7 Hidden fees in Cyprus accounting (and how to calculate your real cost)

If you are planning to start a new venture in a country like Cyprus, it is crucial to have an in-depth understanding of its financial landscape.

Regardless of your business structure and core activity, you might need to work with a local accountant or an established accounting firm to manage your accounting books.

While the typical monthly fee structure for accounting services is often manageable, are you sure about the type of services you require, especially in the future?

As you navigate the complexities of the Cypriot financial landscape, it’s essential to uncover the potential hidden charges to accurately calculate the accounting costs that can significantly impact your budget. Let’s dive in!

1. The annual company levy

Every company incorporated in Cyprus is obligated to pay an annual fee to the Registrar of Companies, which is due by December 31st. If you miss this deadline, late payment incurs steep penalties.

The hidden cost: Starting a new business in Cyprus, you would likely be unaware of this obligation. Your accountant has to include this compulsory fee in the books, which would come off as a surprise bill to you. However, this is not treated as a separate accounting service per se; it’s almost always handled and invoiced by your accountant.

Pro tip:

• Companies have to pay a fee of €350 to submit their Annual Return on time.
• Ask your accountant upfront about it: “Is the Annual Company Levy included in the retainer, or will it be invoiced separately at the end of the year?“

2. The “per-transaction” bookkeeping surcharge

Imagine settling on a fixed fee for monthly bookkeeping with your accountant. However, this fee may cover processing of only a “standard” number of transactions (e.g., 50 per month).

If your business is active, especially in trading, e-commerce, or holding companies with diverse investments, you may be charged extra for every transaction over that threshold.

The hidden cost: This “per-transaction” pricing can spike an expected monthly cost that scales with your success. For example, if you make high sales in one month, you would also have to bear a surprisingly high accounting bill.

Pro tip:

• Evaluate your average monthly transactions from your bank statements.
• Explicitly ask your accountant about the monthly transaction volume included in the fee, and the per-transaction cost for anything over that limit.

3. The mandatory audit fee

With the exceptions of a few, every limited liability company in Cyprus is required by law to undergo annual audits of its financial statements.

The hidden cost: The mandatory annual audit is a separate activity, not added to the basic accounting retainer, despite incurring a significant cost.

Why? This fee depends on the complexity of your books, the size of your company, and the time required by the auditor. For a small firm, the fee might be a few thousand euros, but for a more complex company, it can be substantially higher.

Pro tip:

• Request a separate quote for the annual audit during the onboarding of your accountant.
• Clarify whether the preparation of the statutory financial statements (a prerequisite for the audit) is included in your bookkeeping retainer or is an additional service.

4. Tax return & VAT filing fees

Filing corporate tax returns and VAT returns is often treated as a discrete accounting service. While your monthly retainer might only cover bookkeeping services, the actual preparation and submission of official returns to the Tax Department are billed separately.

The hidden cost: Since these submissions are legal necessities, you must secure these services, despite feeling like you are being charged double for the same financial data.

Pro tip:

• Get a clear breakdown of the fees; whether this monthly fee covers the preparation and filing of your Corporate Income Tax Return, Provisional Tax, and VAT returns, or if there are any fixed or estimated fees for each.

5. Director’s fee & social insurance processing

If you or the appointed director receives a salary, the company is responsible for processing payroll, calculating and deducting social insurance, and contributing the employer’s share.

The hidden cost: Since administrative payroll processing is a recurring task, accountants often charge on a per-payroll-run basis. So, if there are multiple directors or paying salaries, these small fees accumulate over the year.

Pro tip:

• Confirm whether the processing of directors’ fees and the associated social insurance contributions are included in the service package. If not, what is the fee per processing period, monthly or annually?

6. Ad-hoc advisory & consultation fees

Let’s say that you called your accountant for a quick consultation about a potential new contract, a tax optimisation strategy, or an employee benefit. While you might assume that this short conversation costs nothing, many accounting firms reportedly track the duration for this professional advice outside the scope of basic compliance and bill it.

The hidden cost: Even if you receive proactive advice, the fear of an unexpected invoice can prevent you from seeking it.

Pro tip:

• Discuss the billing policy for advisory time upfront, like whether there is a grace period or an hourly rate. A reputed accountant and transparent accounting firm will outline the same in your engagement letter.

7. GHS (GesY) contribution calculations

The General Healthcare System (GHS) of Cyprus requires contributions based on income, including salaries, dividends, and interest. Now, if you are a shareholder/director who receives dividends, calculating these contributions adds a layer of complexity to periodic filings.

The hidden cost: GHS contribution is a relatively new regulatory obligation. While some include the calculation and reporting in their compliance fees, others might treat it as a separate administrative task and charge accordingly.

Pto tip:

• Do your due diligence and specifically inquire about whether the calculations and reporting for GesY contributions for employees and directors are included in the agreed rate.

Your action plan

To promptly calculate the accounting costs, be duly informed about the accounting landscape. While requesting a comprehensive fee proposal, have a full understanding of the full spectrum of accounting services and fees so that you can budget accurately, avoid extra expenses, and build a trusted, more productive relationship with your financial advisor.

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