Cyprus VAT law changes as from 1 October 2020

October 2, 2020 Insights

As of 1st of October 2020, Cyprus VAT reverse-charge mechanism applies to certain supplies of goods when purchased by a Cyprus VAT taxable person for the purposes of his business. The goods include:

  • Mobile telephones, including devices manufactured or adapted for use on a recognized network and operated at specific frequencies, whether or not they are used for other purposes
  • Integrated circuits, such as microprocessors and central processing units, before being incorporated into end-user products
  • Game consoles
  • Tablet PCs and
  • laptops

VAT Cyprus reverse charge mechanism practical examples

Scenario 1 – VAT treatment
Cyprus company enters a contract for the supply of new laptop computers
VAT implications

  • Cyprus Company provides VAT taxable supplies (income)
  • The laptop computer vendor does not charge VAT on the invoice and notes on the invoice the Cyprus Company VAT registration number and the phrase “Reverse-Charge – Article 11E”
  • Cyprus Company applies VAT reverse charge mechanism at 19%
  • Cyprus Company has full right of deduction so in the same Cyprus VAT return recovers the Cyprus VAT self-charged. The net effect is neutral with a cashflow benefit in favor of the Cyprus company (purchaser)

Scenario 2 – VAT treatment
Cyprus Company provides VAT exempt supplies (exempt income for VAT purposes)

If goods received exceed the Cyprus VAT registration threshold, The Cyprus Company providing exempt supplies (exempt income) would be obliged to register with the Cyprus VAT – Cyprus Tax Department and apply the VAT reverse charge mechanism

  • VAT self-charged is payable with each VAT return
  • The laptop computer vendor does not charge VAT on the invoice and notes on the invoice the Cyprus Company VAT registration number and the phrase “Reverse charge – Article 11E” on the invoice

Very Important notes
If a laptop computer vendor wrongly charges VAT on the invoice

  1. Recipient (Cyprus company) is still liable to apply VAT reverse charge mechanism
  2. VAT charged by the laptop computer vendor on the invoice is not recoverable as input VAT by the recipient (Cyprus company)

 

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