Value Added Tax (VAT)

Value Added Tax is imposed on the provision of goods and services in Cyprus as well as on the importation of goods into Cyprus.

Rates

The reduced rate of 5%applies to  the supply of foodstuff, the supply of prepared or unprepared foodstuff or/and beverages (excluding alcoholic drinks, beer, wine and soft drinks) or both, irrespective of whether the goods are delivered from the supplier to the customer or taken away by the customer, the supply of pharmaceutical products and vaccines that are used for health care, prevention of illnesses and as treatment for medical or veterinary purposes, the supply of animals used for the preparation of food, to books, newspapers and magazines, to entry fees to theaters, circus, festivals, luna parks, concerts, museums etc, to entry fees at sports events and fees for using athletic centers, to hairdressing services, to renovation and repair of private households after three years of first residence, acquisition or construction of house considered as first residence (under conditions) and to supply of catering services from school canteens.

Zero rate
Zero rated supplies include the exportation of goods, supply, modification, repair, maintenance,
chartering and hiring of sea-going vessels, which are used for navigation on the high seas and carrying passengers for reward or used for the purpose of commercial, industrial or other activities, supply, modification, repair, maintenance, chartering and hiring of aircrafts, used by airlines operating for reward mainly on international routes, supply of services to meet the direct needs of sea going vessels and aircrafts, transportation of passengers from the Republic to a place outside the Republic and vice versa using a seagoing vessel or aircraft, supplies of gold to the Central Bank of Cyprus and International passenger transportation within Cyprus.

Exemptions
Exempt supplies include rental of immovable property for residential purposes, financial services, hospital and medical services, postal services, insurance services, disposal of immovable property, and educational services (conditions apply).

Who is obliged to register
Every individual or company is obliged to register if:
(a) at the end of any month, if the value of taxable supplies recorded in the last 12 months exceeds €15.600 or
(b) at any point in time the value of taxable supplies are expected to exceed €15.600 in the next 30 days.
(c) provides services to a VAT registered person within European Union with nil registration threshold
(d) offers distant sales with registration threshold of  € 35.000
(e) is involved in the acquisition of goods from other EU member states and relates to persons who offer exempt supplies of goods and services or are non profitable organizations with registration threshold of €10.250
(f) offers zero rated supplies of goods or services
(g) acquires a business on a going concern basis.
(h) businesses carrying out economic activities, which receive services from abroad for which an obligation to account for Cyprus VAT under the reverse charge provision exists subject to the registration threshold of € 15.600 per any consecutive 12 month period.
(i) is established abroad and makes distance sales of goods to Cyprus (i.e., sales of goods to individuals in Cyprus from abroad) which exceed €10.000 and does not opt to make use of the simplified One Stop Shop (OSS) scheme
(j) is established in Cyprus and performs cross border sales of goods and certain services to individuals established in other EU Member States and the value of these sales exceeds €10.000.
(k) is engaged in taxable activities in Cyprus, but is not established in Cyprus, with nil registration threshold

Right of registration
Persons who trade, outside of Cyprus, in goods or services which would have been taxable if they were provided within Cyprus, group of companies and company divisions.

VAT returns, payment of VAT / VAT Refund
Any registered person must submit to the VAT Commissioner a VAT return within 40 days from the end of any tax period and pay the VAT due.
Where in a VAT period, VAT input is higher than VAT output; the difference can be refunded or transferred to the next VAT period.
As from 19/02/13, if the repayment of the VAT refundable amount delays for more than 4 months then the amount will be refunded together with interest* provided that the company is not under investigation from the VAT Authorities.

Administration of intra-community trading and intra-community services
Businesses that undertake intra-community trading, i.e. purchases and sales of goods and provision of
services from/to EU member states need to complete the following forms:

Intra-Community Acquisitions
1. Intrastat - Arrivals of Goods
2. Inclusion in the VAT return (on a total basis)

Intra-Community Supplies
1. Intrastat - Departures of goods
2. Recapitulative statement for supplies of goods and services (VIES form)
3. Inclusion in the VAT return on a total basis.

Time of Submission
INTRASTAT forms are submitted to the VAT authorities by the 10th day which follows the end of the related month in an electronic form only.

The Recapitulative statement is submitted to the VAT authorities within 15 days from the end of the related month in an electronic form only.

Penalties and interest

* Omission to submit or pay the VAT on time constitutes a criminal offence with up to € 8.550 penalty or 5 years imprisonment or both.
The interest rate applicable to each year is available in the Cyprus Tax Department’s webpage.
** Omission to submit the VIES on time constitutes a criminal offence with up to € 850 penalty.

Tax Tribunal/Appeals
Taxable persons can submit a hierarchical appeal to the Tax Tribunal. The hierarchical appeal should be filed within 45 days (or more, subject to the approval of the Tax Tribunal) from the date of the notification to the taxable person of the relevant decision or act of the Commissioner.

Appeals may also be made to the Tax Commissioner within 60 days from the date of issue of the tax assessment.