Value Added Tax
Imposition of Value Added Tax
Value Added Tax (VAT) is imposed on goods and services sold or furnished in the Republic of Cyprus, as well as on importation of goods from non-European Countries and acquisitions of goods and services from the European Union member states.
It is compulsory for business to register with the V.A.T. department if they had an annual turnover of taxable supplies in excess of € 15.600 during the preceding 12 months or is expected to exceed the € 15.600 within the next 30 days.
Business with a lower turnover may elect to register at their discretion. However, if a business has only zero rated supplies and exceed the threshold € 15.600 it has to register for V.A.T. Business with exempt products and services only do not have the right to register even if their turnover exceeds the threshold.
An obligation for registration also arises for companies which make acquisitions of goods from other E U member states in excess of € 10.250 during any calendar year.
A taxable person from abroad makes distance sales with registration threshold of € 35.000
V A T declaration and consequences
VAT returns must be submitted quarterly and payment of any VAT must be made with 40 days after quarter has ended. Delay in payment will result with a 10% fine on the outstanding amount and 9% interest thereon.
Should in any quarter have any refundable VAT, this may be credited against future payments if your entity is classified in the special group of entities or you may apply for an immediate rebate.
As from 19 February 2013 every taxable person who makes a claim for VAT refund will be entitled to repayment of the VAT amount with interest (currently at 4,75% p.a.), in the event that the repayment is delayed for a period exceeding four months from the date of the submission of the claim.
In case a VAT audit regarding the claim is conducted by the VAT Commissioner, the time period of four months is extended to eight months.
Basic difference between Zero and Exempt supplies
Business entities that offer exempt rated supplies are not entitle to recover any input VAT paid on their purchases, imports, assets and expenses where as business entities that offer zero-rated supplies are allowed to recover the input VAT.
Irrecoverable VAT Input
As an exception to the general rule, input VAT cannot be recovered in a number of cases which include the following :
- Purchase or hire of a salon motor vehicle
- Non-employee entertainment or hospitality expenses
- Non-director entertainment or hospitality expenses
- Housing expenses for directors and their connected persons
- Acquisition used for making exempt supplies
- Goods acquired in accordance with the second-hand goods scheme
- Expenses which are not wholly and exclusively for the business
Imports and Exports
Imports and Exports to countries other than EU member states have the same treatment as prior to accession of Cyprus to the EU. In other words, exports are zero-rated and VAT input with the appropriate rate will be charged on importation of goods.
Intra Community Transactions
As of 1st May 2004, the terms and tax treatment applicable to imports and exports from / to EU ceased to be applicable. Instead, imports and exports are regarded as intra-community trade and its VAT treatment is outlined below :
- Intra-Community Supply
Goods that leave a member state (MS) with a destination in another MS are zero rated in the first MS provided that :
- There is an EU valid VAT number of the buyer and
- There is proof that the goods have left the first MS and
- Have entered another MS
- Intra-Community Acquisition
Goods acquired by a business entity in a member state (MS) from another MS are not subject to VAT upon arrival, but they will be subject to acquisition accounting (Reverse Charge Procedure) in purchases books as follows :
- The purchaser will self-charge VAT at the rate applicable to the goods in his state and at the same time claim back the full amount, thus creating no further costs to the business entity unless it relates to exempt supplies whereby the cost absorbed by the business entity.
- Triangulation Transactions
Triangulation transaction is where three parties are involved, where two supplies take place and one movement of goods. However, special rules are applicable to the aforesaid type of transaction
International Business Companies
The activities of most International Business Companies fall outside the scope of VAT, but they may opt for a voluntary registration if they satisfy the following criteria :
- Usual place of residence is the Republic
- There is a business establishment in the Republic
- Do not make or intend to make taxable supplies within the Republic
- Trading outside the Republic which would be taxable if traded within the Republic
|Exempt||Rents / Medical and dental care services / Insurance / Banking and Financial services / National postal services / Education / Sports / Lottery tickets, betting coupons for football and horse racing / Land / Used building / New building for which proper application for planning permission was filled prior to 1 May 2004|
|0||Supplies to VAT registered persons in other EU member states / Exports to non-EU countries / Food, except in the course of catering / Supply of medicines falling within CE tariff codes 30.03 and 30.04 / Supply of vaccines for medical and veterinary use falling within CE tariff code 30.02 / Commissions received from abroad for exportation of goods / Commissions received from abroad relating directly to the importations of goods from non-EU member states where the goods are placed under customs temporary regime, temporary storage, free zones, customs warehousing, etc. / International air and Sea transport|
|5||Supply of live animals for human consumption / Supply of animal feedings stuffs, seeds, fertilizers and insecticides / Transportation of persons on a rural or city bus and their luggage / Funeral services and supply of coffins / Road sweeping, garbage collection and recycling other than services supplied by state authorities, local authorities and public utility corporations / Services of authors, composers, artists and critics of work of art as well as the Royalties received by them.
– As From 01/05/2004
Books, newspapers and magazines / Gas in Cylinders / Non-bottled water / Ice cream, yogurt ice-cream and similar products / Salted or spicy products made from potato, cheese puffs and crisps, dry roasted or spicy nuts / Cereal and similar products packaged for human use.
– As From 01/01/2006
Renting of Camping space for caravans.
– As From 19/10/2007
Renovation or repair to dwelling older that three years old from its first use and the materials uses do not exceed 50% of the total cost / Hair salon services – (Men and Women) / Confectionery items, chocolates and biscuits which are partly or wholly covered with chocolate / Bottled water, juice drinks and manufactured beverages (those non included at the standard rate of VAT) / Food supplements, ingredients for preparation of foodstuff and foodstuffs / Syrups, flavoured or and coloured / Contraception products and Sanitary protection products for women / Repair services of medical equipment and equipment for disabled persons / Supplies of vaccines and medicines previously taxed at 15% / Medical equipment for exclusive use of disabled persons / Services of medical, dental and thermal treatment not exempt from VAT / Admissions to shows, circuses, fairs, amusements parks, concerts, museums, zoos, cinemas, exhibitions and cultural events, sports events and licenses for the use of sporting facilities / Children’s car seats
|9||– As from 01/08/2005
Rural, urban and suburban taxi transport services / Tour, excursive and suburban bus services
– As From 01/01/2006
Hotels, tourist and other similar establishments including provision of holiday accommodation / Restaurant services and similar catering services with the exception of alcoholic drinks / Supply of sea onshore passenger and luggage transport
|19||All supplies of goods or rendering of services except those taxed at 0% / 5% / 9% or exempt|
Since the establishment of V.A.T. legislation on the 1/7/1992 the changes for V.A.T. rates are shown in the table that follows:
|Dates / Periods||Standard Rate||Reduced Rate 1||Reduced Rate 2|
|01/07/1992 – 30/09/1993||5%||—||—|
|01/10/1993 – 30/06/2000||8%||—||—|
|01/07/2000 – 30/06/2002||10%||5%||—|
|01/07/2002 – 31/12/2002||13%||5%||—|
|01/01/2003 – 31/07/2005||15%||5%||—|
|01/08/2005 – 29/02/2012||15%||5%||8%|
|01/03/2012 – 13/01/2013||17%||5%||8%|
|14/01/2013 – 12/01/2014||18%||5%||8%|
|13/01/2014 – Today||19%||5%||9%|
The information contained in this Site has been written in general terms and therefore cannot be relied on to cover specific situations; application of the principles set out will depend upon the particular circumstances involved and we recommend that you obtain professional advice before acting or refraining from acting on any of the contents of this newsletter. PanAudit Konnaris Limited would be pleased to advise readers on how to apply the principles set out in this newsletter to their specific circumstances. PanAudit Konnaris Limited accepts no duty of care or liability for any loss occasioned to any person acting or refraining from action as a result of any material in this newsletter.
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