Accounting for construction companies in Cyprus
Construction carries accounting pressures that few other Cyprus sectors share. The VAT reverse charge on construction services means that, between VAT-registered parties, the customer rather than the contractor accounts for the tax, so cash flow and invoicing have to be set up differently from a normal trade. Long contracts spanning year-ends raise work-in-progress, stage-payment and retention questions that must be recognised correctly under IFRS, and a single mis-costed project can quietly erase a year's margin. Labour is heavy and mixed: directly employed site staff trigger full payroll, employer Social Insurance and GHS, while genuine subcontractors must be treated correctly to avoid disguised-employment risk. On top of this the company pays 15% corporate tax, files annual obligations and must be audited or, if small enough, ISRE 2400 reviewed. Materials, plant and the standard 19% VAT (with a reduced 5% available only on qualifying primary residences) all need accurate handling. We give you live project-level costing and keep every contract compliant.
What we take off your plate
VAT reverse charge
For construction services supplied between VAT-registered persons, the recipient self-accounts for the VAT instead of the supplier charging it. Getting the invoice wording and the self-accounting entries right matters for both parties and is one of the most common error points in the sector.
Job & project costing
Profit lives and dies at project level. We produce management accounts by contract that compare committed and actual cost against budget, so overruns, variations and underclaimed work show up while you can still act, not at the year-end audit.
WIP, stage payments & retentions
Contracts running across reporting dates need work-in-progress, stage-payment income and retentions recognised correctly under IFRS. Retentions held by clients for months after completion must be tracked so revenue and cash are not confused at year-end.
Site payroll & subcontractors
Directly employed labour triggers full payroll with employer Social Insurance, Redundancy, HRDA, Social Cohesion and GHS contributions. Subcontractors must be genuinely self-employed and documented as such; misclassification creates back-contribution and penalty exposure on a Labour Inspectorate review.
Plant, materials & capital allowances
Plant, machinery and vehicles attract capital allowances, while material purchases and input VAT must be matched to the right project and the reverse-charge rules. We keep the asset register and input-VAT recovery accurate so nothing is missed or double-claimed.
Audit, annual obligations & deadlines
A construction company must file annual returns, prepare financial statements and have them audited, or ISRE 2400 reviewed if turnover is below €300,000 and assets below €500,000 for two consecutive years. We coordinate the ICPAC-licensed engagement and keep you on the tax calendar.
The services that fit
Accounting & Bookkeeping
Accurate, ICPAC-aligned bookkeeping and management accounts that keep your Cyprus company compliant and decision-ready.
Learn moreVAT Services
Cyprus VAT registration, returns, VIES and OSS — handled accurately and on time so you avoid penalties.
Learn morePayroll & Social Insurance
Fully managed Cyprus payroll: PAYE, Social Insurance, GHS, payslips and Emoluments returns, every month.
Learn moreFrequently asked questions
For construction services supplied between VAT-registered persons, the recipient self-accounts for the VAT, charging it and, where entitled, reclaiming it on the same return, rather than the supplier charging it on the invoice. The supplier's invoice must note that the reverse charge applies. Getting this right protects both sides on a VAT inspection.
The standard 19% rate generally applies to construction works. A reduced 5% rate can apply to the construction or acquisition of a qualifying primary residence, within strict area and value conditions. The correct rate depends on the property, its use and whether the conditions are met, so each project should be assessed.
Every Cyprus company must have its financial statements audited or reviewed. A full statutory audit applies unless the company qualifies for the lighter ISRE 2400 review, available where turnover is under €300,000 and total assets under €500,000 across two consecutive years. Both are carried out by ICPAC-licensed practitioners, which we coordinate end to end.
A genuine subcontractor invoices you and manages their own tax and contributions; an employee must be on your payroll with Social Insurance, GHS and the other employer levies. Treating workers who are effectively employees as subcontractors creates exposure to back-dated contributions and penalties, so the arrangement and documentation must reflect reality.
Contracts spanning a year-end require revenue and cost to be recognised as the work progresses, with uninvoiced work shown as work-in-progress and amounts withheld by the client shown as retentions. This gives a true profit figure each year rather than a distorted one, and keeps the accounts audit-ready.
On top of gross wages, the employer pays Social Insurance at 8.8%, Redundancy Fund 1.2%, Human Resource Development 0.5%, Social Cohesion 2.0% and GHS 2.9%. Employees contribute Social Insurance 8.8% and GHS 2.65% from pay. We run the full monthly cycle including starters and leavers on site.
Useful tools & guides
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