audit threshold — audit threshold — Cyprus risks losing up to €695.2 million in annual government revenue if a new proposal expands the number of companies allowed to undergo a simple financial review instead of a full audit, according to tax commissioner Soteris Markides.
The current regulations permit businesses with a turnover of up to €200,000 and assets of €500,000 to submit reviewed rather than audited financial statements. However, a new bill proposed by the Democratic Rally (Disy) party seeks to raise the turnover threshold to €900,000. If passed, this change could place around 60,399 companies—approximately 66 per cent of all firms—under the less rigorous review regime.
Concerns surrounding the bill are mounting, with the tax department, the Central Bank of Cyprus (CBC), and the Association of Cyprus Banks expressing their disapproval. They argue that the proposed changes could undermine financial oversight and lead to a significant drop in state revenue.
Currently, there are 51,075 companies within the financial review framework introduced in 2023, which contributed €227.8 million to public finances last year. This figure is expected to rise to €306.8 million in 2023. However, as the turnover threshold increases, so does the potential risk to public revenue.
For example, if the threshold is set at €300,000, the number of firms eligible for the review process would expand to 54,549, with an estimated contribution of €414.3 million this year. Raising the cap to €500,000 would include 57,962 businesses, generating projected revenues of €545 million. At a limit of €600,000, 58,888 companies would be covered, contributing around €595 million. If the threshold reaches €700,000, the figure would rise to 59,543 firms, potentially yielding €633.1 million.
The most significant impact would occur if the limit is raised to €900,000, as this would place 60,399 firms under the review method, exposing €695.2 million in annual revenue to reduced scrutiny.
The bill is set to return to the House commerce committee next week. Key figures, including House energy committee chairman Kyriacos Hadjiyiannis and Nikos Sykas, are expected to deliberate on potential adjustments to the turnover threshold. One option under consideration is to restrict the review regime to companies with a turnover of up to €300,000, ensuring that higher-earning firms continue to undergo full audits.
