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

A Cyprus limited company keeps its books in euro no matter what 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, and the difference between that value and the euro that eventually arrives 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 walks through 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 euro documents. A company that invoices a US client, pays a UK contractor and holds a dollar balance at Wise still has to answer one question for every transaction: what was this worth in euro on the day it happened?

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

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

For VAT, the law answers this for you: foreign-currency amounts are converted at the rate applicable on the day of the transaction, with intra-EU acquisitions converted at the ECB rate. For the rest of the bookkeeping, the source of the rate is a matter of practice: most Cyprus bookkeepers and accountants use the European Central Bank's daily euro reference rate for the invoice date, because it is public, dated and easy for an auditor or a tax inspector to re-check. Whatever source you pick, write it down and keep it. Inspectors object to a convention that changes month to month far more than to any particular source.

The invoice is booked at the published rate on the invoice date. When the customer pays, the bank converts at its own rate, which is the rate that determines how many euro actually landed. The bank side of the entry uses the bank's rate, and 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. Say you invoice a US client $10,000 on 3 March and the ECB rate makes that €9,200, which you book as revenue. The client pays on 28 March and the bank credits €9,050. Revenue stays €9,200; the €150 shortfall is posted as a realised exchange loss, part of that period's result. Had the dollar strengthened, the same mechanics would have produced a gain.

An unrealised difference arises when a foreign-currency balance is still open at a period end. A client who owes you dollars at year end, a supplier you owe pounds, the dollar balance itself: each sits in the ledger at its historical euro value, and at the reporting date you restate it at the closing rate. 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 depart from the accounting result, and 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, your job is simply to record every difference.

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

You can quote the price in dollars, but the amounts a VAT invoice is required to carry, the per-rate values, the totals and the VAT figure, are stated in euro. The practical layout, set out in our guide to Cyprus invoice requirements, shows the euro figures and the exchange rate used 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 business-to-business service to a customer abroad, usually leaves the VAT line at nil, but the net value still appears in euro in the return boxes for supplies outside Cyprus, so the conversion is needed even when nothing is charged. 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 regardless of what the customer later pays or at what rate.

The same logic runs 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, and that figure feeds both the output and input boxes of your VAT return, due with payment 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. A dollar account is agreed to the dollar balance on the bank statement, the same discipline as any bank reconciliation, and that is the test that every receipt and payment has been 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 dollar balance is 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: one ledger account per bank account per currency, each reconciled to its own statement. Our guide to opening a business bank account in Cyprus covers which banks and fintechs offer multi-currency accounts, and it is worth deciding early which currencies you will actually hold.

Watch transfers between your own accounts. Moving dollars into your euro account is really a conversion. The dollars leave at one value, the euro arrive at the bank's rate, and 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 invoiced in dollars owes you dollars in the sales ledger; when they pay, the dollar receivable clears to zero and the euro difference between invoice value and receipt value goes to exchange gains or losses. If a small euro remainder is left after the dollar balance has cleared, it is an exchange difference waiting to be posted, not an amount the customer still owes.

Suppliers work the same way. A UK contractor billed in pounds is booked at the invoice-date rate and paid at the bank's rate. A cloud provider billing in dollars is reverse-charged at the invoice-date euro value and settled at whatever the card conversion produced. Credit notes and part-payments each convert at their own date, and the difference is posted when the balance finally clears.

What are the common multi-currency mistakes?

The mistake we see most often is mixing currencies in a single ledger bank account. Once dollar and euro movements share one account, it can never be agreed 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 overstates or understates debtors, and the error compounds 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 a figure was derived, you want one convention you can point to, applied everywhere.

How does Sumly handle multi-currency bookkeeping?

Sumly keeps the books in euro and supports all major currencies with automatic conversion. The AI reads every document dropped into or emailed to your company's private Sumly inbox, pulls out the counterparty, date, currency, line items and VAT, and books it 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 carries 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, which means a dollar or pound account gets the same automatic matching as the euro one: payments match against invoices by themselves, and any euro gap left after a foreign balance clears shows up as an exchange difference for you to post. The VAT return then assembles 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 and submit it through Tax For All yourself; on Premium your Sumly certified bookkeeper does. The one call Sumly leaves open is how the year's exchange differences are treated for corporate tax, which your accountant decides at year end on books where every difference is already recorded.

Questions people ask

Frequently asked

Can a Cyprus company keep its books in US dollars instead of euro?

The filings are in euro either way. The VAT return is a euro document, the Tax Department assesses in euro, and the financial statements filed with the Registrar are prepared in euro in practice. A company that trades almost entirely in dollars can keep a dollar management view, but every transaction in the ledger still needs a euro value, because the euro values are what the filings are built from. If you think your company has a genuine case for a different functional currency under IFRS, raise it with your auditor before the year starts.

Which exchange rate should I use for a dollar invoice?

For the VAT figures on the invoice, Cyprus VAT law fixes the conversion at the rate applicable on the day of the transaction. For the bookkeeping entry, use a published rate on the invoice date and apply the same source every time; most Cyprus bookkeepers use the European Central Bank's daily reference rate because it is public and dated. The rate your bank actually applied belongs on the bank side of the entry, when the money moves.

Do I have to show VAT in euro if the invoice is in dollars?

Yes. You can quote the price in dollars, but the amounts a Cyprus VAT invoice must carry, the per-rate values, the totals and the VAT itself, are stated in euro. The usual layout shows the euro figures and the exchange rate used on the face of the invoice, so a Cyprus customer can reclaim input VAT and the Tax Department can tie the invoice to your return.

Are exchange gains and losses taxable in Cyprus?

The books and the tax computation can give different answers. Your ledger records every exchange difference as it arises, realised or unrealised. The corporate tax computation may then adjust the accounting result, depending on whether a difference is realised and what produced it. That adjustment is made once, in the tax return, by whoever prepares it. During the year your only job is to make sure the differences are actually posted.

What happens if the rate I used differs from the rate the bank gave me?

That is normal, and it is exactly where realised exchange differences come from. The invoice was booked at a published rate on the invoice date, the payment landed at the bank's rate on the payment date, and the difference between the two euro values is posted to an exchange gain or loss account. Once that posting is made, the customer's balance clears to zero in both currencies, which is the check that the entries are right.

How does Sumly handle foreign-currency transactions?

The books stay in euro, and every major currency converts automatically. Drop a dollar invoice into your Sumly inbox and the AI reads the currency along with the counterparty, date, line items and VAT, then books it double-entry at both the dollar amount and its euro value, with the document linked to the entry. Read-only bank feeds, including Revolut Business and Wise, match payments to invoices automatically, so exchange differences show up as gaps to post rather than hiding in unmatched balances.