Value Added Tax

Imposition tax

 
VAT is imposed on:

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• delivery of goods in Cyprus

• delivery of services in Cyprus,

• acquisition of goods from other EU member states and

• the importation of goods into Cyprus from third countries.

 

Taxable person
 
A taxable person under the provisions of the VAT legislation is every person (Individual or Company) that:

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• Exercises business and

• It is registered with the VAT either in Cyprus or within the European Union.

 

All taxable persons charge VAT on their taxable supplies (output tax) and are being charged with VAT on goods or services which they receive (input tax).

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VAT rates

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Standard rate     19%

Reduced rate        9%

Reduced rate        5%

Zero rate               0%

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Standard rate

The standard rate applies to the supplies of all goods and services in Cyprus which are not subject to the zero rate and the reduced rate and are not exempt from VAT.

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Reduced rate 9%

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The reduced rate of 9% applies mainly for services regarding the tourist sector and businesses that commercialize food and drinks. The reduced rate is available for:

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•  All the restaurant and catering services (including various type of alcoholic drinks and soft drinks).

•  Accommodation services (hotels, hostels, tourist lodgments and any other similar establishments).

•  Passenger transportation with taxis and passenger transportation with buses.

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Reduced rate 5%

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The reduced rate of 5% applies to:

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• The supply of foodstuff.

• The supply of pharmaceuticals products.

• The supply of live animals used for the preparation of food.

• Books, newspapers and magazines.

• Entry fees to theaters, cinemas, sport events, Luna parks, museums and similar cultural events.

• Hair salon services.

• Renovation and repair of private households after three years of first residence (see below).

• Acquisition or construction of residence, subject to conditions (see below).

 

Zero rate

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The zero rate applies to:

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• Exportation of goods.

• Supply, hiring and repair of sea-going vessels and aircrafts.

• Supply of services to meet the direct needs of sea-going vessels.

• Transportation of passengers from the Republic to a place outside of the Republic and vice versa using a seagoing vessel or aircraft.

 

Exempt from VAT

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The following are exempt from VAT:

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• Postal services.

• Insurance services.

• Hospital and medical caring services.

• Educational services (under certain conditions).

• Disposal of immovable property where the application for building permission has been submitted prior to 1 May 2004.

• Rental of immovable property for residential purposes (see below).

 

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VAT registration

Compulsory 

Every individual or company is obliged to register to VAT if:

 

• at the end of any month its taxable supplies exceed the €15.600 threshold during the 12 last months or

• it expects that its taxable supplies will exceed the €15.600 threshold within the next 30 days

• import goods in Cyprus from other EU member states (relates to persons who offer exempt supplies of goods and services or are non-profitable organisations) of a value exceeding €10.250

• provides services to another VAT registered person within European Union

• a foreign taxable person makes distance sales to Cyprus, with registration threshold of €35.000

• acquires a company on a going concern basis

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Voluntary
 
Taxable persons not exceeding the threshold of €15.600 have the option to register voluntary.

 
 
VAT Return (VAT 4) 

The submission of the VAT returns are usually prepared and filed quarterly.
 
Mainly the VAT return must be submitted every three calendar months by every taxable person.
The payment of the VAT must be made by the 10th day of the second month that follows the month in which the VAT period ends.
 
In case where the input tax is higher than the output tax in the taxable period the difference is refundable or is transferred to the next VAT period in order to be credited against any payable account.
 
VAT Information Exchange System (VIES)

VIES declarations are required for the supplies of goods and services between EU Member States.
 
A company involved in intra-community transactions must submit VIES declarations to the VAT Office for every calendar month by the fifteenth (15th) day of the month which follows the month for which it relates.

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The above should be used only as a source of general information and it is not intended to provide, and should not be relied on for tax, legal or accounting advice. It is also subject to Disclaimer. Before engaging in any transaction you should seek for professional advice.

 

For further details on these issues, please do not hesitate to contact us.