CYPRUS VAT
08 03 2011
Cyprus VAT-General Information:
Cyprus VAT is charged on every taxable supply of goods or services. That is on every supply of goods or services made within the Republic, by a taxable person, in the course or furtherance of any business carried on by him, other than a supply exempted in accordance with the provisions of the Law. Additionally, Cyprus VAT is charged on the importation of goods into the Republic.
VAT is an indirect form of taxation intended to burden consumption expenditure. It is an indirect tax because the trader / taxable person acts as an agent of the VAT Service, collecting Cyprus VAT from customers / consumers on its behalf and returning the tax to the Republic.
Cyprus VAT is imposed on supplies and collected at every stage of the production, transportation and distribution of goods and services.
Taxable person Cyprus VAT Tax chargeable on any supply of goods or services is a liability of the person making the supply. Taxable person is every person, natural or legal, resident in the Republic or abroad, who carries on a business and has registered as such in the Cyprus VAT Register or he is liable to be registered according to the provisions of Cyprus VAT legislation. The term “business” has a very broad sense and means any economic activity carried out in an independent way regardless of the purpose or results of such activity. The term “business” includes any trade, profession or vocation.
Employees or other natural persons who are bound to any employer by a contract of employment or by other legal relation, which creates relationship of employer and employee, are not considered to be carrying out an economic activity and therefore they are not considered as taxable persons.
In addition the Cyprus VAT legislation provides that Governmental Authorities, Local Authorities and Public Authorities are not deemed to be taxable persons for the supplies of goods or services made by them in carrying out their mission. There are, however, certain supplies explicitly defined in the legislation, for which the aforementioned persons are considered taxable persons.
The supplies of goods or services made by a person who is not considered as taxable, are not VAT chargeable. On the other hand when this person buys goods or services, he is charged with VAT as if he was the final consumer.
Supplies of goods and services Cyprus VAT is charged on every taxable supply of goods or services, that is on every supply of goods or services made within the Republic, by a taxable person in the course or furtherance of any business carried on by him.
As a general rule a supply of goods or services is considered to be taxable if made for consideration. Nevertheless, the Law provides that specific supplies are considered to be taxable even if made for no consideration.
The supply of any goods is treated as made in the Republic if the goods are in the Republic. The supply of any services is treated as made in the Republic if the person supplying them is in the Republic.
As an exception, the Cyprus VAT legislation provides that the supply of certain services should be treated as taxable even if made by a person who is in another country and received by a person who registered in the Republic.
Place and time of supplies of goods and services
The supply of any goods is treated as made in the Republic if the goods are in the Republic. The supply of any services is treated as made in the Republic if the person supplying them is in the Republic.
As an exception, the legislation provides that the supply of certain services should be treated as taxable even if made by a person who is in another country and received by a registered person who is in the Republic.
A supply of goods is treated as taking place at the time of the removal of the goods or at the time when the goods are made available to the person to whom they are supplied. A supply of services is treated as taking place at the time when the services are performed.
As an exception to the above, if an invoice is issued or a payment is received before or an invoice is issued within 14 days after the removal of the goods and the performance of services, the supply of goods or services is treated as taking place at the time the invoice is issued or the payment is received.
Cyprus VAT Rates Standard rate 15%
VAT is charged on every supply of goods or services at the standard rate of fifteen per cent (15%).
Reduced rate of 5%
The reduced rate of 5% is imposed on the supply of coffins, services supplied by undertakers, services of writers, artists, on the supply of fertilizers, foodstuff for animal, live animals, seeds, non bottled water, newspapers, books, periodicals, certain products for persons with special need, ice cream, certain types of nuts (salted etc), transport of passengers and their accompanying luggage with urban and rural buses, the letting of camping sites and caravan parks, hair salon services, confectionary product, foods ,bottled water, Juices, medicines, pharmaceutical products, entry fees to theaters, cinemas at sports events, luna parks and similar cultural events.
Reduced rate of 8%
The following are taxable at the reduced VAT rate of 8%: transport of passengers and their accompanying luggage within Services of restaurants and the supply of food in the course of catering. Provision of accommodation in the hotel sector or in sectors with a similar character. The transport of passengers and their accompanying luggage by sea, within
Zero VAT rate
Certain supplies of goods or services are zero-rated; the supply, hiring and repair of sea-going vessels and aircrafts, the supply of services to meet the direct needs of sea-going vessels. In addition, a supply of goods is zero-rated if the VAT Commissioner is satisfied that the goods have been exported or supplied to a registered person in another member state.
No Cyprus VAT is charged on supplies of goods or services which are exempted under the VAT legislation; leasing or letting of immovable property, the supply of immovable property with the exception of buildings or parts of buildings and the land on which they stand if the application for a building permit was submitted after the 1st May, 2004, financial services, lotteries, medical care, social welfare, education, sports, cultural services, insurance Transactions etc.
Importation of goods.
Cyprus VAT is charged on all imported goods regardless of the importer being a taxable person or not.
In the importation of goods of goods. Cyprus VAT is considered to be an imports duty and is charged as if it were a duty of Customs. In certain cases, the importation of services, that is the supply of services from abroad to
Customs Enactments are applied on imported goods with such exceptions or adaptations as regulated by the Cyprus VAT legislation.
Tax returns, tax payment and credit
Every taxable person is liable to submit Tax Declarations and pay the tax that may be due, usually every three months. Tax declarations relate to certain tax periods that are made known to the taxable person at the stage of his registration. On the tax declarations, taxable persons calculate their output tax (the tax on supplies of goods or services they made during the relevant tax period and the Cyprus VAT calculated on the acquisition of goods from other member States)
Foreign enterprises doing business in Cyprus
If a trader is not resident in the Republic – in the case of a natural person or the legal person is based abroad – carries out a business in Cyprus and is liable or entitled to registration in the VAT Register of the Republic, the Cyprus VAT officer may appoint a person who is resident in the Republic and is recommended by the trader, to act on behalf of the trader for Cyprus VAT matters (a VAT representative) or require security for the protection of public revenue.
It should be noted that for persons resident in another member state or legal persons incorporated in another member state, there is no obligation to appoint a Cyprus Vat representative.
Zero rating of intra-community supplies
Prior to 1st May 2004 (accession of
- The customer is registered for VAT in the other MS,
- The customer’s VAT registration number is obtained and retained in the supplier’s records ,
- This number, together with the supplier’s VAT registration number is quoted on the sales invoice,
- The goods are dispatched and transported to the other MS,
- The supplier retains appropriate commercial documentary evidence that the goods have been removed from Cyprus,
- The supplier submits the Recapitulative Statements to the VAT Service.
The VIES system
VIES (VAT Information Exchange System) contributes to the effectiveness of this new VAT regime and provides a mechanism for preventing and deterring of the abuse of the VAT zero-rating provisions on intra-community trade of goods and detecting unreported movements of zero-rated goods between MS. An integral part of the system is a requirement that each MS must store and process specific information which it collects from its traders about their supplies to other MS. Obligations of traders under VIES Under the EU and the national legislation regulating VIES, any VAT-registered person who supplies goods to a VAT-registered person in another MS has to submit the Recapitulative Statement declaring all the intra-community supplies made during a calendar quarter. The Statement must be submitted to the VAT Service until the 15th day of month following the month to which the statement relates.
INTRASTAT
Purpose of the INTRASTAT system Obligations of traders under INTRASTAT As from May 1st 2004, each VAT-registered person who supplies goods to or/ and receives goods from other member states (the value of which is exceeding the statistical threshold), is obliged to submit the INTRASTAT return for arrivals as well as dispatches to the VAT Service each month. The return must be submitted to the VAT service until the tenth day immediately following the end of the month to which the return relates.
In January 1993, frontier controls on the movement of goods between EU member states were abolished and importers and exporters in EU trade no longer were required to complete customs documentation. Therefore, in order to fill the gap that was created concerning the collection of statistics information, the EU introduced a system known as INTRASTAT. The system was designed to ensure that statistics of internal EU trade could be collected in a way which would maintain the quality of the statistics and the timeliness of their collection.
The system places obligation on traders to submit periodic declarations of their trade. The INTRASTAT returns are submitted to the VAT Service each month and concern arrivals from, as well as dispatches to other member states.
