';
side-area-logo

© ServPRO 2011-2023 | All Rights Reserved | Policies

INDIRECT TAX (VAT)

Value Added Tax (VAT) in the Republic of Cyprus

In the Republic of Cyprus, Value Added Tax (VAT) is the equivalent of a direct sales tax imposed on all taxable goods and services provided within Cyprus, as well as intra-community acquisition of goods or provision of services from other European Union (EU) member states, and importation of goods from third countries. The Value Added Tax (VAT) Law of 2000 (L.95(I)/2000), as amended, incorporates, with certain exceptions, the respective EU Directives for VAT.

VAT is applied on every stage of the production cycle of goods and the provision of services.

“Output VAT” is the VAT charged by taxable persons on their supply of goods and provision of services, while “Input VAT” is the VAT charged to taxable persons for goods and services received. The difference between the two VAT amounts is either paid to the VAT authorities (Output VAT > Input VAT) or credited to the taxable persons (Output VAT < Input VAT). A VAT credit is carried forward to be set off against future VAT obligations. In certain cases, credited VAT is refunded to the taxable person.

VAT Rates
  • Zero percent rate (0%)
  • Reduced rate of five percent (5%)
  • Reduced rate of nine percent (9%)
  • Standard rate of nineteen percent (19%)
Zero percent (0%) rate is mainly applied to the following:
  • Services related to the import of goods in Cyprus from third countries when their value is included in the total taxable value of the imported goods.
  • Services related to works carried out on movable goods that are temporarily imported in an EU Member State for the provision of the said services and are subsequently exported to a third country.
  • Supplies, modifications, repairs, maintenance works, chartering and leasing of ships which are either used in open sea navigation for the transport of fare paying passengers, or which are used to carry out commercial, industrial, fishing or salvage activities.
  • Supplies, modifications, repairs, maintenance works, chartering and leasing of aircrafts operated by airline companies carrying fare paying passengers on international routes.
  • Services related to either the direct needs of ships and aircrafts covered in the preceding two bullet points, or to their passengers (as long as the services provided are under the direct agreement between the supplier and the ship / aircraft company). Services to the above-mentioned vessels for storing and/or servicing their cargo is also included in this VAT rate category.
  • Transport of goods from an EU Member State to a third country.
  • Supply of gold to the Central Bank of Cyprus.
  • Supplies to non-profit organisations, which are subsequently exported to third countries for the organisations’ humanitarian and educational activities in the third countries.
Five percent (5%) reduced rate is mainly applied to the following:
  • Supplies of pesticides used for agricultural activities and certain types of fertilisers per EU Directives;
  • Supply of animal foodstuff;
  • Supply of water;
  • Supply of books, newspapers, leaflets, magazines, and so forth;
  • Supply of goods used by disabled persons such as wheelchairs, Braille typewriters, crutches, splints, and so forth;
  • Supply of food and drinks, excluding alcoholic beverages and carbonated soft drinks;
  • Supply of LPG in cylinders;
  • Supply of pharmaceuticals and vaccines that are used for medical care and for the prevention of illnesses;
  • Supply of art objects by galleries or directly by the artist such as paintings, sculptures, and so forth;
  • Services related to road cleaning, garbage collection and processing, excluding such services provided by municipalities and Government departments;
  • Services by artists, writers, composers, and the intellectual rights on their product;
  • Transportation by city and rural buses;
  • Entrance fees to shows, museums, amusement parks, movies, concerts, and so forth;
  • Entrance fees to sporting events as well as rights of use of sporting venues;
  • Repairs and maintenance on private houses carried out at least three (3) years from first residence (see VAT on immovable property);
  • School canteen food-related activities; and
  • Acquisition or construction of private homes under certain circumstances (see VAT on immovable property).
Nine percent (9%) reduced rate is mainly applied to the following:
  • Transportation of passengers and their luggage by taxis, tourist buses or intercity buses;
  • Services and supply of goods by nursing homes, which are not exempt transactions;
  • Restaurant services provided in a restaurant as well as catering services, including alcoholic beverages and soft drinks (delivery services of food are excluded from the aforesaid services);
  • Domestic transportation by sea of passengers and their accompanying luggage; and
  • Hotel accommodation services including all-inclusive services.
Nineteen percent (19%) standard rate

The standard rate applies to the supply of all goods and services in Cyprus which are not subject to zero percent (0%) rate, reduced rates, or are not exempt.

As of October 2020, taxable persons who purchase the following goods for business purposes must account for VAT in Cyprus based on the reverse charge provisions as per VAT Law of 2000 (L.95(I)/2000), as amended:

  • Zero percent rate (0%)
  • Integrated circuit mechanisms, such as microprocessors and central processing units, prior to their integration into end-user products; and
  • Game consoles, computer tablets and laptops.

The supplier must therefore not charge the customer VAT on their invoice, while also including the VAT number of the customer on the invoice.

Exemptions from VAT include mainly the following:
  • Postal services provided by the Cyprus’ national post authority;
  • Hospital and medical care services, including services provided by dentists, chiropractors, physiotherapists, psychologists, and so forth;
  • Supply of human organs, blood, and human milk;
  • Supply of services by dental technicians;
  • Supplies and services directly related to social welfare, including homes for the elderly that are provided by non-profit organisations;
  • Supplies and services directly related to child and youth protection that are provided by non-profit organisations;
  • Education services, including professional training provided by public and approved private schools, including certain private lessons by educators;
  • Supplies and provision of services by non-profit cultural, religious, sports and other related organisations;
  • Insurance and counter insurance and their related services;
  • Most financial and banking services;
  • Lottery tickets, betting on football games and racehorses, and other approved gambling games;
  • Import of gold by the Central Bank of Cyprus;
  • Supplies of second-hand buildings and leasing of buildings used as a private residence (see VAT on immovable property)
Difference between exempt supplies and zero rate supplies

The significant difference between exempt and zero percent (0%) rate supplies is that businesses or individuals that make exempt supplies are not entitled to recover Input VAT paid on their costs and expenses. If a company makes both exempt and vatable supplies (under any other rate), the company can recover the VAT on a pro-rata basis based on a ratio of the respective revenue earned from the vatable supplies to its total revenue.

VAT Registration

A business is obligated to register to the VAT Register at the Tax Department if any one of the following is applicable:

  • In the previous twelve (12) months ending with the current month it has total turnover subject to VAT higher than €15,600.
  • At any point in time, if its forecasted turnover subject to VAT for the next thirty (30) days is expected to be higher than €15,600.
  • At any point in time, if it forecasts that the value of goods acquired from other EU Member States in higher than €10,251.61.
  • It acquires goods from other EU Member States whose value within a calendar year is higher than €10,251.61.
  • It provides services subject to VAT of any value to a business registered for VAT in another EU Member State.
  • Distance supplies from another EU Member State to Cyprus-based consumers whose value within a calendar year is greater than €35,000. The supplier has to register and report for VAT for all supplies within a calendar year in excess of the threshold of €35,000.

Any business below the above-mentioned thresholds can voluntarily register to the VAT Register.

Taxable Person

Tax chargeable on any supply of goods or provision of services is a liability of the person making the supply or providing the service. 

A “taxable person” is every person, private individual or legal, resident in the Republic of Cyprus or abroad, who carries on a business and has registered as such in the VAT Register or is liable to be registered in accordance with the provisions of the VAT legislation.

The term “business” has a very broad definition 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 another legal relation, which gives rise to an employer-employee relationship, are not considered to be carrying out an economic activity and therefore, they are not considered to be taxable persons.

In addition, the 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 authorities are considered taxable persons.

The supply of goods or the provision of services made by a person who is not considered to be a taxable person, are not VAT chargeable. On the other hand, when this person buys goods or services, he is charged with VAT as if he were the final consumer. 

VAT Returns, Payments & Refunds

VAT returns are submitted electronically (as of May 2017) either quarterly, which is the norm, or for a different period which was either requested by the registered business or required by the Commissioner of Taxation.

Payment of any VAT due must be made by the (tenth) 10th day of the second month following the end of the respective VAT period (i.e., for a VAT period ending 31/03/2021, VAT due must be paid by 10/05/2021 the latest).

Payment of the VAT due may be made at the cashier’s desk of any commercial bank, via direct bank transfer to the Central Bank of Cyprus as well as via the ‘’Internet Banking’’ platform of selected banking institution.

For VAT refunds a claim must be submitted electronically to the competent authorities by completing the Form 4B via the TAXISnet system.

The registered business requesting a VAT refund is entitled to interest if the VAT authorities delay paying the refund for more than four (4) months from the claim submission date. Note that the four (4) months period is extended to eight (8) months if the Tax Commissioner has decided to investigate the submitted claim through an audit of the registered business.

VAT refunds are made via bank transfer – in order to obtain the refund, the entity should complete and submit the Form T.D. 1900 to the relevant District VAT Office along with an IBAN certificate or other equivalent documentation issued by the bank showing the entity’s bank details.

VAT refunds will be suspended where income tax returns have not been submitted by the submission date of the VAT refund claim. In addition, no interest will be payable on a VAT refund for the period during which the refund is suspended. Finally, VAT refund applications cannot be submitted after six (6) years from the end of the relevant tax period.

Intra-Community Trading & Services

Entities that undertake intra-Community transactions, such as acquisitions and sales of goods and provision of services from/to EU Member States need to complete and submit the following forms:

  • VAT return
  • Recapitulative statement for supplies of goods and services (VIES form)
  • INTRASTAT – Arrivals of Goods
  • INTRASTAT – Departures of Goods
Obligations of Traders under INTRASTAT

As from 1 May 2004, each VAT-registered person who supplies goods to and/or receives goods from other Member States (the value of which exceeds the statistical threshold), is obligated to submit the INTRASTAT return for arrivals as well as dispatches to the Tax Department each month via TAXISnet. A trader may appoint an agent to make and submit the INTRASTAT return on his behalf. 

According to the applicable EU legislation, the Government of the Republic of Cyprus defines each year thresholds expressed in annual values of intra-Community trade, below which parties are exempted from providing any INTRASTAT information. The thresholds are defined separately for arrivals and dispatches and they may change each year.

The INTRASTAT return must be submitted to the Tax Department until the tenth (10th) day immediately following the end of the month to which the return relates.

Penalties and Interests

Late Registration

€85 for every month of delay
Late Submission of VAT returns
€100 for each return
Late Payment of VAT
10% of amount due plus interest
Late De-Registration
€85 one-off
Late Submission of INTRASTAT Returns

€15 for each return (non-compliance that continues after the thirty (30) working days constitutes a criminal offence and a convicted person may incur an additional fine of up to two thousand five hundred sixty-two euro (€2,562)).

Late Submission of VIES Returns

€50 for each statement
Failure to Comply with the Reverse Charge Provisions for Transactions Falling under Sections 11, 11A-11E and 12A of the VAT Law of 2000 (L.95(I)/2000), as amended (applies from 1st July 2021)
€200 for each VAT return (the total penalty should not exceed €4,000)
VAT on Immovable Property

VAT at the standard rate of 19% is applied on the following types of immovable property transactions:

  • Supply or transfer of buildings or parts of buildings, including the land on which they have been erected, before they are used for the first time. This provision includes all types of buildings (residential, industrial and commercial).
  • As of 2 January 2018, supply or transfer of undeveloped buildable land from a person or business in the course of carrying out an economic activity. Land in agricultural, archaeological, and environment protection areas is not included in the vatable land.
  • “undeveloped buildable land” includes all land plots under development, with or without title, and land plots intended to be developed in the future.
  • “economic activity” is determined based on the frequency and continuation of the activity as well as on other measurable parameters. Once off supply of a plot of land with no indication of subsequent continuation of the said activity is not considered to be an economic activity for VAT purposes.
  • VAT is not applicable to undeveloped buildable land, which was either transferred before 2 January 2018 or for which a sales agreement was deposited at the Land Registry Department before 2 January 2018.
  • As of 13 November 2017, leasing of immovable property to a lessee who is subject to VAT and intends to use the leased property for carrying out their vatable activities.
  • The owner of the property (lessor) can opt to be exempted from the obligation to charge VAT on the lease of the property by informing the Tax Commissioner accordingly. The option to be exempted from VAT is irrevocable, except when the property is transferred to a new owner, in which case the new owner has the option to either charge VAT on the lease amount or opt to be exempted from VAT.
  • VAT is chargeable on new leases or renewed lease agreements with significant changes from the previous agreements signed on or after 13 November 2017.
  • The lease is considered subject to VAT if at least 90% of the lessee’s turnover is subject to VAT.
  • The owner of the property may claim a VAT refund on all VAT expenses related to the leased property that have occurred on or after 13 November 2017, including construction costs, repairs, maintenance, and so forth.
  • For properties that have been constructed before 13 November 2017, and for which a new lease agreement has been signed on or after 13 November 2017, provided that construction occurred less than ten (10) years from 13 November 2017, the owner may claim VAT paid on construction costs pro-rata for the remaining years of the 10-year period after 13 November 2017. For example, if a property’s construction was completed in 2012, VAT on construction costs can be claimed for the remaining five (5) years (2018-2022 – 5/10 of total VAT paid on construction costs).
  • Leasing of residential properties is exempt from VAT.
  • As at 1 January 2019, the long-term leasing of immovable property which transferred the right of disposal of the property from the owner to the lessee is subject to the standard rate of 19% or 5% if applicable. The said applies in cases where the immovable property is new. The effective transfer of the right to dispose of immovable property is further described by the Tax Authorities and does not include only the persons who are covered by the principal of free ownership but also circumstances where the person has similar rights to free ownership rights.
  • Transfer of property as part of the restructuring of a loan or a forced sale, in which case the recipient of the property must account for VAT using the reverse charge method and pay the resulting VAT to the respective VAT Authority.

It is to be noted that the rental of property not intended for vatable activities is exempt from the 19% VAT rate.

VAT at the reduced rate of 5% is applied on the following types of immovable property transactions:

  • Construction or sale of immovable property before its first use to an eligible individual intending to use it as a principal and permanent residence in Cyprus for the next ten (10) years.
  • Application with a number of different supporting documents must be filed to the Tax Commissioner who issues the relevant certificate approving the application of the reduced VAT rate.
  • Reduced VAT rate is applicable on the first 200 square meters of the property. VAT at the standard rate is charged pro-rata to the remaining squares meters based on the property’s building coefficient. For large families, the above threshold of 200 square meters is increased by 15 square meters for each additional child after the third child (e.g., a family with 5 children will be entitled to a reduced VAT on the first 230 square meters).
  • The right to request application of the reduced rate on a new property acquisition can be used again once the 10-year permanent residency period has elapsed.
  • A person has the right to apply for reduced VAT on a new property before the 10-year period has elapsed, provided he/she has ceased to use as permanent residence the existing property, and he/she pays the difference between the standard VAT and the reduced VAT applicable at the time of the acquisition of the previous property.
  • If a person ceases to use a property as their primary and permanent residence before the 10-year period has elapsed, the Tax Commissioner must be notified and VAT must be paid on the difference between the standard rate and the reduced rate for the period the property is not used as a primary and permanent residence.
  • Building works, repairs, and maintenance of private residences carried out by plumbers, carpenters, electricians, painters, and contractors. If the value of materials supplied is higher than 50% of the total value of the works performed, the supply of materials is charged at the standard VAT rate of 19%.
Our Tax Practice Portfolio

Our Tax Department has been thriving for over a decade, with our clients seeking our professionals’ advice and assistance in all aspects relating to taxation for corporates as well as individuals, in line with the latest local and international tax developments.

Our clients entrust us with the structuring of their operations in a way that incorporates the applicable tax incentives and ensures their compliance with any and all of their tax obligations and filing of their tax returns. The exceptional quality of our tax professionals is the reason why our clients select us to be their entrusted tax partners.

Contact us today for an initial, complimentary consultation.

LET’S WORK

TOGETHER.

Image icon
T: +357 22 021100
F: +357 22 757566
Image icon
[email protected]
Image icon
1 Kinyras Street, Kinyras Tower,
3rd Floor, 1102 Nicosia, Cyprus
Image icon
servpro.com.cy

excellence
redefined.

© ServPRO 2011-2023. All Rights Reserved. Policies
Name*
Untitled*
logo