Obligations of a Cyprus Company
Updated: Sep 1
Setting and establishing a business in Cyprus may initially seem like a simple process, but through our experience we can safely state that it is not without its challenges. To set up and have a compliant company in Cyprus the corporation must adhere to specific legislative (both local & EU) and tax obligations.
We, at Flexi, have developed an all-inclusive service for all your business needs. Allow us to alleviate the stress and enjoy hassle-free and swift service from our experts.
1. Statutory Obligations
1.1. Company Incorporation and Appointment of Officials
As step one, you need to decide the name of your company and apply for the reservation of the said name with the Department of Registrar of Companies and Intellectual Property. Once, approved, you may proceed with the incorporation of your company and file the relevant forms to the Registrar. The following need to be submitted:
Memorandum and Articles of the Association
Information on the Directors & Secretary
Information on the Shareholders
Information on the Registered office
1.2. Register of Ultimate Beneficial Owners
As from the 12th of March 2021, Cyprus has established a register of ultimate beneficial owners (UBOs) for all Cyprus companies and legal entities. Therefore, the details of the UBOs of all companies, including the name, address, date of birth, ID/passport number etc., must be submitted to the online portal of the Registrar.
UBO is considered any natural person who, directly or indirectly, owns or controls the company. The particulars on the UBO registry are explained in our article UBO Registry: Becoming A Reality In Cyprus.
1.3. Company Levy
It is compulsory for all companies registered in Cyprus to pay an annual fee in order to remain in good standing. The settlement of the annual fee in a timely manner is vital to avoid further charges and penalties.
1.4. Annual General Meeting
General Meetings of the officials of the company must be held on a yearly basis. For newly incorporated companies, the first Annual General Meeting can take place within 18 months from the incorporation of the company.
1.5. Annual Returns (HE 32)
A company is obligated to submit its Annual Returns to the Registrar accompanied with the audited Financial Statements of the previous year and a declaration of the directors and secretary of the company stating that the Financial Statements are fully approved by the shareholders at the Annual General meeting. For a newly incorporated company, the Annual Returns should be submitted within 18 months from the incorporation of the company. The Annual Returns should be filed within 42 days from the Annual General Meeting.
1.6. Audited Financial Statements
All companies must prepare annual audited financial statements in accordance with the International Financial Reporting Standards (IFRS). As per the Companies Law, Cap. 113 the financial statements must reflect the true and fair view of the company’s activities. The financial statements must be audited by an independent auditor with a Cyprus registration. All audits shall be completed according to the International Standards of Auditing (ISA).
1.7. Record Keeping
Any changes within the company must be duly recorded; a register of the company’s officials and charges shall be maintained and be up to date at all times and kept at the company’s registered office. Furthermore, minutes of all meetings shall be recorded by the company’s secretary and kept in file.
If the company would like to proceed with any structural changes, including the change of officials & share capital or amendments to the Memorandum & Articles of the Association, it must submit all the relevant changes to the Registrar in a timely manner by filing the relevant forms.
2. Tax Obligations
2.1. Tax Registration
All Cyprus companies and foreign companies that are considered as Cypriot tax resident are obliged to have a tax identification code (TIC). In order to obtain the TIC, they must register with the tax department within 60 days from their date of incorporation or from the date the company is considered a Cyprus tax resident.
Any changes that may affect the records of the tax authorities, must be submitted to the Commissioner of Taxation within 60 days from the said change.
2.2. Tax Returns
All companies must file their Corporate Annual Tax Returns Declaration (T.D.4) with the Tax Department in a timely manner. Failure to meet the deadline will result in additional penalties for late submission.
2.3. Tax payments
Companies in Cyprus calculate their corporation tax based on a self-assessment system for the current year’s taxable profit. The tax is payable in two equal instalments in July and December. The companies may revise their provisional tax assessment at any time prior to the end of the current tax year and any underpayments can be corrected by the 1st of August of the following year. Failure to meet the said deadline will result to additional interest being charged.
2.4. Value Added Tax (VAT)
According to the VAT law, any company that is conducting business in European Union and has an annual turnover of €15,600 and over, is obliged to register with the Tax Department and submit VAT returns every quarter followed by the relevant payment.
2.5. Contributions to the Social Insurance and other funds
A company that has employees has certain responsibilities and is obliged to make contributions to various funds. The same applies to all employees, who are also liable to such contributions on an individual basis. These contributions are withheld by the employees’ monthly salary and shall be paid to the authorities by the end of the month following the month the salary relates to and they are calculated on gross emoluments as follows:
2.6. Corporation Tax
For a Cyprus tax resident company, tax is imposed on the income accrued or arising from sources of income in Cyprus and abroad. When a company is not a Cyprus tax resident, tax is imposed only on income accrued or arising through a permanent establishment in Cyprus or from other sources in Cyprus. The current corporate tax rate is set at 12,5% but certain exemptions also apply.
In 2023, a global minimum corporate tax rate of 15% will be applied. Read more at our article Global minimum corporate tax of 15%.
2.7. Special Defence Contribution
Special defence contribution is imposed on dividends, interest income, rental income and disposal of assets. More specifically, the rates and types of income are described below:
2.8. Capital Gains Tax
Capital Gains Tax is imposed on gains from:
the disposal of immovable property in Cyprus
the disposal of shares of companies which own immovable property in Cyprus and at least 50% of their market value derives from said properties
the disposal of shares of companies which are not listed on a recognised stock exchange and own immovable property in Cyprus
The Capital Gains Tax is imposed on the net profit from the disposal at a rate of 20%. Certain exemptions apply.
How we can assist you
Flexi is a one-stop-shop for all your business needs. We can assist with the preparation and submission of all the required forms/documents to the Registrar and tax authorities. At the same time Flexi can help you be always compliant with with all local & EU laws and regulations. From incorporating your business, appointing officials, providing a registered address for your company to tax planning and corporate structuring we got you covered. Our team is comprised by a number of experts in the fields of tax, accounting, legal and administration and we are ready to serve you and your company in a cost and time effective manner. Contact us to discuss your options.
*DISCLAIMER: This article and its publication are intended to provide a brief introduction and act as a general guide. This is provided for information purposes only and cannot be utilized as a substitute for professional advice. This document does not represent a legal opinion and one must not rely on it without receiving independent advice based on the particular facts of its own case. No responsibility is accepted by the author or the publishers for any loss suffered from acting or refraining from acting based on the contents of this publication.
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