lorraine, Author at Fairfax

Fairfax Newsletter December 2024

Changes in 2025

Fairfax would like to inform all employers about the changes that will be put in effect in 2025.

SIF Contribution Rates

At the moment, the rate applicable remains at 8.8% deducted by the employee and 8.8% contributed by the employer.

There is no further change at the contribution rates of the other social insurance funds in effect.

You may refer to the chart below for your ease of reference:

SIF Insurable Income Increase

In addition, to the above contribution rate, the maximum level of yearly insurable earnings will change. During 2024 the yearly maximum level of insurable income was €62,868, while from 1st January 2025 the maximum level of insurable income will be increased to €66,612 per annum.

How can we help? Explore the benefits of engaging the Fairfax team to assist you by outsourcing your
payroll function to us.

Contact our team on +357 25558025 or at accounts@fairfaxyeaman.com.

Announcement | Latest Change in Legislation Affecting Penalties for Undeclared Employment

The key changes introduced in this legislation amendment focus on stricter penalties for undeclared employment and the removal of outdated terminology to streamline legal language. By significantly increasing the fines for initial violations and escalating penalties for repeated offenses, the amendment aims to enhance compliance and accountability among employers. These revisions reflect the government’s commitment to improving labour protections and ensuring the integrity of the social insurance system.

Kindly note, confirmed with immediate effect, the penalty that will be implemented by the Social Insurance Inspector in case of undeclared employment will be 1000 euro (instead of 500 euro that was in place until recently) for each employee for the month that the violation of the law. In addition to that, there will be an extra fine of 500 euro for each calendar month of employment prior to the month the violation was detected.

Moreover, the new law is introducing some hefty penalties in case the employer won’t comply to the regulations and will have another case of undeclared employment in the span of 2 years following the first violation:

2000 euro fine for the 2^ndviolation
3000 euro fine for the 3^rdviolation and any violation thereafter

Last but not least, we would like to point out the importance of declaring the employment on ERGANI platform before the employment commencement date.

We remain at your service, should you need further clarifications or assistance from our end. You can reach us on +357 2555 8025 or email accounts@fairfaxyeamen.com .

Data Security and Compliance in Payroll | A Strategic Priority for Cyprus

In today’s digital-first world, as Cypriot businesses expand into international markets, managing payroll across borders is not just a logistical challenge, it’s a cybersecurity and compliance minefield. Payroll systems, holding sensitive data like employee IDs, salary, and banking details, are prime targets for cyberattacks. With more companies adopting cloud-based solutions and outsourcing payroll management, safeguarding this data becomes paramount. Failure to prioritise cybersecurity could lead to substantial penalties under both EU regulations and local laws, alongside serious reputational damage.

Cross-Border Payroll Risks

There are significant risks associated with managing payroll for a worldwide workforce. Handling sensitive employee data across borders increases exposure to data breaches, hacking, and unauthorised access. Consequently, the challenge for businesses in Cyprus is navigating various international tax laws and data protection regulations, all while protecting payroll data from cybercriminals.

At FairFax, we recognise that while outsourcing payroll and using cloud systems offers convenience and efficiency, these solutions also expose businesses to potential vulnerabilities. We implement industry-leading security practices to ensure that our clients’ payroll data is encrypted, securely stored, and fully compliant with GDPR.

GDPR and Cyprus-Specific Compliance Requirements

Cypriot businesses are subject to GDPR, the EU’s flagship data protection law, which sets strict rules on how personal data is handled. For payroll, this means ensuring that employee data is encrypted, stored securely, and accessible only to authorised personnel. Failure to comply could result in significant fines. Additionally, the EU Pay Transparency Directive—set to take effect by 2026—will require companies to disclose salary information, adding another layer of complexity to payroll compliance. Businesses need to ensure their payroll systems are ready for this shift in transparency.

Best Practices for Securing Payroll Data

Invest in Encryption and Secure Cloud Solutions: Ensure payroll data is encrypted both at rest and in transit, and that your cloud provider offers multi-factor authentication (MFA) and real-time security monitoring.
Conduct Regular Audits: Schedule frequent audits and risk assessments to identify vulnerabilities. Compliance with standards like ISO 27001 adds an additional layer of security assurance.
Employee Training: Employees are often the weakest link. Regular training on data privacy, phishing, and cybersecurity protocols will reduce human error.
Work with Trusted Payroll Providers: Partner with outsourcing firms that follow GDPR, SOC 2, and other data security standards, and have clear protocols for handling breaches.

Outsourcing Payroll – Opportunities and Risks

Outsourcing payroll can ease the administrative burden on Cypriot companies, especially when managing multiple areas. However, it introduces new risks, particularly if third-party systems are compromised. It’s critical to choose partners who prioritise data security, comply with global standards, and have transparent breach response protocols in place.

Securing Payroll Systems in a Globalised Market

In today’s global economy, data security and compliance have become mission-critical for payroll management. Cypriot businesses expanding internationally must stay ahead of evolving regulations, like GDPR and the upcoming Pay Transparency Directive, to protect their operations and reputation.

At FairFax, we understand these challenges and offer cutting-edge, secure payroll solutions that are not only compliant but also tailored to the unique needs of businesses operating across borders.

Protect your business from payroll data breaches, avoid costly penalties and ensure full compliance with evolving regulations. Contact FairFax today for secure, tailored payroll solutions that safeguard your operations and streamline compliance.

REMINDER | NEW Deadline Extension for the Submission of Personal Income Tax Returns and Payment of the Due Tax for the Year 2023

The Tax Department has announced an extension for the electronic submission deadline of personal income tax returns and related tax payments for the 2023 tax year.

On October 30, 2024, the Tax Department published an announcement on its website extending the deadline for submitting the 2023 personal income tax return (Form T.D.1) to November 30, 2024 for employees and pensioners with gross annual incomes exceeding €19,500.Self-assessment income taxes are also subject to this extension.

Similarly, self-employed individuals (Form T.D.1 self-employed) with an annual turnover below €70,000 who are not required to submit audited accounts now have until November 30, 2024, to file their 2023 income tax returns. This extension also covers the self-assessed payment of any income tax due.

If you need further clarification for the above Decree and/or assistance with the submission process, contact us via email on accounts@fairfaxyeaman.com or by calling +357 25558025.

Benefits of Setting Up a Business in Cyprus

Setting up a business in Cyprus offers numerous advantages, making it an attractive destination for entrepreneurs and investors. From favourable tax incentives to a strategic geographic location, Cyprus has established itself as a business hub in the Mediterranean. This article will explore the benefits of setting up a business in Cyprus, focusing on tax incentives and advantages, an overview of the process and requirements, and a comparison with other EU countries.

Tax Incentives and Advantages

Low Corporate Tax Rate

One of the most significant benefits of establishing a business in Cyprus is the low corporate tax rate. Cyprus boasts a corporate tax rate of 12.5%, one of the lowest in the European Union. This competitive rate allows businesses to retain more of their earnings, which can be reinvested for growth and development.

Double Tax Treaties

Cyprus has an extensive network of double tax treaties with over 60 countries. These treaties ensure that income earned in one country is not taxed again in another, thereby avoiding double taxation. This is particularly beneficial for businesses with international operations, as it minimises the tax burden on cross-border income.

Tax Exemptions and Deductions

Cyprus offers several tax exemptions and deductions, such as:

Exemption on Dividend Income – Dividends received by Cypriot tax residents are generally exempt from corporate tax.
Capital Gains Tax Exemption – Gains from the disposal of securities, including shares and bonds, are exempt from capital gains tax.
Notional Interest Deduction (NID) – Companies can deduct a notional interest on new equity injected into the business, reducing taxable income.

VAT Advantages

The Value Added Tax (VAT) rate in Cyprus is 19%, which is relatively low compared to other EU countries. Additionally, businesses engaged in international trade can benefit from VAT exemptions on exports.

Overview of the Process and Requirements

Company Formation

Choosing a Company Name – The name must be unique and approved by the Registrar of Companies.

Drafting the Memorandum and Articles of Association – These documents outline the company’s structure and operational guidelines.

Registration with the Registrar of Companies – Submit the necessary documents and registration fee.

Legal and Regulatory Requirements

Shareholders and Directors – A Cyprus company must have at least one shareholder and one director. Directors can be individuals or corporate entities.

Registered Office – Every company must have a registered office in Cyprus.

Company Secretary – Appointing a company secretary is mandatory.

Tax Registration

Tax Identification Number (TIN) – Obtain a TIN from the Tax Department.
VAT Registration – Register for VAT if the annual turnover exceeds €15,600 or if the business engages in intra-community trade.

Bank Account

Open a corporate bank account in Cyprus to facilitate financial transactions.

Comparison with Other EU Countries

Corporate Tax Rates

Cyprus offers one of the lowest corporate tax rates in the EU at 12.5%.
In comparison:

Ireland: 12.5%
Bulgaria: 10%
Germany: 30-33%
France: 26.5-27.5%
Croatia: 18%

Ease of Doing Business

Cyprus ranks favourably in terms of ease of doing business. The World Bank’s Doing Business Report highlights the straightforward procedures for starting a business, favourable tax policies, and efficient regulatory framework.

Double Tax Treaties

Cyprus’ extensive network of double tax treaties is comparable to other major EU countries, providing significant advantages for international business operations. Countries like the Netherlands and Luxembourg also have extensive treaty networks, but Cyprus combines this with a lower corporate tax rate and other fiscal benefits.

Geographic and Strategic Advantages

Cyprus’ strategic location at the crossroads of Europe, Asia, and Africa makes it an ideal base for businesses looking to operate in multiple regions. This is a unique advantage that is less prominent in other EU countries.

Setting up a business in Cyprus presents numerous benefits, particularly in terms of tax incentives, a straightforward setup process, and strategic advantages. The low corporate tax rate, extensive double tax treaties, and various exemptions make Cyprus a highly attractive destination for entrepreneurs and investors. When compared to other EU countries, Cyprus stands out with its favourable business environment and strategic location, making it a prime choice for business establishment and growth.

FairFax’s team can assist you with your company’s accounting and corporate management needs.

Browse through our website to find out more about the services we offer.