Value Added Tax

VAT is imposed on all imports and on the sale of goods and provision of services in the Republic of Cyprus by a person who is, or should be, registered for VAT (a "taxable person"), in the course or furtherance of a business.

Mechanics of VAT

1. VAT is charged on taxable supplies of goods and services made (output tax) and is paid on purchases of goods and services received (input tax)

2. VAT returns showing the output tax and input tax must be submitted every three months, or monthly at the option of the taxable person

3. If the output tax is greater than the input tax, the difference must be paid within 40 days from the end of each VAT period

4. If the output tax is less than the input tax, the difference is refunded

Registration

Registration is compulsory for businesses with an annual turnover of taxable supplies in excess of CY£9,000 Businesses with a lower turnover have the option to register.

Goods or services exempt from VAT

These include :

1. Disposal of immovable property except of new buildings and the land transferred with them provided the licence to erect such buildings was submitted to the Authorities after  May 1, 2004.

2. Rents

3. Banking and financial services

4. Insurance

5. Health (Specific industries)

6. Education (Recognized by Ministry of Education)

VAT tax rates

The VAT legislation provides for the following three tax rates

1. Zero rate (0%)

2. Reduced rate (5%)

3. Catering rate (8%)

4. Standard rate (15%)

Zero-rated taxable supplies (0%)

1. exports

2. foodstuff, except in the course of catering medicines

3. commissions received from abroad relating to exports of goods

Reduced rate taxable supplies (5%)

1. coffins and funeral services

2. road cleaning garbage collection and recycling services by writers, composers and artists, as well as the royalties received by them

3. newspapers, magazines, books

4. Public transport.

5. agricultural medicines and fertilizers

6. renting of camping and caravan space

7. Water supply

8. Dry nuts

9. Ice cream, salted cereals except those intended to be consumed with milk for breakfast.

Catering rate (8%)

1. catering industry (excluding alcoholic drinks)

2. goods and accommodation services in the hotel industry

3. taxi services

4. tourist buss transportation

Irrecoverable input tax

For certain supplies of goods and services, input VAT is irrecoverable these include

1. purchase or import of saloon cars

2. business entertainment expenses (except those relating to employees)

3. goods acquired in accordance with the sale of second-hand goods scheme

4. accommodation, food, drink and travelling expenses of staff and business representatives

5. purchases which directly relate to the provision of exempt supplies, subject to restrictions

Summary of the official Site of the VAT Authorities of Cyprus

http://www.mof.gov.cy/mof/customs/VAT.nsf/Main?OpenFrameSet

1.1  Cyprus Citizens

Cypriot Citizens - General Information about VAT

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, 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 VAT from customers / consumers on its behalf and returning the tax to the Republic.

VAT is imposed on supplies and collected at every stage of the production, transportation and distribution of goods and services.

1.2  Cypriot Citizens - VAT Rates

  VAT is charged on every supply of goods or services at the standard rate of fifteen per cent (15%) as from the 1st January 2003. The reduced rate of five per cent (5%) is imposed on the provision of accommodation in the hotel sector or in sectors with a similar character and on the supply of food in the course of catering, except the supply of alcoholic beverages, wine and beer, which is chargeable at 15%. In addition, the reduced rate of 5% is imposed on the supply of coffins, services supplied by undertakers, services of writers, artists etc.

Certain supplies of goods or services are zero-rated; the supply, hiring and repair of sea-going vessels and aircraft, the supply of services to meet the direct needs of sea-going vessels, the supply of goods entered into customs regime, the supply of medicines, newspapers, books and periodicals, children’s wear and footwear, food – except the supply of food in the course of catering. In addition, a supply of goods is zero-rated if the VAT Commissioner is satisfied that the goods have been exported.

No 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, financial services, lotteries, medical care, social welfare, education, sports, cultural services, insurance transactions etc.

1.3  Cypriot Citizens - Rights

Customers have the right to know whether the retailers are registered for VAT. Therefore retailers have to display their registration certificate. Otherwise, customers have the right to ask retailers to see the certificate.

Customers have the right to know, before any purchase, the selling price and to make sure that VAT is included. Therefore, goods for sale must bear a label with the selling price – including any amount of VAT - written on it. In relation to supplies of services, the fees (including any VAT amount) must be displayed at a visible place.

When customers purchase goods or services, they have the right to demand an invoice. Therefore, every person who supplies goods or services must issue an invoice (a credit invoice or a cash invoice or a receipt).

When a customer returns goods to the supplier, because for instance they were defective and if he is entitled to cash refund, the seller, if he is a registered person and thus charged VAT, must return the whole amount to the customer including the tax

1.4  Cypriot Citizens - Obligations

Every person who is concerned, in whatever capacity in the supply of goods or services in the course or furtherance of a business, is liable to furnish to the VAT Commissioner such information and produce for inspection any documents upon demand by the VAT Commissioner.

1.5  Cypriot Citizens - Personal Imports

  When goods are imported in the Republic, the applicable VAT rate is usually the same as the rate, which would be applied if those goods were supplied within the Republic. VAT must be paid to Customs at the time of the importation of goods

Visitors from abroad

2.1  Visitors from abroad - General Information about VAT

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, 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 VAT from customers / consumers on its behalf and returning the tax to the Republic.

 
VAT is imposed on supplies and collected at every stage of the production, transportation and distribution of goods and services.

Customers have the right to know whether the retailers are registered for VAT. Therefore retailers have to display their registration certificate. Otherwise, customers have the right to ask retailers to see the certificate.

Customers have the right to know, before any purchase, the selling price and to make sure that VAT is included. Therefore, goods for sale must bear a label with the selling price – including any amount of VAT - written on it. In relation to supplies of services, the fees (including any VAT amount) must be displayed at a visible place.

When customers purchase goods or services, they have the right to demand an invoice. Therefore, every person who supplies goods or services must issue an invoice (a credit invoice or a cash invoice or a receipt).

When a customer returns goods to the supplier, because for instance they were defective and if he is entitled to cash refund, the seller, if he is a registered person and thus charged VAT, must return the whole amount to the customer including the tax

2.2  Visitors from abroad - On Arrival / Entering Cyprus

  Temporary visitors are not obliged to pay any duties and VAT on arrival in Cyprus for the goods they bring with them for personal use, as provided by the Customs Legislation.

2.3  Visitors from abroad - Local purchases

  Visitors will have to pay VAT on most of the goods they purchase locally. If they purchase goods from retailers who operate the “Retail Export Scheme”, visitors can claim a VAT refund on some of the goods they intend to export from Cyprus. To be qualified to use the scheme visitors must not be owners of Cypriot passports, must have not resided in Cyprus for more than 365 days in the two years prior to the purchase date and must intend to leave Cyprus by the last day of the third month following the month in which the goods were purchased, carrying the goods in their hand luggage. The value of the goods must exceed £100 but must be below £10.000 per person and the goods should be put to personal or family use. During the purchase the shopkeeper, if he operates the scheme, will provide the visitor with a sales invoice issued under the scheme. The visitor must produce this invoice along with the goods to the Customs Authorities upon departure from Cyprus. The customs officer will certify the exportation of the goods and the visitor will have to post the certified invoice back to the shopkeeper or to a VAT refund company in order to receive the refund

2.4  Visitors from abroad - On Departure / Leaving Cyprus

If visitors, who purchased goods from shops that operate the “Retail Export Scheme”, wish to claim a VAT refund on some of the goods they intend to export from Cyprus they have to produce the invoice issued by the shopkeeper under the scheme along with the goods to the Customs Authorities, upon departure from Cyprus. The customs officer will certify the exportation of the goods and visitors will have to post the certified invoice back to the shopkeeper or to a VAT refund company in order to receive the refund.