Filenews 11 June 2022 - by By Eleftheria Paizanos
The benefit of small and medium-sized enterprises and self-employed persons from the new process of auditing their financial statements will be great. These companies and self-employed persons will now only receive an overview of their financial statements by a statutory auditor or an audit firm, instead of the full audit procedure currently in place, with the submission of audited financial accounts.
In order to participate in the new control institution, beneficiaries must have a turnover of up to €200,000 (including interest, dividends and rents). Also, they should have a balance sheet of €500,000 (includes all assets of legal persons, without loans and liabilities).
According to data from the Tax Department, it is estimated that 36,863 companies or 42.6% of the total fall under the criteria of turnover and balance sheet determined by the Parliament. Today, the audit applied was considered to be unbalanced, as the audit process is the same, regardless of the size of the companies. All businesses, that is, proceed to financial audits through the submission of audited financial accounts.
The new legislation, which was unanimously approved a few days ago by the Plenum of the Parliament, was the result of a single law proposal of the parties. Initially, EDEK, DISY, DIPA submitted three law proposals, by which the institution of the review of the financial statements would be applied to companies with a turnover of up to €700,000 and with a balance sheet of up to €1 million. In fact, with the three bills of law, the rapporteurs overflowed the criteria, resulting in strong reactions from the government, which believed that by opening the gap, tax evasion would be reinforced.
In order not to leave the legislative effort in a vacuum, DISY and DIKO submitted a fourth law proposal, which proposes the implementation of the institution for businesses with a turnover of up to €200,000. After consultations and discussions, a new proposal was prepared, according to which legal and natural persons with a turnover of €200,000 will go through an overview. and a balance sheet of €500,000.
It is worth noting that the European directive defines as micro enterprises those businesses with a balance sheet of up to €350,000 and a turnover of €700,000, while small businesses are companies with a balance sheet of €4 million. and a turnover of €8 million. Due to the fact that in Cyprus there are not a large number of enterprises with the criteria set out in the European Directive, the above criteria were initially decided. In fact, MPs will be waiting to see how the law works and if necessary in the near future they will probably vary the ceilings of the criteria relating to turnover and balance sheet.
The main provisions of the new legislation
The legislation, which is soon expected to be published in the Official Gazette of the Republic, provides for the following:
- The limits with the net amount of turnover and the total balance sheet of companies whose financial statements may be subject to a simplified audit procedure should amount to €200,000 and €500,000, respectively, for at least two consecutive years.
- Companies that are regulated and supervised by the Central Bank, the Superintendent of Insurance and the Hellenic Capital Market Commission, as well as companies which acquire or hold a special participation in the supervised companies in question, are excluded from the law.
- The net turnover includes rental, interest, dividend and royalty income.
- In the event that the annual report submitted by a company to the Registrar of Companies attaches financial statements that were submitted to an overview, the Registrar of Companies will record the annual report without exercising control over whether the net amount of turnover and the total balance sheet of the company exceed the above mentioned limits.
- The legislation will enter into force on 1 January 2023 and will apply to financial statements that expire on 31 December 2022 or any other subsequent date.
