Cyprus Value Added Tax (VAT)
Date of last update: 1 January 2014
Every person, legal or physical, who provides goods and services in Cyprus, as well every person, legal or physical who acquires goods from the European Union (EU) and the importation of goods from third countries into Cyprus is liable to be registered with the VAT authorities if they exceed the threshold of €15.600 turnover per annum. Companies and persons with lower turnover can be registered voluntarily.
The supply of intra-community services imposes the obligation to register with the VAT department irrespective of the turnover with no imposition of any threshold.
Taxable persons charge VAT on their taxable supplies (output VAT) and are charged with VAT on goods or services which they receive (input VAT).
If output VAT exceeds total input VAT, within a VAT period, a payment has to be made to the VAT authorities. If input VAT exceeds output VAT, the excess input tax is carried forward as a credit and set off against future output VAT. Refund of excess input VAT can be obtained under some circumstances.
For intra-Community acquisition of goods the trader does not pay a VAT on receipt of goods in Cyprus but he accounts for VAT using the “reverse charge” method on his books.
“Reverse charge” means that the trader self-charges VAT and at the same time claims it back.
However, in cases where the acquisition relates to an exempt transaction, with “reverse charge”, the trader must pay the VAT that corresponds to the acquisition.
As from 1st January 2010, significant changes in the VAT legislation came into effect, aiming at rendering Cyprus compatible to EU standards. Such changes relate to the following:
- Changes in the country of taxation of services provided between business established in two different EU Member States (B2B);
- Changes in the country of taxation of services, supplied to consumers (B2C);
- Changes in the time of supply of services for which VAT is due by the recipient;
- Procedure for refund of VAT paid in another Member State (MS).
As a result of the above changes, new compliance obligations arise for Cyprus resident businesses supplying services to other businesses within the European Union for which the recipient of the service is obliged to account for VAT under the reverse charge method.
According to the new provisions, providers of services will be required to complete and submit a monthly VIES or declaration for services which are taxed by the recipient under the reverse charge provisions. As from 1st January 2010, the VIES declaration for the supply of goods within EU must also be submitted on a monthly basis. Submission of the VIES return will only be electronically.
The VAT legislation provides for the following tax rates:
Reduced rate (e.g. catering services, transportation with taxi, agricultural and tourist buses, hotel accommodation, etc.)
Reduced rate (e.g. book and newspaper delivery, gas, certain foodstuff, etc.)
Zero rate (e.g. supply of food other than catering, medicines, air passenger transportation)
Some goods and services are exempt from VAT. They include:
- most banking, financial and insurance services;
- most hospital, medical and dental care services;
- most educational and sport activities;
- supplies of real estate (except supply of new buildings before their first use) including supplies of land and second-hand buildings;
- postal services provided by national postal authority;
- lottery tickets and betting coupons for football and horse racing;
- management services provided to mutual funds;
- letting of immovable property (the letting of immovable property with the right of purchase is not exempt).
The information in this report is for information purposes only. It is not intended to constitute tax, legal or other professional advice, and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances. We accept no responsibility for any errors, omissions or misleading statements in this report, or for any loss which may arise from reliance on materials contained in this report.