News: Certain peculiarities of calculating VAT in Cyprus

VAT in Cyprus - case studies

While Cyprus adheres to the EU's tax compliance rules, it still sets its own standard (upper) VAT rate. In matters of calculating the value-added tax, there is often a need for individual legal advice.

We decided to cover the most interesting cases, which can serve as a useful example for our readers.

Situation 1

A consulting company from France provides services to the Cyprus company. The organization receiving services reportsfor VAT. If the Cyprus company is registered as a potential VAT payer, but has never conducted an activity subject to this tax, should it refund VAT for the services of the French company? Should the consulting company include VAT in the issued invoice?

Answer

The place of sale of services in the EU is the territory where the consumer of this service is located. In this example, the consumer of the service is in Cyprus, so the French company receives the tax number of the Cyprus organization and issues the invoice without VAT. Thus, the Cyprus company will receive the invoice without VAT and, accordingly, no such payment is involved.

If it were a question of obtaining services related to real estate, VAT would necessarily be included in the invoice. In our situation, it was about providing consulting services, which are not subject to VAT.

Situation 2

The Cyprus company works with the supplier of goods (natural person, non-resident). Since he is not a taxpayer in Cyprus, he does not include VAT in the invoice.

The company resells the goods to another company in Cyprus at the purchase price (hence VAT is not charged). Is it necessary for the Cyprus seller company to be registered as a VAT payer, if in fact it does not have to pay this tax?

Answer

Following this example, you need to invoke the territory that is the place of sale of the goods.

If the transfer of ownership rights of the goods took place on the territory of Cyprus, the parties to the transaction must act within the framework of the Cyprus VAT law. If the price of the concluded deal on sale/purchase exceeds EUR 15,600, then the individual seller must be registered and receive the tax number, as well as the Cyprus company that is engaged in reselling the goods.

Below is the information on the current VAT rates in Cyprus

The standard rate is 19%.

The reduced rate, which is charged for transportation services, restaurant business and other services sectors, is 9%.

The minimum rate for pharmaceutical products, food, tickets to museums, cinemas, theaters, etc. is 5%.

A zero rate is valid for business in the sphere of goods export, aircraft leasing.

If you faced with a controversial VAT-related situation, ask for assistance of professional lawyers of Law&Trust International. With our help, you will find the optimal legal solution for any situation related to VAT in Cyprus.