Hundreds of companies are opened in Cyprus every year. In addition to its convenient geographical location, the island offers many tax benefits, the possibility of cooperation with any European counterparties and customers, and all this on legal grounds.
Concerning taxes, many of our people mistakenly believe that this country is still a Mediterranean “tax haven”. In reality, the situation is quite different. The island has its taxes and fees that both companies and individuals are required to pay. Moreover, government services monitor the completeness and correctness of all payments received. But even with this in mind, the Cyprus tax burden is quite low compared to any other European state:
- In the country, all payments in the form of interest, dividends, and royalties are taxed at a zero rate. The same applies to receipts from foreign representations and branches.
- The corporate tax in the state is only 12.5%.
- The Cyprus VAT rate is the lowest in Europe at only 19%. Moreover, some activities, such as passenger transportation, may be taxed at a reduced rate.
- There is no inheritance tax in the country, so not only you, but also your children will be able to enjoy the results of your labors.
- The Cypriot government actively attracts wealthy foreigners to the island. The Economic Citizenship Program also provides significant assistance in this difficult issue for Cypriots. Among her options are investments in real business. So, by investing in the enterprise with 5 million euros, along with your own European business, you will receive a second passport to Cyprus.
Features of accounting in Cyprus
The actual creation of the company is just the beginning. In addition to carrying out current transactions, every Cypriot company is obliged to maintain accounting records. All companies registered on the island are required to regularly submit their financial reporting data to the relevant departments. They are all stored in the company’s file. Plus, the company must annually undergo an audit, the results of which are also entered into a “personal file”.
It is worth noting that Cypriots adhere to international financial reporting standards. The latter is used not only in Cyprus but throughout the EU. Despite the need to regularly submit accounting reports, you do not need to have your accountant on staff. Outsourcing is well developed on the island, so you can turn to a third-party company that will provide you with a highly qualified specialist. Outsourcing will help you to significantly save money, so you do not have to pay salaries and all related taxes for maintaining one more employee.
Deadlines for filing reports in Cyprus
According to the Income Tax Law, every Cypriot taxpayer, be it an individual or a company, is required to declare his taxable income annually. Individuals must file their tax returns by June 30th of the following year. Companies can file tax returns for the current reporting year at the end of the next year.
Besides, all companies must maintain analytical records of all their activities. It should reflect all receipts, purchases, and other transactions. They must be entered in the ledger. Such books should be kept for at least the next 7 years, after which they can be written off. The information in them must be updated at least once a quarter. Plus, based on current transactions, a VAT declaration is prepared and submitted to the tax authorities quarterly. To account for some types of taxes (including VAT), along with the tax return, it is necessary to submit accompanying documents for each transaction – receipts, invoices, etc.
Plus, every company must pay corporate tax annually. It is worth noting that the rate of this tax in Cyprus is the lowest in the EU and is only 12.5%. Payment must be made by July 31st of the current tax year. In case of late payment to the company, a penalty of 10% will be charged.
Together with corporate tax, all businesses must pay an annual fee for renewing registration in the Commercial Register. The levy is € 350 and must be paid by June 30 of the current tax year. In case of delay, you will be charged a fine. Its amount depends on the total delay in payment and can range from 10% to 40%. Keep in mind that a delay of more than 5 months can lead to the exclusion of the company from the register, which will negatively affect your business.
It is worth noting that late payment of mandatory taxes and fees, refusal, or incomplete provision of reporting data may also lead to the forced removal of the company from the register. By the end of March 2016 alone, the Registration Department had excluded more than 25,000 companies. The reason for such radical measures was the incomplete submission of accounting documents for previous years. Naturally, enterprises that have left the register can restore their rights within 2 years, but this will not affect their reputation in the best way.