company review — company review — Cyprus’ parliamentary commerce committee is proposing to lower the turnover threshold for companies eligible for a simple review of financial statements to €400,000. This new level marks a significant shift from the previously suggested €900,000 threshold by the Democratic Rally (Disy) party.
- This initiative reflects ongoing discussions about regulatory changes affecting small to medium-sized enterprises in Cyprus, aiming to balance compliance requirements with economic realities.
Company review: Committee’s Recent Developments
The proposal was revisited during a committee session on Tuesday, following objections from key stakeholders including the taxation department, the Central Bank of Cyprus (CBC), and the Association of Cyprus Banks. Their concerns centred on the potential implications of a wider threshold expansion for public revenue and compliance.
Compromise on the Turnover Limit
In an effort to reach a compromise, Disy MP and former party leader Averof Neophytou suggested the reduced limit of €400,000. Neophytou argued this would not significantly impact public revenue, estimating that the change would keep the effect below 5 per cent of the state’s projected €8.1 billion income for 2025.
Impact of the Proposed Change
According to figures from the tax department, lowering the review threshold from €200,000 to €400,000 would result in approximately 56,590 companies, or 61.9 per cent of all registered businesses in Cyprus, qualifying for a simple review rather than a comprehensive audit. In 2022, these companies collectively contributed €358.6 million to the state, with projections for this year at €348.8 million.
Comparative Analysis with Original Proposal
In contrast, the original Disy proposal to extend the threshold to €900,000 would have benefited around 60,399 companies, representing 66 per cent of the total. These firms are expected to generate approximately €695 million for the state.
European Directive Influence
The discourse surrounding the proposed threshold is also informed by a European directive which, since 2023, mandates that 51,075 companies with turnover up to €200,000 undergo review-only requirements. This directive is anticipated to yield roughly €228 million for the state in 2022.
Reassessment of the Threshold
Despite the committee’s agreement on the €400,000 threshold, officials from the tax commissioner’s office have previously indicated that a more suitable figure would be €300,000. They argue that this amount would avoid significant revenue loss. Companies in the €300,000 bracket number around 54,549, contributing €301.7 million in 2022 and an estimated €414.3 million for the current year.
Support from Professional Bodies
Notably, professional organisations such as the Institute of Certified Public Accountants of Cyprus (ICPAC) and the Cyprus Bar Association have endorsed the move to a €400,000 threshold. They claim smaller firms would benefit from reduced reporting obligations amidst rising compliance costs.
Concerns from Various Ministries
During the session, several ministries voiced their concerns regarding the financial implications of the higher limit. They highlighted that the economic impact remains insufficiently substantiated. Additionally, the legal service indicated that adjusting the threshold does not pose legislative challenges.
Next Steps for the Proposal
The proposal is still subject to further evaluation as the committee awaits additional input from the tax commissioner’s office. The outcome will determine if the €400,000 limit will be adopted or if further adjustments will be considered.
This initiative reflects ongoing discussions about regulatory changes affecting small to medium-sized enterprises in Cyprus, aiming to balance compliance requirements with economic realities.
