Reporting requirements and tax residency rules

Reporting Requirements

All Cyprus resident Companies are required to appoint accountant who will maintain the Company’s accounting records and post the transactions in the accounting system. As per the tax legislation, the accounting records should be updated within 4 months from the date of the transaction. The Company is required to prepare Financial Statements in accordance with the International Financial Reporting Standards (IFRSs) which should be subject to mandatory audit.

The Company is also required to appoint auditors who will carry out an independent examination on the Financial Statements of the Company and express an opinion as to Truth and Fairness in accordance with the International Standards on Auditing (ISAs).

The audited Financial Statements should be submitted on an annual basis to the Registrar of Companies and they are available for public inspection. The Company should also submit its Tax Declaration (called IR4) to the Inland Revenue Department until 31 December of the following fiscal year (the fiscal year in Cyprus ends 31 December) which should be in full agreement with the audited Financial Statements.

Tax Residency Rules and Important Tax Facts

A Company is a tax resident in Cyprus if it is managed and controlled in Cyprus. There is no exact definition of management and control. However, it is widely known that the following criteria should be satisfied:

  1. The majority of the directors should reside in Cyprus.
  2. The majority of the board meeting should be held in Cyprus.
  3. The general policy of the Company should be formulated in Cyprus.
  4. The contracts and agreements should be executed in Cyprus.

The taxable profits of a Cyprus Company are subject to 10% corporation tax. In general all expenses incurred by a Cyprus Company are treated as tax deductible provided they were incurred wholly and exclusively for the purposes of the Company’s business.

A Cyprus Company enjoys significant tax incentives. Some of them are as listed below:

  1.  Dividends distributed to a Cyprus Company exempt from taxation.
  2. Gains from disposal of securities are not taxable.
  3. Tax losses are carried forward without any restrictions.
  4. Dividends, interest and royalties paid by Cyprus Companies to non Cyprus tax residents exempt from withholding tax in Cyprus.
  5. Cyprus has a wide range of Double Taxation Treaties for avoidance of double taxation on income generated on the contracting state. It has concluded more than 40 Double Taxation Treaties.

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