax either as provided by the law or by a demand for payment issued by the Commissioner. Non-compliance with the above obligations In case of non-compliance with the above obligations, the Authorities may take criminal court proceedings against the company and its directors and the company will face penalties for no or late filings. Contact Us For further information you may contact: Christos Christodoulou Director christos@cfa-auditors.com Nicolas Trikkis Principal nicolas@cfa-auditors.com Our Office: Spyrou Kyprianou 57, M. Frangos Court, 3 rd Floor, 6051, Larnaca, Cyprus : : : info@cfa-auditors.com

Tax Card May kpmg.com.cy

Tax Card May kpmg.com.cy Tax Card 2018 May 2018 kpmg.com.cy 1. Personal Income Tax 1.1 Tax Rates Chargeable Income 0-19.500 Tax Rate % Tax Amount Cumulative Tax 0 19.501-28.000 20 1.700 1.700 28.001-36.300 25 2.075 3.775 36.301-60.000