All companies in Cyprus, following their incorporation with the Registrar of Companies, have the statutory obligation to maintain their registration up to date, by complying with their annual obligations and by notifying any changes in their details, within the specified time limit defined in the Companies Law.
In this article, we state the basic details and obligations of companies incorporated in Cyprus regarding annual returns and financial statements. Please have in mind that the below instructions and quidding lines are according to the Cyprus Registrar of Companies on the date of this article’s publication and changes may occur under new legislation or amendments. You are advised to contact us directly to be informed of the most updated details if you require assistance with filing annual reports and financial statements.
A. What does an annual return include
Every company in Cyprus must draw up an annual return once every calendar year that must include essential information about the company as of the date of its drafting, regarding:
- The company’s registered office address
- The address of the place where the company’s registers are kept
- The directors, secretary and share capital (for a company with a share capital)
- The register of its members
The annual return must be accompanied by the financial statements relating to the previous financial year duly certified by a director and the company’s secretary, along with payment of the calculated fee.
Submission of annual return exemption
If a company was registered before the 14th of August 1974 and has its registered office or place of business or all of its assets in an occupied or inaccessible area under the control of the Republic, then the company is not obliged to submit an annual return. If the previous requirement applies, then the form HE67 must be submitted to the Registrar by hand or post.
B. Financial Statements and other accompanying documents
The directors of the company are responsible to ensure that a complete set of financial statements for the company is prepared following the International Financial Reporting Standards (IFRS) and the provisions of the Companies Law.
The financial statements must include:
- Profit and loss account
- Balance Sheet signed by at least two directors
- Notes
and must be accompanied by:
- The company’s management report and (depending on the circumstances) a consolidated management report
- The company’s auditors’ report
- A non-financial report and (depending on the circumstances) a consolidated non-financial report
- A report, and (depending on the circumstances) a consolidated report for the payments towards governments
The financial statements of the company must first be approved by the board of directors and presented in the annual general meeting of the company for approval by the shareholders.
A company can be exempted from the submission of the financial statements if it is in the year of its incorporation or it is in the year following the year of its incorporation and, it has already convened a general meeting during the year of its incorporation.
Consolidated Financial Statements
Every company with subsidiaries must consolidate its financial statements with the financial statements of its subsidiaries following the International Financial Reporting Standards and, must present the consolidated ones.
The following exemptions apply to preparing consolidated financial statements:
- Small and medium-sized groups unless an associated company is a public interest entity, or the preparation of their consolidated financial statements is governed by legislation other than the Companies Law
- A company which only has subsidiary companies provided that all of the subsidiary companies do not play a significant role, individually as well as collectively, in the presentation of the true and fair picture of the assets, the liabilities, the financial condition and the profits or losses of all the companies included in the consolidation
- A holding company may not include the financial statements of a subsidiary company, if that subsidiary company is not significant enough to affect the true and fair picture of the assets, liabilities, financial condition and profits or losses, of the consolidated financial statements of the holding company. It should be noted, however, that the above exemption does not apply in the case where 2 or more of the subsidiary companies of a holding company collectively are significant enough to affect the true and fair picture of the asset’s liabilities, financial condition and profits or losses, of the consolidated financial statements of the holding company
- Groups of companies whose ultimate holding or holding companies publish consolidated financial statements following International Financial Reporting Standards
Excluded from the submission of management reports are also companies of small and medium size.
Maintaining accounting books
Directors of a Cyprus company are responsible for keeping proper books of account and records based on which the company’s financial statements are prepared.
These books of account and records must give “a true and fair view” of the company’s financial affairs and allow the determination of the financial position of the company, with reasonable accuracy, at any specific point in time. They must also include supporting documents (with contracts and invoices), which should reflect:
- All the amounts of money which are collected and spent by the company, as well as issues for which a relevant collection and expenditure is made
- All the sales, purchases and transactions of the company
- and all the assets and liabilities of the company
C. Annual Return Filing Fee
The fee for filing the annual return amounts is twenty euros with an additional fee of twenty euros if the accelerated procedure is required. In the event of an overdue filing, an additional fee of twenty euros as well as the late filing fee is also imposed.
As of 1/06/2021, the overdue filing of the annual return is subject to a late filing fee not exceeding the amount of fifty euros (€50) upon the first day of non-compliance and a further charge of one euro (€1) for every day the failure to comply continues for the first 6 months, raising to two euros (€2) for every day thereon the failure to comply continues, up to the maximum amount of five hundred euros (€500).
Depending on how you submit the annual return the fees can be paid by credit card (for e-filing submission); or in case of submission by hand or post in cash, by cheque, via an account maintained with the Department of the Registrar of Companies or with a bank transfer.
D. How to file an Annual Return for a Cyprus Company incorporated in Cyprus
All the information included in the annual return must be in accordance with the company’s register of the Registrar of Companies. Any changes in the company’s particulars must be reported to the Registrar before filing the annual return.
The annual return of a private company
From 2014 onwards, you can submit an annual return (form HE32(I)) for a private company with share capital only through the e-filing system of the Registrar of Companies.
The annual return must be accompanied by the financial statements related to the previous financial year and must be certified by a director and the company’s secretary, together with payment of the appropriate fee.
The first financial statements of the company must be presented eighteen months following the incorporation of the company at the latest, and thereafter, at least once every calendar year, accompanied of course by the annual return.
The annual return of a public company and company without share capital
The annual return for a public company (form HE32Δ)) and a company without share capital (form HE32XK) can only be submitted by hand or post.
The annual return must be accompanied by financial statements of the previous financial year and must be certified by a director and the secretary, together with payment of the relevant fee.
Again, the annual return of a public company or with a share capital must be accompanied by financial statements relating to the previous financial year and, must be certified by a director and the secretary, together with payment of the relevant fee.
The first financial statements of the company must be presented eighteen months following the incorporation of the company at the latest, and from there on, at least once every calendar year, accompanied by the annual return.
E. When a Company needs to file an Annual Return
As of 19/6/2015, the annual return must be made up to a date until the company’s annual return date and, must be filed at the Department of the Registrar of Companies within twenty-eight days from its drafting date.
For a new company, the drafting date of the annual return is the day following the expiry of the period of eighteen months from the date of the incorporation of the company. For example, if your company was incorporated on 10th February 2018, the annual return must be drafted up until 11th August 2019.
For an existing company, the drafting date of the annual return is the date on which one year lapses from the drafting date of the last filed annual return.
For example, if the drafting date of your last filed annual return was 6th December 2018, the next annual return must be drafted by the 6th of December 2019.
Please note that it is not possible to file an annual return which has a drafting date of the same calendar year as the last filed annual return.
Extending the Annual Return Date to a later date submission
The annual return date of the company can be extended by notifying the Cyprus Registrar of Companies of the new annual return date of the company before the expiry of the annual return date for that specific year.
The new annual return date must not exceed 3 months from the annual return date of the company and cannot extend beyond the last day of the calendar year.
Late filing fee for overdue filing of annual return
As of 1/6/2021, the overdue filing of an annual return is subject to a late filing fee not exceeding the amount of fifty euros upon the first day of non-compliance and a further charge of one euro for every day the failure to comply continues for the first 6 months, raising to two euros/day if the failure to comply continues, and up to a maximum amount of five hundred euros.
F. Late Filing
Failure to comply with the statutory obligation to submit annual returns to the Cyprus Registrar of Companies can have several consequences.
As of 1/06/2021, the overdue filing of the annual return is subject to a late filing fee not exceeding the amount of fifty euros upon the first day of non-compliance and a further charge of one euro for every day the failure to comply continues for the first 6 months, raised to two euros/day thereon the failure to comply continues, up to the maximum amount of five hundred euros.
Prosecuting the Company and its Officers
Failure to file an annual return is also considered to be a criminal offence and in the event of conviction the company and every one of its officers, responsible for the omission, are liable to a fine not exceeding the maximum amount of forty-two euros.
Administrative Fine
Failure to file an annual return with financial statements is also liable to an administrative fine imposed on the company not exceeding the maximum amount of eight thousand five-hundred and forty-three euros (€8.543).
Strike-off
Failure to file the annual returns and financial statements of a company may result in the involuntary strike-off from the Register and subsequent dissolution of the company, by the Registrar of companies.
Important notice: all administrative fines, penalties and other charges are presented as the amount due to the Registrar of Companies upon confirmation of violation. Other additional charges can also occur that may include services offered or advice from a professional such as a Tax expert, a lawyer or a consultant.
Conclusion
With all the advantages of establishing and operating a company in Cyprus, business owners must also have in mind that the legislations, deadlines, and any other obligations of any company must be kept updated and with regulations guidelines otherwise they risk the imposition of substantial penalties and fines. Cyprus, with its 12.5% corporate tax, attractive double tax treaties with over 60 countries, the elevated status of being an EU and Eurozone member, attractive location and capable workforce, can offer a lot of advantages to corporate entities and businessmen.