22.What is the Tax system in Cyprus and how it works?

Every company is obliged to prepare by August 1st, the provisional income and tax declaration. This means that the company must calculate the approximate profit for the financial year which in most cases ends 31st of December , declare the approximate income on which the company must calculate the the approximate income tax (4.25% for companies registered and worked before January the 1st 2002 or 10% for companies registered after that period).

The total sum of the calculated tax must be  divided  in 3 equal installments which must be paid to tax revenue the 1st of August, 30st of September and 31st of December. Final Tax report must be given till august 1st next year.  Our accountants form this report, based on bank statements of the company. This report must be checked and sign by a licensed local auditor, who confirms that the report is formed according the companies Act and presents the true and fare financial status of the company. After this procedure , the tax is calculated on the profit and must be paid.

Declared taxable profit, can be recalculated at any time before December 31st without any penalties.

In case that the actual profits are less than the declared, no changes must be done on the declaration. After last tax installment is paid, the difference is returned with 9% interest after January 1st of next year.

If tax paid based on provisional declaration is 75% less than the actual tax, an additional tax must be paid which is calculated as 10% of the difference between the declared and actual tax. If the tax is not paid in time, will be recalculated with 9% interest, starting from the last day of payment period. In case that the tax was not paid by fault of the company, a penalty of 5% will be affected. If the tax payment is delayed more than 6 months the penalty will increase to 9%.

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