An Outline of the Accounting and Financial Reporting Obligations of a Cyprus Company

I. Books and records

Companies incorporated in Cyprus are required to keep proper books of accounts either at the company’s registered office or at any place designated by the directors.

The books and records of a company are not open to inspection by anyone other than the directors and auditors. The Inland Revenue, as well as the VAT authorities can, however, request the production of any records while examining accounts for tax or VAT purposes.

The accounting records must show all sums of money received and expended all sales and purchases, assets and liabilities.

Other books required to be kept are:

• Register of members
• Register of directors and secretary
• Register of directors’ interests (in shares of the company)
• Register of debentures and charges
• Minutes of directors’ and shareholders’ meetings.

The Income Tax Law requires that all transactions of a company must be entered in the company’s accounting records within 4 months from the date of the transaction.

VAT laws require that the VAT returns be prepared on a quarterly basis (the quarters are decided by the VAT office and are not necessarily on a calendar basis). Furthermore, VIES Returns (an EU system of reporting cross-border business-to-business transactions within the EU) are required to be filed on a monthly basis.

In practice, therefore, in order to ensure full compliance, companies should update their bookkeeping records in maximum of monthly cycles.

II. Annual Returns

All companies must file an annual return giving details of the company’s capital structure, mortgage particulars, and particulars of registered shareholders, directors and secretary. 

A copy of the annual financial statements must be attached to the annual return, with an auditors’ report (now required for all companies), and a Management Report (previously referred to as Report of Board of Directors) where this is required (see further below). The documents filed with the Registrar of Companies must be in Greek (or Turkish) and are open to public inspection.  By concession, the financial statements filed with the Annual Return may be in English.

III. Annual Financial Statements

Financial Statements must be prepared by all Cyprus incorporated companies once a year and presented at the shareholders’ Annual General Meeting (AGM). 

They may be in any language, but a Greek or English translation is required to be filed with the Registrar of Companies as an attachment to the company’s Annual Return. 

The accounting period should be for twelve months ending on any date decided upon by the directors. 

Financial Statements should be prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and International Financial Reporting Standards as issued by the IASB and should comply with the Companies Law, Cap. 113. 

The Accounting year-end is deemed to be 31 December, unless notice of another date is given.

Small companies (see further below for definition) are, subject to certain conditions, exempt from the obligation to prepare Management Report.

IV. REQUIREMENT OF Consolidated financial statements

If a Cyprus company is holding subsidiaries, it is required to prepare consolidated financial statements.

The following exemptions apply:

• Small and medium sized groups (see definition in categories of groups further below) may be exempt from the obligations to draw up consolidated financial accounts (Note: The exemptions from consolidation in the cases of (i) severe and long-term restrictions, (ii) disproportionate cost or undue delay and (iii) held exclusively with the view to subsequent sell, as these were provided by the previous Law have been abolished).

• Groups of companies, the holding or mother companies of which publish consolidated financial accounts on the basis of Generally Accepted Accounting Principles, shall be exempt from the obligation to draw up consolidated financial accounts.

Under the Cyprus  Companies Law, the term ‘small/medium-sized group’ shall mean a group of companies, of which the companies being consolidated:

• Are non-publicly-traded companies
• The drawing up of their consolidated financial accounts is not subject to other legislation
• Fully comply with two out of the three criteria referred to below at the date of closure of the balance sheet of the holding company

Categories of Groups

In September 2016, the Cyprus Companies Law was amended, and inter alia, introduced  new definitions  of Small, Medium and Large sized  Groups of Companies, summarised in the below table:

Category	Criteria	Condition
	Total Gross Assets	Net Turnover	Average No of employees during the year
Small Groups	Less than €4.000.000	Less than €8.000.000	Less than 50	On a consolidated basis, do not exceed the limits of at least two of the three criteria as at the balance sheet date of the parent company
Medium-Sized Groups	Less than €20.000.000	Less than €40.000.000	Less than 250	Groups which are not small groups, and which, on a consolidated basis, do not exceed the limits of at least two of the three criteria as at the balance sheet date of the parent company
Large Group	More than €20.000.000	More than €40.000.000	More than 250	Groups which on a consolidated basis, exceed the limits of at least two of the criteria as at the balance sheet date of the parent company

v. Audit of Financial Statements

The Financial Statements of all Cyprus companies have to be audited by an independent auditor or auditors

The auditors are required to express an opinion on the financial statements and state the following in the auditors’ report:

• Whether they have obtained all the information and explanations which, in their opinion, were necessary for the purpose of their audit
• Whether, in their opinion, proper books of account have been kept by the company
• Whether the financial statements (balance sheet and profit and loss account) are in agreement with the books of account
• Whether, in their opinion, the financial statements give the information required by law, and give a true and fair view of the state of the company’s affairs as at the date of the balance sheet and the profit or loss for the financial year ended on the balance sheet date
• Whether, in their opinion, the information given in the Management Report (previously referred to as “report of the Board of Directors”) is consistent with the financial statements.

Furthermore, auditors in Cyprus have to follow International Standards on Auditing and report as to whether the financial statements comply with International Financial Reporting Standards.

Note: From September 2016, small/dormant companies are also subject to statutory audit, as the exception that previously existed in the Law was abolished.

Categories of Companies

In September 2016, the Cyprus Companies Law was amended, and inter alia, introduced new definitions of Small, Medium and Large sized Companies, summarised in the below table:

Category	Criteria	Condition
	Total Gross Assets	Net Turnover	Average No of employees during the financial year
Small Companies	Less than €4.000.000	Less than €8.000.000	Less than 50	As at their balance sheet dates do not exceed the limits of at least two of the three criteria.
Medium- sized Companies	Less than €20.000.000	Less than €40.000.000	Less than 250	Are not small companies and which as at their balance sheet dates do not exceed the limits of at least two of the three criteria.
Large Companies	More than €20.000.000	More than €40.000.000	More than 250	As at their balance sheet dates exceed at least two of the three criteria.

VI. Annual Income Tax Return

Every company resident in Cyprus for tax purposes is required to complete and submit an annual Income Tax Return (TD4) to the Department of Inland Revenue (Cyprus Income Tax Office, CITO).

The annual Tax Return for all Cyprus companies (including small companies) should be based on the Company’s standalone financial statements.

Cyprus Tax Laws require the TD4 to be based on the Company’s audited financial statements and be accompanied by an Auditor’s Confirmation of compliance.

The contents of this article should be considered to be of a general nature only not referring to any particular business.  Before proceeding with any action, please request further advice relating specifically to your business.  We will be very pleased to be of assistance.