Multi-currency bookkeeping for a Cyprus company: rates, VAT and bank accounts

A Cyprus limited company keeps its books in euro, whatever currency its customers pay in. Every dollar invoice, every pound subscription and every foreign-currency bank balance needs a euro value in the ledger, converted on the date of the transaction. When the money arrives, the difference between that value and the euro you actually receive is posted as an exchange gain or loss. Get the rate, the date and the difference right, and multi-currency bookkeeping is routine. This guide covers all three, plus VAT on foreign-currency invoices and reconciling a dollar or pound bank account.

Why are the books in euro when the customers pay in dollars?

Because everyone who reads the books reads euro. The financial statements attached to the corporate tax return, the VAT return and the Tax Department's assessments are all in euro. Say your company invoices a US client, pays a UK contractor and holds a dollar balance at Wise. For every one of those transactions you still have to answer one question. What was it worth in euro on the day it happened?

None of that stops you working in other currencies. It means the ledger carries two numbers for each foreign transaction, the original amount and its euro equivalent. The euro number is the one that flows into the trial balance, the VAT return and the year-end close. Founders from the UK sometimes expect to choose a presentation currency, the way they could for a company at Companies House. In Cyprus you need the euro values either way, because that's what the Tax Department reads.

Which exchange rate do you use, and on what date?

For VAT, the law decides. Foreign-currency amounts are converted at the rate applicable on the day of the transaction, and goods bought from other EU countries, known as intra-EU acquisitions, convert at the ECB rate. For the rest of the bookkeeping, the rate source is a matter of practice. Most Cyprus bookkeepers and accountants use the European Central Bank's daily euro reference rate for the invoice date. It's public, dated and easy for an auditor or a tax inspector to re-check. Whatever source you pick, write it down and stick to it. Inspectors object far more to a convention that changes month to month than to any particular source.

Book the invoice at the published rate on the invoice date. When the customer pays, the bank converts at its own rate, and that rate decides how many euro actually land. The bank side of the entry uses the bank's rate. The gap between the two euro values is your exchange difference.

What is the difference between a realised and an unrealised exchange difference?

A difference is realised when the balance is settled, and unrealised while the balance is still open at a period end. Say you invoice a US client $10,000 on 3 March. At the ECB rate that's €9,200, which you book as revenue. The client pays on 28 March and the bank credits €9,050. Revenue stays at €9,200, and you post the €150 shortfall as a realised exchange loss in that period's result. If the dollar had strengthened, the same steps would have produced a gain.

An unrealised difference comes from a foreign-currency balance that's still open at a period end. Think of a client who owes you dollars at year end, a supplier you owe pounds, or the dollar bank balance itself. Each sits in the ledger at its historical euro value. At the reporting date you restate it at the closing rate, and the movement is an unrealised gain or loss. When the balance later settles, the revaluation reverses and the final realised figure takes its place.

Both belong in the books. The corporate tax treatment of exchange differences can differ from the accounting result. Any adjustment happens once, in the tax computation, without touching the ledger. Confirm the treatment for your company with your accountant at year end. During the year, just record every difference.

How do you handle VAT on a foreign-currency invoice?

State the VAT amounts in euro, even when the price is in dollars. The amounts a VAT invoice must carry are stated in euro, which covers the value at each rate, the totals and the VAT figure. Our guide to Cyprus invoice requirements sets out the usual layout, with the euro figures and the exchange rate on the face of the invoice. A Cyprus customer then has the euro figure it needs to reclaim input VAT, and the Tax Department can match the invoice to your return.

Most foreign sales carry no Cyprus VAT at all. An export, or a service to a business abroad, usually leaves the VAT line at nil. The net value still goes into the return's boxes for supplies outside Cyprus, in euro, so you need the conversion even when you charge nothing. Where Cyprus VAT does apply, at the 19% standard rate or a reduced one, the euro VAT amount on the invoice goes into the output box. What the customer later pays, and at what rate, doesn't change it.

It works the same way in reverse. A foreign supplier's dollar or pound invoice with no VAT on it is reverse-charged at its euro value on the invoice date. Under the reverse charge you account for the VAT yourself, so that figure goes into both the output and the input boxes of your VAT return. The return and the payment are due by the 10th day of the second month after the quarter ends.

How do you reconcile a bank account held in dollars or pounds?

Reconcile it in its own currency. Agree a dollar account to the dollar balance on the bank statement, as you would with any bank reconciliation. That's the test that every receipt and payment is recorded. The euro side is separate. The ledger carries each dollar movement at the rate of its own day, so the account's euro carrying value drifts away from what the dollars are worth at today's rate. That drift is an unrealised difference, and you correct it by revaluing the account at the period-end rate.

Keep currencies apart in the chart of accounts. Give every bank account its own ledger account for each currency, and reconcile each one to its own statement. Our guide to opening a business bank account in Cyprus covers which banks and fintechs offer multi-currency accounts. Decide early which currencies you'll actually hold.

Watch transfers between your own accounts. Moving dollars into your euro account is really a conversion. The dollars leave at one value and the euro arrive at the bank's rate. The difference against the ledger's historical value is an exchange gain or loss. Booking these at an assumed rate is one of the most common reasons a foreign-currency account stops reconciling.

How do you run customers and suppliers in several currencies?

Give each one a default currency and track both balances. A customer you invoice in dollars owes you dollars in the sales ledger. When they pay, the dollar balance clears to zero, and the euro difference between the invoice value and the amount received goes to exchange gains or losses. If a small euro remainder is left after the dollar balance clears, it's an exchange difference waiting to be posted. The customer doesn't still owe it.

Suppliers work the same way. You book a UK contractor's pound invoice at the invoice-date rate and pay it at the bank's rate. A cloud provider billing in dollars is reverse-charged at the euro value on the invoice date and settled at whatever the card conversion produced. Credit notes and part-payments each convert at their own date, and you post the difference when the balance finally clears.

What are the common multi-currency mistakes?

Three, and we see them again and again. The most common is mixing currencies in a single ledger bank account. Once dollar and euro movements share one account, you can't agree it to any statement, and every conversion hides inside what looks like an ordinary payment.

The second is leaving euro remainders on cleared foreign balances. A customer who has paid in full in dollars should show zero everywhere. A sales ledger full of unposted remainders shows debtors too high or too low, and the error grows quietly all year.

The third is switching rate sources, a reference rate one month and the bank's rate the next. When an inspector asks how you got a figure, you want one convention you can point to, used everywhere.

How does Sumly handle multi-currency bookkeeping?

Sumly keeps the books in euro and converts all major currencies automatically. Drop a document into your company's private Sumly inbox, or email it there, and the AI reads it. It pulls out the counterparty, date, currency, line items and VAT, then books the document double-entry at both its foreign amount and its euro value on the transaction date. Every entry stays linked to its document. Every customer and supplier has a default currency, so a dollar client's invoices run in dollars in the sales ledger while the euro values flow to the trial balance.

Bank feeds are read-only open banking connections, so Sumly sees transactions but can never move money. The Cyprus banks connect alongside Revolut Business and Wise, so a dollar or pound account gets the same automatic matching as the euro one. Payments match against invoices by themselves. Any euro gap left after a foreign balance clears shows up as an exchange difference for you to post.

The VAT return then builds itself from those euro values, reverse-charged purchases and exports included, and every Cyprus VAT code maps to the official boxes of the return. On Base, you review it and submit it yourself through Tax For All, the Tax Department's portal. On Plus, Sumly files it for you, along with your VIES statement of EU sales and your payroll. On Premium, your Sumly certified bookkeeper does. Sumly leaves one call open. Your accountant decides at year end how the year's exchange differences are treated for corporate tax, working from books where every difference is already recorded.

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