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VAT in Cyprus

Updated on Friday 10th July 2020

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The Cypriot taxation system is made of direct and indirect taxes with the value added tax (VAT) being an indirect tax. The value added tax is a levy levied on companies selling goods and services, but it is applied to the final consumer, which is the client.
Cyprus introduced the VAT system in 1992 and ever since the rates applicable under this tax have changed several times, the last alteration taking place in 2014.
 
Below, our company formation agents in Cyprus explain how the VAT is applied and the rates it is levied on for different goods and services.
If you need assistance in company formation, including for tax and VAT registration in Cyprus, our consultants are at your disposal with complete services.
 

Who is required to register for VAT in Cyprus?
 

Apart from the annual turnover requirements, it is important to note that the VAT registration requirements for Cyprus individuals and companies becomes mandatory under specific circumstances.
 
The following categories of taxpayers are required to register for VAT in Cyprus:
  • - individuals – natural persons involved in the supply of goods and services chargeable for VAT;
  • - limited liability companies and partnerships, as well as other business form acknowledged by the Cyprus Company Law;
  • - clubs, foundations, unions and other entities registered under the provisions of the Cyprus Civil Code;
  • - international companies operating through subsidiaries and branches, as well as groups of companies.
VAT registration in Cyprus becomes mandatory once the 15,600 euros threshold is exceeded, no matter if the applicant for a VAT number is a natural person or a company.
 
If you want to open a company in Cyprus and need assistance in registering it, including for VAT purposes, our local advisors are at your disposal for guidance.
 
We invite you to read about VAT registration in Cyprus in the scheme below:
 
VAT Registration in Cyprus
 

Cyprus VAT number format
 

Cypriot companies applying for VAT registration will be issued numbers with the format of the country code CY followed by a 9-digit number which ends with a letter. The VAT number is important because based on it, companies can also obtain EORI numbers which will facilitate their trading activities on the EU territory.
 
If you decide to open a company in Cyprus and need assistance in registering for VAT or obtaining an EORI number, we can assist you.
 

How is the VAT levied in Cyprus?
 

The following categories of taxpayers must register and pay the VAT in Cyprus:
  • sole traders and companies producing and selling taxable goods and services in Cyprus;
  • -  sole traders and companies producing and selling goods and services within the EU;
  • -  sole traders and companies receiving payments on a good and services they sold;
  • -  sole traders and companies receiving payments on goods and services they intend to sell.
Those who are liable to pay the VAT are also entitled to refunds on these payments under certain conditions which can be explained by our local consultants.
 

VAT rates in Cyprus
 

The following VAT rates are available in Cyprus:
  • - the 19% standard rate which is applicable to most goods and services supplied in this country;
  • - the reduced 9% rate which is levied for restaurant, catering and other tourism services;
  • - the reduced 5% rate which is applied to the sale of books, magazines and various sports facilities;
  • - the 0% reduced rate applied to various services related to imports and exports.
 
Value added tax (VAT) is mandatory in Cyprus for any type of company that provides goods or services made in Cyprus. Various VAT rates apply according to the type of product and they are as follows: the standard rate is 19% (increased from 18%) and the reduced rate is 9% (increased from 8%). The standard rate applies to all goods or services that are not subject to the reduced rate, the zero rate or that are exempt from VAT altogether. 
 
There are also goods and services exempt from VAT payments.
 
Our Cypriot company formation experts can help you with any details about the process of VAT requirements for your type of business in Cyprus. Companies that perform import and export activities in Cyprus may be exempt from VAT under certain conditions.
 

Reduced VAT rates in Cyprus
 

The reduced rate of 9% applies for various services, mainly for those that concern the tourist sector and businesses that commercialize food and drinks. The reduced rate is available for:
 
  • - restaurant and catering services (including various type of alcoholic drinks and soft drinks);
  • - accommodation services (hotels, hostels, tourist lodgements, and any other similar establishments);
  • - passenger transportation with taxis and passenger transportation with buses.
 
Another reduced rate of 5% applies to:
 
  • - the supply of foodstuff;
  • - the supply of pharmaceutical products;
  • - the supply of books, brochures, newspapers, and other printed materials;
  • - the supply of liquid gas.
 
The list of services that are exempt from VAT in Cyprus includes:
  • - postal services;
  • - education;
  • - cultural services offered by non-profit organizations;
  • - lotteries;
 

Documents required for VAT registration in Cyprus

 
Cyprus companies will need to file several documents for obtaining a VAT number. Among these are:
  • - the form released by the Tax Department;
  • - a copy of the identification papers of the company’s directors;
  • - evidence of reaching the VAT registration threshold (where applicable).
     
The documents to be filed with the Tax Department in order to obtain a Cyprus VAT number are From T.D. 2001 for obtaining a tax identification number and Form T.D. 1101 – application for VAT registration. In the case of newly established companies both forms need to be filed, while in the case existing companies, the second form must be filed.
 
These forms will be filed with the local tax office in the Cypriot city in which is company or individual has its legal seat, respectively residence.
Companies or individuals interested in changing information related to VAT payments are required to file Form T.D. 2003 – amendments of taxpayer data.
 
These forms must be accompanied by the following documents:
  • - copy of an official document stating the person or company carries out activities subject to taxes in Cyprus;
  • - copy of an identity card/passport or registration certificate issued by the Trade Register;
  • - additional information is also required depending on the type of entity requesting VAT registration.
Our Cyprus company formation consultants can offer more information and can help you prepare the documents required for VAT registration.
Our company formation agents in Cyprus can help you register ant type of business form for VAT with the authorities in this country.

 

The process of VAT registration in Cyprus

 
Any individual in Cyprus or company in Cyprus that produces taxable supplies over the threshold of 15,600 euro must register for VAT at the Cyprus VAT Register. The registration can be made at the end of any month if the value of the taxable supplies produced over the last year exceeds the threshold or at any time of the value of the produced goods is expected to exceed the said value within the following 30 days.  
 
The regulations concerning VAT are also applicable for non-resident companies in Cyprus if they are making taxable supplies in the country. For this purpose, non-resident companies can appoint a representative or apply for local VAT registration. Specific conditions apply to non-resident companies that are not registered for VAT in Cyprus but supply and deliver goods from other EU countries and the value of these sales exceeds a certain amount per year. Our Cypriot company formation specialists can help you with further details if you perform distance selling.

Those who need help in VAT registration in Cyprus can rely on our local specialists who can prepare the documents to be submitted with the authorities here and can also benefit from assistance in preparing and filing the necessary forms in due time. Those who want to open companies in Cyprus can rely on us through the entire business registration procedure.
 

When is VAT registration required for foreigners?
 

VAT registration is required to both individuals and companies in Cyprus, or foreign citizens and companies with operations in Cyprus under specific circumstances which do not necessarily have to do with the threshold imposed by the VAT authorities. Another important thing to know is that telecom companies can register in one EU country for VAT in order to provide its services in all other member states.
The following activities trigger the registration for VAT in Cyprus of foreign citizens and companies:
  1. the import of various goods into Cyprus from a company or individual in a non-EU country;
  2. the transfer of goods between Cyprus and EU countries (intra-community supply, dispatches and arrivals);
  3. any activity which implies the sale or purchase of goods on the Cypriot territory;
  4. the online sale of goods to clients in Cyprus under the distance selling VAT registration requirements;
  5. warehousing activities completed in Cyprus as consignment stock are also required to be registered for VAT;
  6. exhibitions, events, training activities are also subject to registration for VAT in Cyprus;
  7. the self-supply of products and receipt of services from a non-VAT company are also subject to registration under certain regulations.
It is important to note that Cyprus is an EU member state, which is why it needs to comply with the EU Reverse Charge mechanism.
Our Cyprus company formation advisors can help you with the registration for VAT, no matter if you are local or foreign trader.
It is useful to know that in Cyprus, VAT registration must be completed with the Tax Department.
 

The Reverse Charge process in Cyprus
 

The Reverse Charge mechanism has entered into EU legislation in 2010 and it implies companies in the EU to respect several regulations related to the charge of the value added tax. The process requires Cyprus companies buying services or goods from companies in other EU states to move the responsibility of recording the transaction from the seller to the buyer. This means the Cyprus company in the quality of buyer will be required to enter the transaction in its accounting. This way, the seller will no longer be required to register for VAT in Cyprus.
This is also available for Cyprus companies selling goods to customers in EU states, as they will no longer be required to register for VAT in the respective states.
 
The Reverse Charge has several benefits, among which one of the most important refers to EU VAT reclaims on the costs incurred by the goods or services supplied.
 
We also offer tailored accounting services, if you need such solutions for your company in Cyprus.
 

Special regulations for VAT payers in Cyprus
 

It should be noted that there are special categories of VAT payers in Cyprus. These are farmers, taxi operators, travel agencies and tour operators, retail exporters and second-hand retailers. They fall under the Special Regimes for specific economic operators.
Our Cyprus company formation advisors can offer detailed information on these special categories of  VAT payers.
 

Services exempt from VAT in Cyprus

 
As mentioned earlier, there are certain categories of goods and services exempt from the VAT. However, this does not imply that a Cyprus company is exempt from registering for the value added tax altogether, it will simply not levy the VAT on the goods and services exempt from this tax. Among the services exempt from VAT in Cyprus are the letting and rental of immovable property (residential and non-residential buildings), medical services which can include hospitalization and dental treatments, banking and other financial services, as well as educational and sports-related activities.  Postal services are also exempt from VAT in this country.
 
Mutual funds management services are also exempt from the VAT in Cyprus, which is one of the most important advantages of setting up investment funds here. Also, Cyprus is known as one of the main financial centers in Europe.
 
If you need more information on VAT exemptions in Cyprus, our company formation agents can guide you. They can also explain the rights and obligations of your company when it comes to collecting and paying this important tax.
 

The Cyprus VAT on immovable property

 
Many foreign citizens and investors are attracted by the sunny weather of Cyprus and decide to buy properties here. When correlated with the Cyprus residence by investment program, real estate purchases become even more appealing.
 
The standard 19% rate applies only on the leasing of land and commercial buildings and only if used by the person or company using it to make taxable supplies, however, the lessor has the right to decide whether to impose or not the VAT on the respective property. The VAT also applies on the sale of building land that has not been used for construction if a commercial activity is carried on it.
 
The supply of real estate which can imply land or used buildings is exempt from the VAT in Cyprus.
 
Our Cyprus company formation advisors can offer more information on the specific situations when companies can use VAT-exempt real estate.

 

Invoicing requirements in Cyprus
 

All invoices issued by Cyprus traders must contain specific information about the VAT. These must contain the VAT number of the supplier, the VAT rate applied, and the amount of money collected as value added tax. If the 0 rate applies, information that supports the rate must be provided.
Here are some interesting facts about taxation in Cyprus:
  • - the personal income tax is levied at progressive rates ranging between 0% and 35%;
  • - the corporate income tax in Cyprus is levied at a standard rate of 12.5%;
  • - the profits from intellectual property rights can be granted deductions of up to 80% of the corporate tax;
  • - the incomes of foreign companies in the gas and oil industry can be taxed at a rate of 5% or less, under Cyprus’ double tax treaties.


Filing VAT returns in Cyprus
 

Cypriot companies can register for VAT at a national level, however, if they have intra-Community supplies of goods and services they can also register in the VAT Information Exchange System (VIES) or the Intrastat System. Based on these options they will be required to submit VAT returns.
 
Companies registered for VAT in Cyprus are required to file VAT returns by respecting the following calendar:
  • - national VAT returns must be filed within 40 days from the end of the quarterly reporting period;
  • - VIES returns must be filed within 40 days from the end of the quarterly calendar period;
  • - Intrastat returns must be filed every 10th day of the month for the previous month.
Based on these returns, Cyprus companies and sole proprietors can also apply for refunds for the VAT. We also offer accounting services related to VAT payments and return filings.
 

Obligations for VAT payers in Cyprus
 

VAT registration in Cyprus in case of individuals and companies will imply several obligations. These obligations must be fulfilled depending on the legal personality of the taxpayer. Cypriot companies must issue invoices and maintain accounts and records. They are also required to prepare audited financial statements with the help of an accredited auditor.
Cypriot companies are required to file various tax declarations from which their annual turnover result. Also, VAT returns must be filed on a regular basis.
 
When it comes to sole traders, the obligations depend on their annual incomes. The tax and VAT filing requirements are different for those earning below 70,000 euros per year. They are subject to simplified filing requirements. In the case of sole traders with annual incomes exceeding 70,000 euros per year, the same invoice issuance requirements apply. They also need to file audited financial statements.
Individuals registered for VAT in Cyprus are required to file Form T.D. 1004 VAT declaration and pay the amount due by the 10th following the month of filing the form.
 

The advantages of VAT registration in Cyprus

 
As seen above, the value added tax is an indirect levy, however, registration for it is not mandatory until a specific turnover threshold is reached. Cyprus companies interested in registering for VAT on a voluntary basis will benefit from various advantages. Among these, they will be seen as businesses with a good reputation when it comes to partners and clients. Then, they will be entitled to VAT refunds under qualifying conditions.
 
VAT registration is available for all types of companies, including sole traders and even startup companies which are quite popular at the moment. These companies do not have any obligations other than collecting the VAT and forwarding it to the Cyprus authorities. They must also file their VAT returns in accordance with the stablished calendar. In Cyprus, VAT returns can be filed on a monthly or quarterly basis.
 
If you need assistance in preparing and filing VAT returns in Cyprus, our local consultants can help you.
 

The VAT and the EORI system in Cyprus

 
As an EU member state, Cyprus is also part of the EORI system meaning that local companies trading with other businesses in the EU must apply for EORI numbers. A mandatory condition for obtaining an EORI number is to have a VAT one.
 
The EORI number of Cyprus company is issued based on the VAT number and quite easy to obtain with the Cyprus Customs. The number will be used for every transaction within the EU and only needs to be obtained once.
 
If you want to open a company in Cyprus and need to register it for VAT and EORI, you can rely on our specialists who can also provide various accounting services.
 

De-registration from VAT in Cyprus

 
Cyprus companies have the possibility of de-registering from the VAT system under various circumstances. Among these are company liquidation which will trigger automatically the deletion of the company from the Trade Register and tax authorities’ records, the sale of the business which will imply for the new owner to de-register from the VAT and obtain another VAT number, as well as not reaching the turnover required for the company to keep its number.
 
Our consultants in Cyprus are at your service with detailed information and assistance when you need it. We can handle the Cyprus company formation procedure which also implies tax and VAT registration, or we can complete the process of obtaining a VAT number separately at a later date.
 
If you have a trading company in Cyprus, the VAT registration process must be considered from the beginning of the operations, so you can rely on us.

 

Assistance in obtaining a Cyprus VAT number
 

The Cypriot tax legislation is quite comprehensive as the country has its own laws, but it also follows EU regulations on taxation. This is why those seeking for VAT registration in Cyprus must respect various conditions depending on whether they are Cypriot residents, EU or non-EU residents. Foreign companies are also subject to different VAT registration requirements in terms of documents if they are registered in non-EU states.
 
If you are interested in more details about VAT in Cyprus and how your Cypriot company must observe the regulations, please contact our company formation representatives in Cyprus. We can help you with any taxation matters.
 
 

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Call us now at +357 24 656 406 to set up an appointment with our consultants in Larnaca, Cyprus. Evgenios Erotokritou is the CEO of E.R. Team Global Consultants and he will help you open your company in Cyprus as fast as possible.

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