Proposal Lowers Company Review Threshold to €400,000

Cyprus’ parliamentary commerce committee is moving closer to approving a reduction in the turnover threshold that determines whether companies can undergo a simple financial statement review rather than a full audit, settling on €400,000.

This represents a significant narrowing from the €900,000 level originally proposed by Disy.

The matter returned to the committee on Tuesday after the taxation department, the Central Bank of Cyprus (CBC) and the Association of Cyprus Banks expressed objections to such a broad expansion of eligibility. In response, Disy MP and former party leader Averof Neophytou put forward the reduced figure as a compromise, arguing that the financial effect on state revenues would remain below five per cent of the government’s projected €8.1 billion income for 2025.

Figures provided by the tax department indicate that increasing the review threshold from €200,000 to €400,000 would mean that 56,590 companies—representing 61.9 per cent of all registered businesses—would fall under a simple review rather than a full audit. These companies generated €358.6 million in revenue for the state in 2022, with receipts expected to reach €348.8 million this year.

By comparison, extending the threshold to €900,000, as laid out in the initial Disy proposal, would apply to 60,399 companies, or 66 per cent of the total, from which the state currently collects €695 million.

The discussion is also influenced by a European directive that has been in effect since 2023, which already places 51,075 companies with a turnover of up to €200,000 under review-only requirements. Those companies contributed approximately €228 million to state revenues in 2022.

Although the committee has requested that the tax commissioner’s office revisit and reassess the revised proposal, officials have previously indicated that a limit of €300,000 would be preferable, stating that such a level “would not significantly erode revenues.”

Companies within this category total 54,549 and contributed €301.7 million in 2022, with expected receipts of €414.3 million this year.

Despite this, several professional organisations, including the Institute of Certified Public Accountants of Cyprus (ICPAC) and the Cyprus Bar Association, have expressed support for the €400,000 threshold, maintaining that smaller businesses “would benefit from lighter reporting obligations at a time of rising compliance costs.”

During the committee session, representatives from multiple ministries restated concerns that the financial implications of the higher limit remain inadequately justified, while the legal service confirmed that the proposed adjustment does not create legislative complications.

By fLEXI tEAM