Overview

Our VAT experts will make sure that you fully comply with the VAT rules and more importantly minimize your VAT liability and burdens and optimize the VAT recovered improving your cash flow and efficiency. Our VAT professionals will update you on any new VAT regulations and advice you on any VAT issues arising from your business transactions.

 

Scope of VAT:

Value Added Tax (VAT) is an indirect tax (ie tax on consumer expenditure).

VAT is charged on the supply of goods and services in Cyprus, on acquisitions from EU member states and on imports from non-member states.

The principle of VAT is that it should be paid on the consumption of goods and services by the final consumer. However, the VAT is not only collected at the final point of consumption but at the intermediary stages by businesses.

 

VAT is payable on:

  1. Taxable supplies made by a taxable person
  2. In the course of a business
  3. Which are not specifically exempted or zero rated

 

Taxable supplies:

A trader may make:

  1. Standard rated supplies – 19% from 13/1/2014 (18% from14/1/2013 to 12/1/2014)
  2. Reduced rated supplies – 5% or 9% from 13/1/2014 (8% up to 12/1/2014)
  3. Zero rated supplies – 0%
  4. Exempt supplies

 A taxable supply is any supply of goods and services made within Cyprus other than an exempt supply or a supply outside the scope of VAT. 

 

 Registration to the VAT Authorities:

A trader is required to register if his taxable turnover (including zero rated supplies):

       1. At the end of any month the value of taxable supplies for the 12 months then ended exceeds €15.600, such calculation being applied at the end of every month 

       2. At any time, there are reasonable grounds to believe that the value of taxable supplies in the next 30 days from that point in time will exceed €15.600

A trader is required to register also if:

       1. Services are provided to VAT registered persons in EU member states

       2. Services are received from EU and non EU member states

A trader who starts a new business with reasonable expectations or an established business which starts expansion may register voluntarily.

 

Pre – Registration Input VAT:

Where a registered person has suffered input VAT prior to VAT registration, this can be claimed under the following conditions:

  1. For services received within 6 months prior to registration
  2. For goods purchased within 3 years prior to registration and the goods are still in the possession of the registered person

 

 VAT invoices:

A VAT registered trader making taxable supplies is required to issue a tax invoice, not later than 30 days from the date of the taxable supply. 

Tax invoices are important because a registered trader can obtain a deduction of input VAT on the tax charged on the tax invoice.

There are 2 types of invoices:

  1. Normal VAT invoice(if total amount including VAT is above €85)
  2. Retailer’s invoice (if total amount including VAT is below €85)

 

 Documents treated as VAT invoices:

  • Document issued for self-billing purposes
  • Authenticated receipts in the construction industry.

 

 Deduction of input VAT:

Input VAT is the VAT paid by taxable persons on goods and services supplied to them or imported by them provided that the goods and services are used for business purposes.

Input VAT is recoverable provided certain conditions are met.

 

Reverse charge:

For acquisition of goods from EU member states and receipt of services from both EU and non EU member states the taxable person does not pay VAT on receipt of goods and services in Cyprus but instead accounts for VAT using the acquisition accounting method, also known as reverse charge. This is simply an accounting entry in the books of the business whereby it self-charges VAT and at the same time claims the VAT back, provided the business has the right to recover input VAT. In this way, there is no cost to the business.

In cases where the business has no right to recover input VAT, the taxable person has to pay the VAT.

 

VAT return submission and payment of VAT due:

VAT returns must be completed and returned to the VAT Commissioner together with any VAT payable due within 40 days of the end of the relevant VAT period.

 

Penalty for late submission of VAT return:

There is €51 penalty in respect of each VAT return submitted late.

 

Penalty for late payment of VAT payable:

There is 10% penalty on the amount of tax due and interest at 4,5% from 1/1/2014, 4,75% for 2013, 5% for 2011 and 2012, 5,35% for 2010 and 8% for 2007 to 2009 per annum from the due date of payment until the actual date of payment. The interest is calculated per days.

 New legislation which came into effect from 26 July 2013 with the purpose to provide financial assistance to the taxable persons that have been affected from the bank resolutions measures states the following:

1. There will be no imposition of additional tax and interest for the late payment of VAT by a taxable person, for the periods ending on 28 February, 31 March, 30 April and 31 May 2013 if the taxable person settles the payable VAT and submit all the relevant VAT Returns up to 10 December 2013.

2. The additional tax imposed for the late payment of VAT by a taxable person, is reduced from 10% to 5%, for the VAT periods ending on 30 June, 31 July, 31 August and 30 September 2013 if the taxable person settles the payable VAT and submit all the relevant VAT Returns up to 10 December 2013. The interest will be imposed as normal.

 

 Interest on VAT refunds:

 As from 19 February 2013 taxpayers are entitled to interest on the VAT refund claimed in case the refund is paid by the VAT Authorities later than four months from the date of the submission of the claim of the VAT refund.

 In case the VAT Authorities carry an investigation in the relevant claim of the VAT refund taxpayers will be entitled to interest on the refund if it is paid later than eight months from the date of the submission of the claim. The four months are extended by another four months.

 

 VAT 5% on the acquisition or construction of primary and permanent residence:

 The reduced rate of VAT 5% applies to agreements as from 1 October 2011 provided they relate to the acquisition or construction of residences to be used as the primary and permanent place of residence for at least 10 years.

 A grant from the Ministry of Finance is obtained by eligible individuals for agreements concluded up to 30 September 2011 for the acquisition or construction of primary residence.

 The reduced rate of VAT 5% applies for the first 200 square meters of residences of total covered area of up to 275 square meters. In the case of families with more than 3 children the allowable total covered area increases by 15 square meters for each additional child.

 The reduced rate VAT 5% applies only after obtaining a certified confirmation from the VAT Commissioner.

 Eligible individuals must submit an application which will state that the house will be used as the primary and permanent place of residence. The applicant must attach a number of documents supporting the ownership rights on the property and evidencing the fact that the property will be used as the primary and permanent place of residence.

 The application for the construction of a residence should be made at any time during the construction.

 The application for the purchase of a residence should be made before the transfer of the property.

 As from 8 June 2012 eligible persons include residents of non EU Member States, provided that the residence will be used as their primary and permanent place of residence in Cyprus.

 

Services

Our VAT department provides:

  • Registration of businesses (companies, group of companies, partnerships and self-employed individuals) with the VAT Authorities
  • Transfers between businesses as going concern
  • VAT returns preparation and submission
  • Applications for VAT refunds
  •  Advice on any VAT issues arising from business transactions and on VAT exposures
  • VAT planning and VAT saving opportunities
  • Assistance on VAT investigations
  • VAT rulings
  • VAT due diligence reports
  • Registration of businesses (companies, group of companies, partnerships and self-employed individuals) with the VAT Authorities for VIES and Intrastat
  • VIES returns preparation and submission
  • Intrastat returns preparation and submission
  • Deregistration of businesses (companies, group of companies, partnerships and self-employed individuals) with the VAT Authorities
  • Deregistration of businesses (companies, group of companies, partnerships and self-employed individuals) with the VAT Authorities for VIES and Intrastat
  • Assistance to individuals to apply for the reduced rate (5%) VAT on the acquisition or construction of house