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.