In Cyprus, the tax year is the calendar year.
Business organisations are required to prepare audited accounts based on generally accepted auditing standards. Tax returns are completed based on these accounts on a calendar-year basis.
Companies should be registered online and submit their annual tax returns electronically. In this respect, the submission deadline of the 2019 corporate tax return is 31 March 2021 (see however COVID-19 economic response extensions granted).
Payment of tax
Corporate entities must pay provisional tax on the current year’s income. Such provisional tax payment is made in two equal instalments on 31 July and 31 December of the tax year. A final balancing payment must be made on or before 1 August of the following year on a self-assessment basis to bring the total payments of tax to the total actually due according to the tax return.
For year 2020 a final balancing payment must be made on or before 1 August 2021.
Tax audit process
The Cyprus tax process is one of self-assessment. Following the filing of a tax return, the CTA has six years from the end of the relevant tax year to raise an enquiry (12 years in cases of established fraud or wilful default). These can range from simple information requests to detailed technical challenges over treatments adopted in the tax return.
Any enquires are often conducted between the taxpayer and the CTA by exchange of information via correspondence and meetings. Where agreement cannot be reached, litigation may be necessary.
A taxpayer may also proactively request that the CTA review the company’s ‘open’ tax years if the taxpayer requires a tax clearance certificate (e.g. upon commencement of voluntary liquidation).
For companies in a tax-loss position per the self-assessment return, the CTA is not restricted to the above-mentioned six-year (or 12-year) period; however, outside of this period, any adjustments may only reduce or nullify a loss.
Topics of focus for tax authorities
Tax authorities generally focus on the tax statements being computed based on generally accepted auditing standards prepared and audited financial statements and on the principles of taxation as per the tax laws and their issued circulars.