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- The preparation of accounts for companies which do not have a VAT number
- The VAT system
- The preparation of VAT returns
- How to close a company registered in Cyprus
- Checklist - to be completed at the time of purchase of Cyprus companies
- Appendixes
Information on the obligatory filing of accounts in Cyprus
As a member of the European Union, Cyprus also follows the EU standards in its accounting system, while also retaining the traditions of the Anglo-Saxon legal system. In general it can be stated that the tax administration system is well developed, with relatively transparent laws and regulations.
All companies registered in Cyprus must comply with these formal regulations, even if they have been dormant (carried out no transactions).
The purpose of this section is to provide our clients and partners with a summary of the main points of the Cypriot accounting system. Obviously, however, the information contained here is no substitute for a detailed consultation with a local accountant.
| Subject of the accounting obligation: | Companies registered and tax-resident in Cyprus. Companies must apply for a Tax Number from the Inland Revenue. |
| Accounting obligation: | Companies must, by law, keep clear bookkeeping records in accordance with Cyprus procedures. |
| Auditing obligation: | The auditing of the accounts must be carried out by a certified auditor in Cyprus. |
| Financial year: | This typically coincides with the calendar year, and so begins on January 1st and ends on December 31st. If the financial year does not coincide with the calendar year, it can not be longer than 12 months. (In the past it could be extended to 18 months). |
| Deadline for the filing of financial statements: | December 31st of the year following the subject year. |
| Rates of tax on profits: | The basic rate of corporate profit tax for Cyprus companies is 10%. |
| Tax advance and tax payment conditions: | Companies which make a profit must pay a tax advance. In June of each financial year, the company directors and shareholders must estimate the expected profit for the year, and must pay a tax advance for the amount calculated in three equal instalments as follows: - first instalment: by August 1st - second instalment: by September 30th - third instalment: by December 31st. There can be no great discrepancy between the estimated and actual amounts in the annual accounts, as, if the estimated profit is less than 75% of the actual profit, a 10% tax penalty is payable on the difference. In order to be able to prepare the accounts on time, and so that companies can pay the tax advance and the tax itself, the accountant we are in cooperation with asks clients to provide the material for the accounts twice a year, as follows: - the material relating to the first half of the year by September 30th of the subject year - the material relating to the second half of the year by March 31st of the year following the subject year |
| Accounting fees: | The accounting fees will be calculated based on the number of monthly accounting items (please see Appendix 1). |
| Auditing fees: | The audit is a separate process, and separate fees will be charged based on the number of yearly accounting items (please see Appendix 2). |
The preparation of accounts for companies which do not have a VAT number
The accountant or the representative of LAVECO's office in Cyprus will send the client a written request, twice a year as described above, for the documentation (photocopies will suffice) necessary for the preparation of the company's accounts (invoices, contracts, bank statements, registers, minutes, bills of lading, customs papers etc.).
After receiving accounting documentation, the accountant will calculate the number of transactions and issue invoices for Accounting and Auditing, which will be forwarded to the client.
Once the invoices have been settled, the accountant will start the preparation of the accounts and Financial Statements.
The accountant sends the end of year financial statements to the company director to be signed.
The client returns the signed report to the accountant.
The accountant files the Financial Statements with the tax authorities and Commissioner of Companies in Cyprus.
Important note: the accountant will only start to prepare accounts and Financial Statements once the relevant invoices have been settled. Therefore, we strongly advise our clients to settle all invoices in good time.
The VAT system
Once a company has been registered in Cyprus it has the right to apply for an EU tax number, and with this also becomes subject to the EU VAT system. The application generally takes between 1 & 2 weeks and the company then receives an EU tax number.
Every company registered in Cyprus and in possession of a tax number is obliged to file VAT returns, even if the company was dormant (had no transactions) during the given period.
VAT returns must be prepared quarterly. The quarterly periods are set by the tax authorities, and do not coincide with the calendar “quarters”. The tax authorities send notification of this to the client (or the accountant).
The accountant prepares the VAT return on the basis of invoices and other documents provided by the client ON A MONTHLY BASIS.
If a company buys from one EU country and sells to another EU country, then it must file VIES (VAT Information Exchange System) returns. If the company is involved in buying and selling products or services within one country then such returns are not necessary.
In order to fill out the VIES forms, the following information will be needed:
- Country of Purchase
- Country of Sale
- Your client's VAT number (in their country of residence)
- Number of total transactions and the amount of each transaction
| Fee for application for EU VAT number and VIES | 500 EUR + 15% VAT |
| Fee for filing the quarterly VAT returns | 85 EUR + 15% VAT/quarter |
| Fee for filling the monthly VIES return | 85 EUR + 15% VAT/report |
The preparation of VAT returns
The client is obliged to provide the accountant with all the necessary documents (invoices, contracts, bank statements, registers, minutes, bills of lading, customs papers etc.), within 10 days of the end of the subject month.
- The accountant or LAVECO's Cyprus office will send a notification to the client at the end of each quarter.
- The VAT Forms from the Cyprus VAT Authorities will be forwarded to the clients every quarter. There is a deadline for the filing of the VAT Form, therefore the director of the company must sign the VAT Form without delay and return it to the Cyprus office of Laveco Ltd. in order to avoid any penalties. Unfortunately, the VAT form is in Greek, but the accountant will fill out the necessary information for the clients.
- The client sends the signed VAT Form back to the accountant.
- The accountant files the completed VAT return with the tax authorities.
- The accountant then sends an invoice for the completed service to the client. (Please note that the accountant will only prepare the return for the following quarter, if the invoice for the subject quarter has been settled).
Generally speaking, the majority of companies do not pay VAT in Cyprus, but if the company makes sales in Cyprus, or sells to private individuals or companies from within the EU which do not have an EU VAT number, then it actually has to pay the VAT due in Cyprus. Therefore, if you have any doubts regarding the payment of VAT, please consult with the accountant in Cyprus.
How to close a company registered in Cyprus
In order to close a Cyprus company, the client must first settle all outstanding liabilities with the Cyprus authorities (such as the payment of tax, penalties, filing of Financial Statements, VAT returns etc.). All outstanding invoices for services provided by Laveco Ltd. and the auditor for the preparation of Accounting and Auditing, as well as the invoice for closing the company, must be settled.
Companies with a VAT number are obliged to file VAT reports until the company is officially closed, which takes a couple of months. This procedure depends on the Registrar of Companies and the Tax authorities, and LAVECO Ltd. can not take any responsibility for any delays in the closing process.
This information material is meant as a guideline to the most important regulations regarding the administrative requirements of companies registered in Cyprus. As the system is constantly developing, and the regulations in Cyprus are subject to change, please consult the LAVECO Ltd. office in Cyprus at:
| LAVECO Ltd. | |
| Contact Person: | Sonia Vrachimi |
| Tel: | + 357 24 636 919 |
| Fax: | + 357 24 636 920 |
| E-mail: | cyprus@laveco.com |
Wishing you success and fruitful results with the operation of your Cyprus Company!
Checklist - to be completed at the time of purchase of Cyprus companies
| copy of client's passport (director, owner, attorney) | |
| client's residential address (proof of address – utility bill, id address card) | |
| client's contact details (telephone, fax, email, postal address) | |
| application for VAT number, signed by client | |
| authorisation letter to the accountant, signed by the client | |
| sample dormant confirmation letter | |
| sample Tax Residence Certificate | |
| in case of nominee directors: management agreement, signed by client | |
| in case of nominee directors: nominee papers (indemnity, resignation letter, etc.) |
Appendixes
Appendix 1
Accounting
| Category | Accounting items per month | Price per accounting item in EUR |
|---|---|---|
| 1 | 0 | 0 |
| 2 | 1-3 | 9,5 |
| 3 | 4-5 | 9,5 |
| 4 | 6-9 | 9,5 |
| 5 | 10-12 | 9,5 |
| 6 | 13-15 | 9,5 |
| 7.a | 16-20 | 6,5 |
| 7.b | 21-40 | 6,5 |
| 7.c | 41-100 | 3 |
| 7.d | 101+ | 1,65 |
Example 1 :
Companies A & B have 10 and 50 accounting items per month respectively.
COMPANY A
10 x 9,5 = 95 EUR (per month)
COMPANY B
1st 15 items: 15 x 9,5 = 142,50
Items 16-40: 25 x 6,5 = 162,50
Items 41-50: 10 x 3 = 30, 00
TOTAL: 335 EUR(PER MONTH)
Appendix 2
Auditing
| Auditing items per year | Audit price (fixed) EUR | Audit price per item, EUR |
|---|---|---|
| 0 | 625 | N/A |
| 1-36 | 668,75 | N/A |
| 37-60 | 725 | N/A |
| 61-108 | 787,5 | N/A |
| 109-144 | 831 | N/A |
| 145-180 | 875 | N/A |
| 181-240 | N/A | 6,5 |
| 241-480 | N/A | 6,5 |
| 481-1200 | N/A | 4,5 |
| 1201+ | N/A | 4,5 |
Important note: In the case of the yearly audit, fixed prices apply to the first 180 items. Any additional items are charged per item.
Example 2 :
In the case of Companies A & B from Appendix 1, the yearly auditing fees will be as follows (assuming that the monthly figures in the example are average figures for the year):
COMPANY A
10 items per month = 120 annual auditing items
120 items = 831 EUR
COMPANY B
50 items per month = 600 annual auditing items
Items 1-180 = 875
Items 181-480 = 300 x 6,5 = 1950
Items 481-600 = 220 x 4,5 = 990
TOTAL: 3815 EUR
Subject: Authorisation to accountant
Dear Sirs,
I hereby authorise the company __________________________________, from this day forward, to carry out all tasks and duties in relation to accounting and auditing of the company __________________ (a company registered in Cyprus under registered number ____________) in accordance with the laws of Cyprus. Furthermore, the company ________________________________ is authorised to maintain contact with and deal with the authorities in Cyprus (Tax authorities, social security office, VAT office, Employment authorities, etc.) in our name and on our behalf.
The current authorisation is valid from this day until revocation.
Yours sincerely
__________________________________
Director / attorney
Report for accounting documentation Download (report_for_accounting_documentation_form.doc)