Comprehensive Guide to Maintaining a Company in Cyprus: Reporting, Obligations & Key Deadlines

Before registering a Cyprus company, maintenance costs, reporting obligations, and relevant time frames should be considered. 

A Cyprus company has the following recurring reporting and other obligations, along with relevant time frames: 

• Cyprus company financial statements preparation, including a report of an independent auditor, after the end of each year 
• Cyprus company annual tax return (TD 4) – after the end of each year 
• Cyprus company’s annual return is submitted to the Cyprus Registrar of Companies together with a copy of the company’s financial statements, after the end of each year 
• For profitable Cyprus companies, provisional taxation assessments – by 31 July and 31 December of each current year, respectively 
• Preparation and submission of VAT returns – after the end of each quarter 
• For Cyprus companies providing taxable supplies to EU countries, preparation and submission of a VIES return, after the end of each month 
• For Cyprus companies acting as employers: 
• Preparation of the statement of withholding tax of employees, electronic submission to the electronic portal of the Cyprus Tax Department, and issuance of the income tax payment reference number for online bank payment, after the end of each month 
• Payment of social insurance deductions and contributions to the Cyprus social insurance services – after the end of each month 
• Submission of Employer’s Tax return and declaration of employees’ data, domestic – foreign income, cut-offs, deductions, life insurance, salary tax cuts, GHS cuts, benefits in kind calculated on possible Cyprus company’s Directors/ Shareholders debit balances, employment, termination dates, etc – end of each year 
• For Cyprus companies acting as tenants of rented property owned by individuals – 
• Tax portal monthly payments for payment of special contributions for defense and the general health system withheld on monthly rentals, after the end of each month 
• Submission of Rent’s return (T.D./I.R.614) for payment of special contribution for defense and general health system withheld from monthly rentals, after the end of each current year’s semester 
• For Cyprus companies receiving interest that is non-trading – 
• Tax portal six-month payments for the payment of special contribution for defense on interest received, after the end of each semester 
• Submission of Return for special defense contribution withheld from interest received (T.D. 602) – after the end of each semester 
• For Cyprus companies paying dividends to their shareholders – 
• Submission of Return for special defense contribution withheld from dividends (T.D. 603) – the month following dividend payment. 

To view the full tax calendar regarding Cyprus company obligations and deadlines, please click here 

 

Cyprus company’s important taxation features  

• Cyprus tax rate on profit from operating activities, including interest income from operating activities, is subject to 12.5%. Subsequent dividends paid to non-resident shareholders are free from any further Cyprus taxes , subject to conditions , and there is no time limit on withholding profits. 

• Dividend income (subject to conditions) and the sale of qualifying titles, shares, and securities, including a significant number of financial instruments, are not subject to taxation in Cyprus. 

• No Cyprus capital gains tax or income tax on the disposal of shares of a private limited liability company. 

• Access to European directives like the EU Parent / Subsidiary directive and interest and royalties directives. The EU parent-subsidiary Directive is widely used within the EU (according to the provisions of the Directive, any payment of the dividend from one member state to another is free of withholding tax provided the required conditions are satisfied under the local legislation of the member state. For a Cyprus Company, there is no minimum holding period and no particular percentage interest or participation conditions. 

• Cyprus has an extensive network of double-tax treaties. 

• Intellectual property regime with a tax of less than 3% 

• Cyprus companies originally financed by their funds/equity can obtain a notional Interest deduction (NID). This means a reduction of the overall effective tax rate depending on the level of the Cyprus Company’s capitalization. There is no inheritance tax in Cyprus 

 

Cyprus company’s other important taxation features and Cyprus company’s important taxation features are explained in detail. 

Taxability of a Cyprus company 

If it is also a Cyprus tax resident company, it is subject to income tax on its worldwide income. Non-tax-resident companies are subject to income tax only on profits derived in Cyprus. Cyprus tax resident companies are those companies whose management and control are exercised from Cyprus and/or have a permanent establishment in Cyprus. 

 

Trading profits 

A Cyprus Company, if it is a Cyprus tax resident company, pays taxes on its net taxable profits. These are determined by pooling its worldwide income and deducting allowable/deductible expenses, charges, and capital allowances. Cyprus nontax-resident companies pay taxes on their Cyprus-sourced income only.  

For allowable/deductible expenses, as a general rule, expenses related to the production of income are considered allowable/deductible expenses to determine the net taxable profits of the company. 

Examples of allowable/deductible expenses 

• Accounting and audit fees 
• Interest expenses, exchange losses, 
• Rent payable 
• Entertainment/transportation costs 
• Travel abroad 
• Wages and salaries, including directors’ 
• Related supplies 
• Depreciation of equipment (Computers, etc.) 
• Cyprus Capital Gains Tax 

Cyprus gains in respect of the sale of immovable property situated in Cyprus (including shares of a company whose assets include such immovable property) are subject to Cyprus Capital Gains Tax. Both residents and non-residents are subject to the Cyprus capital gains tax if they own immovable property in Cyprus. The applicable Cyprus tax rate is 20%. No tax is levied in respect of immovable property situated abroad. No tax is levied on Cyprus capital gains in respect of profits on the disposal of shares of companies (other than the ones that own immovable property). 

 

Sales tax / Cyprus VAT 

Cyprus VAT is generally imposed on taxable supplies of goods and services at the standard rate of 19%. Certain supplies of goods and services are charged at the reduced rates of 3% – 9%; others are zero-rated, notably ship management services. Some supplies of goods and services are exempt from Cyprus VAT: specifically, financial services, health and welfare, insurance, and education. The annual Cyprus VAT registration threshold is EUR 15,600. Cyprus has adopted the provisions of the EU Directive 2008/8/EC effective from 1 January 2010. Exports of goods or provision of services to non-EU or EU VAT-registered persons are subject to 0%. 

 

Losses 

Trading losses of a Cyprus company may be carried forward for a period of up to five years. Losses from overseas activities can be set off against chargeable income for the year and can be carried forward subject to the five-year limit. 

 

Companies Restructuring 

The companies’ restructuring legislation is in line with the EU Merger Directive, extending to companies in non-EU countries. 

 

Related party transactions 

Transactions between related parties do not need to be adjusted for tax purposes as long as they comply with the Cyprus Transfer Pricing regulations. Cyprus introduced Transfer Pricing regulations that follow the OECD Transfer Pricing (TP) Guidelines. 

 

Capital allowances in Cyprus 

Annual wear and tear allowances in Cyprus are allowed on various assets, including plant and machinery, fixtures and fittings, commercial vehicles, hotels, commercial buildings, industrial buildings, computer hardware and software, and loose tools. Allowances range from 3% to 33% per annum. No capital allowances are given for saloon cars. 

 

Depreciation in Cyprus 

Depreciation included in the financial statements of Cyprus companies is disallowed for tax purposes, as capital allowances are given instead. For accounting purposes, depreciation rates applied are those that write off the assets over their useful life. 

 

Cyprus’ double tax treaties 

Cyprus has an extensive network of double-tax treaties. A summary of the applicable withholding tax rates for the income between countries having a double taxation treaty with Cyprus can be found by clicking here 

 

Cyprus tax department written statements (Cyprus tax rulings) 

The Cyprus tax department is issuing a significant number of written statements (Cyprus tax rulings) for taxpayers and, hence, for international Cyprus companies by providing them certainty regarding the tax treatment of their affairs. 

 

Cyprus’s important specific features 

• Cyprus company registration is achievable without the need for a presence in Cyprus. 
• For Cyprus company registration, there are no share capital deposit requirements. 
• For opening a bank account in Cyprus, the physical presence of the customer is not a requirement. This is particularly important, as it saves valuable time, unnecessary expense, inconvenience, and travel to Cyprus. 
• Ability to open a corporate and personal bank account in Cyprus and withdraw money from any country in the world. The running costs of the Cyprus company can be paid by bank card from any country in the world, for example, travel expenses, etc. 
• For companies registered as limited liability companies, liability does not pass on to the shareholders. 
• A Cyprus limited liability company offers asset protection. 
• The Cyprus International Trust regime enables settlors and beneficiaries to enjoy the highest possible degree of protection internationally. Matters arising relating to the validity or administration of a Cyprus international trust are determined by the laws of Cyprus, without the necessity to refer to any other jurisdiction. Dispositions to a trust may not be challenged because they are inconsistent with the laws of another jurisdiction. The law allows the settlor of a trust to preserve the powers of the trust, retain a beneficial interest, act as a protector, revoke, vary, or amend the terms of the trust, and generally give binding directions to the trustee. Another important aspect is that the trust “shall not be void or voidable in the event of the Settlor’s bankruptcy or liquidation or any action or proceedings against the settlor. 
• Cyprus laws on cross-border mergers, combined with the company’s transfer of the seat (foreign companies that re-domicile their registered office in Cyprus), proved favorable for restructuring purposes. 

 

Cyprus’ important general features 

• Cyprus is not an offshore jurisdiction. Cyprus is a member of the EU with a transparent legal framework and tax system fully compatible with the EU directives 

• Free movement of capital between Cyprus and the rest of the countries of the world 

• Flexible and workable Corporate and Trust laws based on the UK legal system 

• Cyprus’ business Language is English 

• Residence permits, visas, and work permits for staff, executives, and key personnel are available in Cyprus 

• Educated, skilled force for employment 

• High-quality Professional Services. Cyprus lawyers and accountants are mostly UK-standard educated.  Cyprus lawyers and accountants are members of self-registered bodies governed by ethical codes of the UK or  International organizations, i.e., UK ACCA, UK ACA, etc 

• Cyprus living is of a high standard 

• Cyprus’ climate is Mediterranean with hot summers and mild, relatively rainy winters. In Cyprus, there are from 300 to 340 sunny days a year 

• Cyprus luxury marinas offer a unique lifestyle in Cyprus.  Exclusive waterfront developments with exclusive restaurants and shops offer a lifestyle uniquely shaped for those who want to live by the sea. 

 

Are you ready to do business in Cyprus? 

Are you ready to seize the unparalleled opportunities of doing business in Cyprus? Discover the ease of setting up your company, opening a Cyprus bank account, and navigating the business landscape with confidence. Get started today! 

Reach out for expert help with tax, accounting, audit, or company setup in Cyprus.

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