Value Added Tax (VAT)


VAT is charged on the supply of goods and the provision of services in Cyprus. It is also charged on the purchase of goods from the EU. Additionally, VAT is charged on the importation of products into Cyprus from Non EU countries.

Any goods that are supplied within the Republic of Cyprus are subject to VAT. Similarly, the supply of any services is considered as made in Cyprus if the person supplying them is supplying them whilst in Cyprus.

Added to this the supply of certain services is treated as taxable even if these services are provided by a person who is resident in another country and are then received by a person who is registered to pay tax in Cyprus.

People who are subject to tax charge VAT on their taxable supplies (output tax). Conversely, they are charged with VAT on goods or services which they receive (input tax).
If the output tax in any given VAT period exceeds the total input tax, payment is required to the state. If the input tax exceeds the output tax, the excess input tax is carried forward as a credit and set off against any future output VAT.

Registration

According to the VAT legislation, registration is compulsory for businesses in the following cases:
–   Businesses are subject to Vat if they have a turnover in excess of €15.600 during the 12 preceding months
–   Businesses which have acquired goods from other EU Member States with a total value in excess of €10.251,61 during any calendar year
–   Businesses engaged in the supply of intra-community services for which the recipient must account for VAT
–   Businesses carrying out economic activities involving the receipt of services from abroad. In this case an obligation to account for the Cyprus VAT under the reverse charge provision exists, which is subject to the registration threshold of €15.600 per any consecutive 12 month period
–   Businesses making distance sales (sales from a business established in another member state), are liable to register for VAT purposes in Cyprus and account for VAT in Cyprus, if in the period starting from the 1st January of the year, the value of distance sales exceeds €35.000

Businesses with a turnover of less than €15.600 or with supplies that are outside the scope of VAT but for which the right to claim the amount of the related input VAT is granted, have the option to register on a voluntary basis.

VAT Rates

The legislation provides for the following four tax rates:
–   Standard rate (19%)
–   Reduced rate of nine per cent (9%)
–   Reduced rate of five per cent (5%)
–   Zero rate (0%)

Standard rate (19%)

VAT is charged on each supply of goods or services in Cyprus at the standard rate of nineteen per cent (19%).

Reduced rate of nine per cent (9%)

The following are taxable at the reduced VAT rate of 9%:
–   Transport of passengers and their accompanying luggage within Cyprus, with urban, suburban and rural taxis as well as with tour and suburban buses
–   Services of restaurants and the supply of food in the course of catering (except the supply of   alcoholic beverages wine and beer, which is chargeable at 19%)
–   Provision of accommodation in the hotel sector or in sectors with a similar character

Reduced rate of 5%

The following are taxable at the reduced VAT rate of 5%:
–   Supply of coffins
–   Services supplied by undertakers
–   Services of writers, artists
–   Supply of live animals, fertilizers and seeds
–   Bottled & non-bottled water
–   Newspapers, books, periodicals
–   Certain products for persons with special needs
–   Ice cream and similar products
–   Certain types of nuts (salted etc)
–   The letting of camping sites and caravan parks
–   Hair salon services
–   Repair and maintenance of private households
–   Animal feedstuff
–   Confectionery products
–   Juices
–   Pharmaceutical products
–   Entry fees to theaters, cinemas at sports events, luna parks and similar cultural events
–   Road sweeping, garbage collection and recycling etc.

Zero rated 0%

The following are taxable at zero VAT rate:
–   Exports to non EU countries
–   Supply of goods and provision of services to a registered person in another EU member state
–   Supply, hiring and repair of sea-going vessels and aircrafts
–   Supply of services to meet the direct needs of sea-going vessels and aircrafts
–   Supply of goods entered into customs regime etc.

Exemptions

The following are exempted under the VAT legislation:
–   Leasing or letting of immovable property (the letting of immovable property with the right of purchase is not exempt)
–   Most banking and financial services
–   Lottery tickets and betting coupons for football and horse racing
–   Postal services provided by the national postal authority
–   Management services provided to mutual funds
–   Medical care
–   Social welfare
–   Educational services
–   Cultural services
–   Insurance transactions etc.

Difference between zero rate and exempt supplies

The difference between zero rate and exempt supplies is that businesses that are considered to have exempt supplies are not entitled to recover the input VAT charged on their purchases, expenses or imports.

VAT declaration

VAT returns must be submitted quarterly and the payment of the VAT must be made by the 10th day of the second month that follows the month in which the tax period ends.

In cases where the quarterly input tax is higher than output tax, and therefore a repayment is due, the difference is refundable or is transferred to the next VAT quarter.

Penalties and Interest:

–   Late registration – €85 for every month of delay
–   Late submission of return – €51 for each return
–   Late payment of VAT – 10% of amount due plus 4% p.a. interest

The VAT services include the following:

–   Registration with the VAT authorities
–   Deregistration from VAT
–   Preparation and submission of the VAT form
–   Written and oral consulting regarding Cyprus and EU VAT legislation