VAT is imposed on the supply of goods and provision of services in Cyprus as well as on the acquisition of goods from the European Union (EU) and the importation of goods into Cyprus.
Taxable persons charge VAT on their taxable supplies (output tax) and are charged with VAT on goods and services which they receive (input tax). If output tax in a VAT period exceeds total input tax, a payment of the difference has to be paid to the VAT authorities. If input tax exceeds output tax, the excess input tax is carried forward as a credit and set off against future output tax or under certain conditions an application is made for a VAT refund.
An actual VAT refund can be obtained in the following cases:
- A period of eight months has elapsed from the date the VAT became refundable.
- The input VAT relates to zero rated output transactions
- The input VAT relates to capital assets of the company
- The input VAT relates to transactions which are outside the scope of VAT but would have been subject to VAT had they been carried out in Cyprus.
- Input VAT which cannot be set off against output VAT until the last VAT period of the year which follows the year in which the VAT period in which the credit was created falls
- The input VAT relates to exempt financial and insurance services provided to non-EU resident clients (services for which the right to recover the related input VAT is granted)
For intra-community acquisitions of goods (with the exception of goods subject to excise duty), the trader does not pay VAT but instead accounts for VAT using the reverse charge method.
No VAT cash outflow arises on intra-community acquisition of goods (with the exception of goods subject to excise taxes) as VAT is accounted by using the reverse charge method. This involves a simple accounting entry in the bools of the business whereby it self-charges VAT and at the same time claims it back, provided it relates to supplies for which the right to recover input VAT is granted, thereby creating no cost to the business.
In cases the acquisition relates to a transaction for which the right to recover the input VAT is not granted, the trader must pay the VAT that corresponds to the acquisition.
Standard Rate 19%
Applies to any provision of goods and services in Cyprus not subject to the zero rates, the reduced rates or is exempt.
Reduced Rate 9%
Applies to the following provision of goods and services in Cyprus:
- Hotel accommodation
- Restaurants and catering services
- Transportation of passengers and their accompanying luggage using urban, intercity and rural taxis and buses.
- Movement of passengers in inland waters and their accompanying luggage
Reduced Rate 5%
Applies to the following provision of goods and services in Cyprus:
- Acquisition and / or construction of residences for use as the primary and permanent place of residence for the next 10 years. Based on the relevant legislation, the reduced rate of 5% applies on the first 200 square meters, whereas for the remaining square meters as determined based on the building coefficient, the standard Vat rate of 19% applies. The reduced rate is imposed only after obtaining a certified confirmation from the VAT Authorities.
- Renovation and repair of old used private residences for which a period of at least three years has elapsed from the date of their first use, excluding the value of materials which constitute more than 50% of the value of the services.
- Supply of fertilizers, animal feeding products and seeds
- Supply of live animals for human consumption
- Books, magazines and newspapers
- Non-bottled water
- Liquid gas
- Supply of Foodstuffs
- Supply of pharmaceutical products and vaccines that are used for health care purposes
- Various goods for the use of handicapped persons
- Ice cream and similar products
- Funeral service and supply of coffins
- Road sweeping, garbage collection and recycling
- Services of authors, composers and artists
Zero Rates 0%
Applies to the provision of the following goods and services:
- Exports to non-EU countries
- Supply, modification, repair, maintenance, chartering and hiring of sea going vessels which are used for navigation on the open sea and which are carrying passengers for reward or used for the purpose of commercial, industrial and other business activities
- Supply, modification, repair, maintenance, chartering and hiring of aircrafts used by airlines for reward mainly or international routes
- Supply of services to meet the direct needs of sea going vessels and aircrafts
- Transportation of passengers from Cyprus to a place outside Cyprus or vice versa using a sea going vessel or aircraft
- Supplies of Gold to the Central Bank of Cyprus
- Commissions received from abroad for import and export of goods.
Certain goods and services are exempt from VAT. They include:
- Most banking and financial services and insurance services
- Most hospital, medical and dental care services
- Certain cultural education and sports activities
- Supplies of second-hand buildings
- Postal services provided by the national postal authority
- Lottery tickets and betting coupons for football and horse racing
- Management services provided to mutual funds
The difference between zero rate and exempt supplies is that businesses that make exempt supplies are not entitled to recover the VAT input charged on their purchases, expenses or imports.
Irrecoverable Input VAT
As an exception to the general rule, input VAT cannot be recovered in some cases, which include acquisitions used for making exempt supplies, purchase, import or hire of salon cars, entertainment and hospitality expenses (except those relating to employees and directors).
VAT on immovable property
- Leasing of immovable property – VAT at the standard rate must be charged on lease of immovable property when the lessee is a taxable and is engaged in taxable activities by at least 90%. The lessor has the right to opt not to impose VAT on the specific property. The option is irrevocable.
- Sale of non-developed building land – VAT at the standard rate of 19% must be charged on the sale of non-developed building land, as from 2 January 2018. Non-developed land is defined as any land intended for the construction of one or more structures in the course of carrying out a business activity. No VAT will be imposed on the purchase or sale of land located in a livestock zone or areas which are not intended for development such as zones/areas of environmental protection, archeological and agricultural.
- Repossession of immovable property by financial institutions – VAT must be accounted under the reverse charge provisions on transactions relating to transfers of immovable property during the process of loan restructuring and for compulsory transfer to the lender, as from 2 January 2018.
- Leases of immovable property which effectively transfer the risks and rewards of ownership of immovable property – As from 1 January 2019 leases of immovable property which effectively transfer the risks and rewards of ownership of immovable property are considered to be supply of goods and therefore become subject to VAT at the standard rate.
Obligation to Register For VAT
Every individual or company is obliged to register if:
- Taxable supplies (turnover) in Cyprus are expected to exceed €15.600 per annum
- Provides services to a VAT registered company within the EU with nil registration threshold
- Offers distant sales with registration threshold of €35.000
- Is involved in the acquisition of goods from other EU members states and relates to persons who offer exempt supplies of goods and services with registration threshold of €10.250
- Offers zero rated supplies of goods and services
International Business Companies who trade outside Cyprus in goods and services which would have been taxable for VAT purposes if they were provided within Cyprus, have a right to Register in Cyprus and obtain a VAT registration number.
- Submission of quarterly VAT returns to the VAT Commissioner within 40 days of the tax period
- Intrastate return on a monthly basis of intra-community arrivals and departure of goods and services within 10 days of the month following the month of the intrastate return.
- Vies return on a monthly basis (recapitulative statement for supplies of goods and services) within 15 days of the month following the month of the Vies return.Global Consultants offer and a full and comprehensive VAT service, to ensure absolute compliance with all rules, regulations and directives, and to maximize cash flow possibilities.
|Thresholds and penalties
|Amount in Euro
|Registration threshold (taxable suppliers in Cyprus)
|Registration threshold for distance sales (sale of goods
to persons not subject to VAT registration in Cyprus, by supplier’s
resident in another EU Member State)
|Registration threshold for acquisition of goods in Cyprus
from supplier’s resident in another EU Member State
|Registration threshold for intra-community supply of services
|Registration threshold for receipt of services from abroad for
which the recipient must account for VAT under the reverse
|Penalty for late submission of VAT return
|51 for each return
|Penalty for omission to keep books and records for a
period of 6 years
|Penalty for late submission of VIES return
|50 for each return
|Penalty for late submission of corrective VIES return
|15 for each return
|Omission to submit the VIES Return constitutes a criminal
offence with a maximum penalty of
|Penalty for late registration with the VAT authorities
|85 per month of delay