Guidance on the New Levy of €350 on Cyprus Companies
It has come to my attention that several people , especially owners of small business, are wondering how the new levy will be paid and how the exemptions on the levy apply. In my previous post I have interpreted the law in it’s literal form (see this Wikipedia page) since my last post though guidance has been circulated by the Registrar of Companies and the Cyprus Bar Association as to:
- Which companies should pay the new levy of 350 Euros!
- How is the new levy of 350 Euros paid!
- Further guidance on the exemptions provided by the relevant law!
Registrar of Companies
On the Cyprus Registrar of Companies’ website (follow link) an announcement has been place and which states that all registered companies are obligated to pay the new levy of 350 Euros.
Furthermore the new levy of 350 Euros is paid by using the form attached as Appendix A.
The announcement further specifies that group of companies consisting of a holding company and subsidiaries and thus paying the maximum of 20.000 Euros will complete and submit the form attached as Appendix B. The form attached as Appendix B shall be signed by the board of directors, the lawyer or the auditor of the group who confirms which companies belong to the group of companies.
Lastly exempt from the obligation to pay the levy are:
- companies or group of companies which are ‘dormant’; or
- do not have any business for the specific year; or
- which do not hold any assets; or
- which hold assets situated in non controlled areas of the Republic of Cyprus.
- for the first year of the incorporation : all companies.
The board of directors, the lawyer or the accountant of the company confirms the exemption with the form attached as Appendix C
The from attached as Appendix A is very simple and does not provide notes as to it’s completion. It does though include reference as to the relevant amending law (L.117(I) of 2011).
Going through the form you will note that the name of the company, the registered number and year for which the new levy of 350 euros is paid must be completed.
The from attached as Appendix B is headed ‘declaration’. The wording requires for the undersigned to confirm that:
By the present I confirm that the companies mentioned below are member of a group of companies for the purposes of Section 39(1)(b) of the Companies Law of 2011 and, to this effect, I make payment of 20.000 Euro for the annual levy in accordance with the above mentioned law which must be distributed in equal between the companies mentioned in the attach catalog
The form attached as Appendix C specifies the name of the relevant law and provides a wording which in summary provides that:
- during a specified year the company or group of companies was dormant or did not have any business; or
- during a specified year the company or group of companies did not have any assets; or
- during a specified year the company held assets situated in non controlled areas of the Republic of Cyprus
Cyprus Bar Association
The Cyprus Bar Association has released a newsletter informing that after communications with the Registrar of Companies they would like to specify that:
- The term business is to be interpreted in it’s wider sence so as not to mean only companies having a turnover derived from the sale of merchandise or those providing services but to extend to companies receiving dividends, interest from loans, rents, rights of usage etc.
- If a company is to be considered dormant the “Affirmation” must be given untill the 30th of June and for the entire year for which the affirmation is given it shall be considered a dormant company. If the company is active after the affirmation has been provided and in any case no later than the 31st of December the levy of Eur. 350 does not need to be paid for that year but rather it is obligated to pay untill June of next year for the following year.
Clarifications, Discrepancies and unresolved issues
Who is required to pay the new levy of 350 Euros ?
Every company registered with the Department of the Registrar of Companies in Cyprus – must pay the new levy of 350 Euros unless one of the exemptions apply.
Companies are registered with the Department of the Registrar of Companies in Cyprus when:
- They are incorporated; or
- They transfer the registered seat to Cyprus; or
- When a merger by absorption is completed and the remaining company is a Cypriot entity; or
- As otherwise specified under the Companies Law, Chapter 113 of the Laws of the Republic of Cyprus.
From this general definition - trade names, registered partnerships, sole traders (sole proprietors) are not required to pay the new levy of 350 Euros since they have not been incorporated as a company under the Companies Law, Chapter 113 of the Laws of the Republic of Cyprus.
How is the new levy of 350 Euros paid ?
The new levy is paid at the Offices of the Registrar of Companies in Nicosia, Cyprus. The form mentioned as Appendix A must be printed, completed and signed and submitted along with a check for 350 Euros issued to the name of the Department of the Registrar of Companies or cash. The teller will issue an invoice in the name of the Company. I will not consider the the payment for group structures.
A recent amendment to the Companies Law provides for the submission through electronic means (see this post) documents to the registrar of companies. Although not clear or confirmed by official sources it is possible that payments for the new levy will be made electronically in the future.
Is my company exempt from paying the new levy of 350 Euros ?
Companies registered with the Department of the Registrar of Companies in Cyprus are exempt from paying the new levy of 350 Euros if:
They are dormant or do not have any business for the specific year
For the purposes of the new levy ‘dormant’ is considered to be a company which does not carry out any activities, however the form named as Appendix C requires the declerant to affirm that the company is dormant or does not have any business for the specific year. Business in this sence has been clarified by the announcement of the Cyprus Bar to be interpreted in it’s wider sence – hence a company carrying on trade, providing services, receiving dividends, interests from loans etc.
In this connection dormant or not carrying on business may be understood as the collection of funds. In other words even if your company is working with an accounting loss – because it collects funds from it’s business – it is not a dormant.
Do not hold assets
No further guidance has been given and it may be understood though that holding any sort of assets in your balance sheet will fail this test – accordingly such companies must pay the new levy.
Hold assets situated in non controlled areas of the Republic of Cyprus.
No further guidance has been given as to this provision however it is generally understood that companies registered with the Department of the Registrar of Companies and holds assets situated in the Turkish Occupied territory of the Republic of Cyprus is exempt from paying the new levy.
For the avoidance of any doubt for the first year it’s incorporation companies registered with the Department of the Registrar of Companies are exempt from paying the new levy.
Thank you for your time.