Value Added Tax (VAT) In Cyprus

VAT is imposed on the supply of goods and provision 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 or services which they receive (input tax).
If output tax in a VAT period exceeds total input tax, a payment has to be made to the state. If input tax exceeds output tax, the excess input tax is carried forward as a credit and set off against future output VAT. 

Immediate refund of excess input VAT can be obtained in the following cases:

• a period of three years has elapsed from the date the VAT became

  refundable (reduced to two years as from 1/1/2014, one year as from

  1/1/2015 and eight months as from 1/1/2016)

• 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 zero rated transactions

• the input VAT relates to the purchase of 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

  within Cyprus

• 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 acquisition of goods (with the exception of goods subject to excise duty) the trader does not pay VAT on receipt of the goods in Cyprus but instead accounts for VAT using the acquisition accounting method. This involves a simple accounting entry in the books 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.

• As from 1 January 2010 significant changes came into effect in the EU and Cyprus VAT legislation in the following areas:

• Changes in the country of taxation of services provided between businesses established in two different EU Member States (B2B)

• Changes in the country of taxation of services, supplied to consumers (B2C)

• Procedure for refund of VAT paid in another Member State

• Additional compliance obligation for electronic submission of the monthly VIES return for services subject to VAT in another EU Member State through the reverse charge provisions

• In addition to the above, as from 1 January 2011 changes came into effect in the EU and Cypriot VAT legislation with regards to the country

• of taxation of cultural, artistic, sporting, scientific, educational, entertainment and similar services including services of organisers of such activities, supplied between businesses (B2B).

• Up to 31 December 2010 the above services, were subject to VAT in the country where those activities were physically carried out.

• As from 1 January 2011, only admission to such activities is subject to VAT in the country where the activities are physically carried out. Services, other than the admission to such events, are subject to VAT in the country where the recipient of the services has established his business.

• As from 1 January 2013 the long-term hiring of means of transport to non- taxable persons (i.e. to individuals or legal persons who are not engaged in business activities) is subject to VAT at the place where the customer is established or has his permanent address or usually resides.

• However, in case the hiring refers to the hiring of a pleasure boats, the place of taxation for VAT purposes is the place where the pleasure boat

• is actually put at the disposal of the customer, so long as the service is provided by the supplier from his place of business or from his fixed establishment situated at the place where the pleasure boat is actually put at the disposal of the customer.

• Up to 31 December 2012 the above services were subject to VAT at the place where the service provider has established his business.