Value Added Tax is a tax charged on every taxable supply, by a taxable person, of goods and services within the Republic, other than an exempted supply. It is also charged on goods acquired in Cyprus from other EU countries and on goods imported from outside the EU.
VAT is an indirect taxation which is applied by the VAT registered business acting as agent of the VAT authority by adding VAT to the full sale price of the taxable goods and services they provide.
Which Businesses Need to Register?
A person (natural or legal) who is making supplies that are taxable must register under certain circumstances, the most important of which are listed below:
- At the end of any month his taxable supplies for the past 12 months exceed €15.600; or
- At any point of time his taxable supplies in the next 30 days are expected to exceed €15.600; or
- A business provides services to a business registered in another EU member state; or
- A person makes acquisitions in Cyprus if at the end of any month the total value of his acquisitions in any EU state exceed €10.251.61; or
- A person has reasonable grounds to believe that the value of the acquisitions he will make in the next 30 days will be in excess of €10.251.61; or
- He makes distance sales and in the period commencing 1 January of the year the value of those distance sales exceeds €35.000; or
- A person acquires a company as a going concern.
Note that zero rated supplies are also liable to be registered and should be included in the total taxable supplies when calculating whether the thresholds are reached.
Furthermore, a person may voluntarily register if he makes taxable supplies that do not exceed the thresholds that would otherwise make him liable.
There are four bands of rate; the applicability of each is determined according to the goods and services that are being supplied:
Standard Rate – 17%
Higher Reduced Rate – 8%
Lower Reduced Rate – 5%
Zero Rate – 0%
Applying the Rates
Some examples of goods and services falling within the bands are as follows:
Standard Rate – 17%
Applies to all goods and services that are not classified as reduced rate or zero rate and are not exempt.
Reduced Rate – 8%
- Transport of passengers and their accompanying luggage within Cyprus, using urban, suburban and rural taxis and tour and suburban buses;
- Services of restaurants and supply of food in the course of catering;
- Provision of accommodation in hotel sector;
- Transport of passengers and accompanying luggage by sea.
Reduced Rate – 5%
- Hairdressing services;
- Animal feedstuff;
- Repair of private households;
- Supply of coffins and services of undertakers;
- Services of writers and artists;
- Non bottled water;
- Newspapers, books, periodicals;
- Letting of camping sites and caravan parks;
- Entry fees to theatres, cinemas and other events;
- Foodstuffs (other than those supplied in course of catering);
- Medicines and vaccinations for prevention of illness and treatment for medical and veterinary purposes;
- Equipment for use by the disabled.
Zero Rate – 0%
- Supply, hiring and repairing of sea going vessels and aircraft;
- Supply of services to meet direct needs of sea going vessels;
- Exports to non EU countries;
Exempt Goods and Services:
- Rental of immovable property;
- Banking and financial services (subject to exceptions);
- Postal services;
- Insurance services;
- Supply of immovable property where application for building permit was submitted before 1 May 2004.
When is it Paid?
Registered persons must submit a VAT return to the VAT Commissioner within 40 days from the end of each VAT period.
Penalties and interest are applied to late registrations and late payments.