Cyprus differs from offshore jurisdictions; in conjunction with Cypriot law, tax-paying companies must submit a tax report and calculate the payable tax taking into consideration the assumed profit for the current year.

In particular, companies that are not going to conduct business in the current year, or they expect business losses, have the right to specify an assumed zero profit in the tax report submitted to the authorities. Companies expecting to gain a profit in the current accounting year should calculate the taxes payable on profits. These are payable in three equal instalments on 30 August, 31 September and 31 December.

Calculations should reflect actual financial status; one should not underestimate expected profits. Cypriot tax authorities may impose a penalty at the rate of 10% on the difference between calculated and actual tax, if actual profit exceeds the announced amount by 25% or more.

It is also important to adhere to the dates for submission of tax reports. If one misses the allocated dates, the auditor is entitled to forward to the taxation authorities a tax report with an indicated zero profit. A penalty of 10% from the payable income tax will be imposed on all of the company’s actual profit for the current year. A late payment penalty equalling 5.35% of annual interest will be added to the penalty.

Taking this into consideration, it is important for companies operating in Cyprus to seek the assistance of qualified expert auditors. Professionals will reasonably assess business profitability and help to prepare tax reports.

Midland Consult (Cyprus) can assist clients with their statutory obligations for auditing of their companies through associated audit firms so that they can monitor the status of their business and create tax reporting based on proven financial indicators.