Understanding the financial reporting obligations for companies in Cyprus is essential for ensuring compliance with local laws and smooth business operations. Below is a comprehensive guide answering key questions about the requirements.

1. What are the responsibilities of company directors regarding financial records?

Directors of Cyprus companies have a legal obligation to maintain proper books of account that present an accurate and fair picture of the company’s financial affairs and transactions. These records must enable the preparation of financial statements in compliance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and the Cyprus Companies Law, Cap. 113.

Directors are also responsible for ensuring the preparation of a full set of financial statements that provide a true and fair view of the company’s financial position.

If you require professional directorship services, our partner firm, Asterisk Corporate Services Limited, offers high-quality directorship support for your Cyprus company.

2. Are there any exemptions related to the preparation of the Management Report?

The Management Report, prepared by the directors, typically accompanies the financial statements and includes specific content required by law. However, small-sized companies and small and medium-sized groups may be exempt from preparing the Management Report if they meet certain criteria outlined in the legislation. These criteria often relate to the size of the company in terms of turnover, total assets, and number of employees.

3. Is an audit or review mandatory for Cyprus companies?

Yes, all companies registered in Cyprus are required to have their financial statements audited or reviewed by a Cyprus-registered auditor.
The auditor is appointed during the Annual General Meeting (AGM) and holds office until the next AGM.

For more information on audit or review requirements of Cyprus companies refer to our Audit & Assurance section.

4. What is the process for submitting an annual return (HE32) in Cyprus?

Every Cyprus company must file an annual return (HE32) with the Department of the Registrar of Companies. This filing includes the corresponding year’s financial statements, accompanied by the auditor’s report or conclusion.

The annual return must also include the following details:

– The registered office address

– Shareholders’ details

– Authorized and issued share capital

– Names of directors

– Company secretary information

It is crucial to file the return on time, as the Registrar of Companies imposes penalties for late submissions. Non-compliance can also lead to administrative sanctions or other legal consequences for company directors.

5. What is the Ultimate Beneficial Owner (UBO) filing requirement?

Companies registered or incorporated under the Cyprus Companies Law, Cap. 113, are required to submit and update Ultimate Beneficial Owner (UBO) information online with the UBO Registry.

Key obligations include:

– Changes to UBO details must be updated within 45 days from the date the change is known to the company or its officers.

– For newly incorporated companies, UBO information must be submitted within 90 days of establishment.

– Between October 1 and December 31 each year, companies are required to confirm the accuracy of the information in the UBO Register.

Non-compliance with UBO obligations can result in administrative fines and increased scrutiny from regulatory authorities.

6. What are the consequences of non-compliance with financial reporting requirements?

Failure to comply with financial reporting obligations, such as the timely filing of annual returns or updating UBO information, can result in fines or penalties imposed by the Registrar of Companies. Non-compliance may also have serious legal implications for the company’s directors and officers.

Consequences of non-compliance include:

– Fines and penalties for late submission of annual returns or UBO updates.

– Legal liability for directors and officers who fail to fulfill their duties.

– Loss of good standing status, which could affect the company’s ability to enter contracts or open bank accounts. 

To avoid these issues, it is essential to work with experienced professionals who can ensure compliance with all reporting obligations.

7. How to stay compliant with financial reporting in Cyprus?

Maintaining proper financial records, complying with IFRS, and ensuring timely submission of returns are critical for Cyprus companies.

Here are some key actions to stay compliant:

– Keep proper financial records that are complete, accurate, and up-to-date.

– Engage a qualified auditor to review financial statements and prepare audit reports in compliance with ISA.

– File annual returns (HE32) on time to avoid fines and penalties.

– Update UBO information within the required timeframe.

Final Thoughts

Proper financial reporting is a fundamental requirement for Cyprus companies. Maintaining accurate records, complying with IFRSs, filing annual returns, and keeping UBO information up-to-date are critical to avoiding penalties and ensuring transparency.