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 data submitted to Parliament by tax commissioner Soteris Markides.

Under current rules, businesses with turnover of up to €200,000 and assets of €500,000 may submit reviewed, rather than audited, financial statements.

However, a Disy bill proposes widening the turnover threshold to €900,000, a move that would place 60,399 companies, around 66 per cent of all firms, under the lighter regime.

According to Philenews, the proposal has drawn opposition from the tax department, the Central Bank of Cyprus (CBC) and the Association of Cyprus Banks, who warn the change could weaken oversight and significantly reduce state revenue.

According to the tax department’s figures, 51,075 companies currently fall under the review framework introduced in 2023, contributing €227.8m to public finances in 2022, with this year’s revenue expected to reach €306.8m. As the threshold increases, the risk to public revenue also grows.

For instance, setting the cap at €300,000 would expand the group to 54,549 businesses, generating an estimated €414.3m this year.

A threshold of €500,000 would bring 57,962 firms under review, with revenues estimated at €545m, while €600,000 would push the figure to 58,888 companies and €595m in state income.

If the turnover limit is expanded to €700,000, then 59,543 firms would be covered, contributing roughly €633.1m.

A further expansion to €800,000 would add another 60,000 companies, while a €900,000 limit would place 60,399 firms under the review method, exposing €695.2m in annual revenue to reduced scrutiny.

The bill will return to the House commerce committee next week, where House energy committee chairman Kyriacos Hadjiyiannis and Nikos Sykas are expected to examine adjustments to the turnover threshold.

One scenario under consideration is limiting the review regime to companies with turnover up to €300,000, ensuring that higher-earning firms continue to undergo full audits.