A Capital Statement is a request from the income tax office to present in writing a fully documented explanation of the increase of assets and belongings for the specific tax payer and his / her family for a specified period of time, usually for the last 7 years. The purpose of this statement is for the Cyprus Income Tax office to identify undeclared income which is evidenced by the increase of the value of the owned property, cash at bank and any other assets the tax payer may have.
From our experience, it is expected that all Cyprus domiciled directors and shareholders of Cyprus Companies will be requested at least once in the lifetime and before the retirement age to prepare such a statement. In other words at least before retiring the tax office will need assurance that these Cypriot directors and shareholders do not owe money to the Income Tax Office before they are permanently removed from the active tax payers records.
This statement, even though sounds easy to produce, it is a lengthy report comprising of several pages of analysis of the tax payers and his / her family income, expenses, lifestyle, assets and illustrates any increase or decrease in their assets for the specified period. If the Capital Statement reflects an increase in assets then such increase must be justified within the report as it will be thoroughly be examined by the Income Tax office. All figures used in this report must be supported by 3rd party evidence such as Company Registrar Information, Income Tax Office paperwork, Payroll Payslips, Land Registry extracts, Dividend Declarations, to mention a few. What is unique and interesting when we prepare such reports in our capacity as tax experts is that all Capital Statements vary in nature and complexity and reveal the real financial history of the tax payer and their families.
Given the magnitude and importance of the Capital Statement it is imperative that you outsource it to a firm of auditors and tax experts with experience in the filed as errors, omissions or the wrong presentation of the financial history of the tax payer could cause unnecessary adventures and time wastage with the local Income Tax Office.
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