Cyprus VAT

Cyprus VAT is obligatory on persons performing a business activity and applies to the supply of goods and provision of services in Cyprus and on imports into Cyprus from non-member States of the European Union.

A taxable person can be an individual or a company, a partnership, or a self-employed person including clubs, associations, institutions, and others.

Taxpayers charge VAT on their taxable supplies (output tax) and are charged VAT on goods or services they receive (input tax). If the output tax in a VAT period exceeds the total input tax, such excess is paid to the Cyprus tax department. If the input tax exceeds the output tax, the additional input tax is carried forward as a credit and is offset against future output VAT.

The excess input VAT is refunded immediately by the Cyprus VAT service of the Cyprus Tax Department provided that the relevant procedures of the department are followed.

There is no VAT cash outflow in respect of the intra-community acquisition of goods (except goods subject to excise duty) as VAT is calculated using the reverse charge accounting method. This implies an entry in the books of the company with which the VAT is charged (VAT is self-charged) and at the same time claims it back, provided that it concerns supplies for which the right to recover input VAT is provided, without creating any costs or any cash outflow from the company.

In cases where the acquisition concerns a transaction for which the right to recover the input VAT is not granted, the company must pay the VAT corresponding to the acquisition.

2.  Registration for VAT purposes in detail

Every individual or company is obliged to register if:

  • Conducts commercial activities including the acceptance of office within the profession and if at the end of any month, if the value of the taxable supplies during the period of the previous 12 months has exceeded € 15,600, or at any point in time, if there are reasonable grounds to believe that the value of the taxable transaction during thirty days starting from this point in time will exceed € 15,600,
  • Zero-rated supplies of goods or services;
  • Acquisition of a business on a going concern basis;

Detailed analysis of VAT on cross-border transactions related to Cyprus is dealt with in a separate section on our website.

3.  VAT rates in Cyprus

Cyprus VAT legislation uses the following VAT tax rates:

  • The standard VAT rate is 19%
  • The zero VAT rate is 0%
  • Reduced VAT rate by 9%
  • Reduced VAT rate by 5%
  • Exempt

4.  Difference between zero VAT-rated transactions and VAT-exempt transactions

The basic difference between zero VAT-rated transactions and VAT-exempt transactions is that the businesses making VAT-exempt supplies of goods or provision of services are not eligible to recover VAT paid on their purchases and expenses while the businesses making zero VAT-rated supplies of goods or provision of services are eligible to recover the VAT paid on their purchases and expenses.

5.  Cyprus VAT rate of 9%

The Cyprus VAT rate of 9% applies to:

  • All restaurant and catering services (including the supply of alcoholic drinks, beer, wine, and soft drinks).
  • Accommodation in hotels, tourist lodgements, and any other similar lodgements including the provision of holiday lodgements.
  • Transportation of passengers and their accompanying luggage within Cyprus using urban, intercity, and rural taxis and tourist and intercity buses.
  • Movement of passengers in inland waters and their accompanying luggage.
  • Provision of services and supply of goods by nursing homes, which are not exempt transactions.

6.  Cyprus VAT rate of 5%

The Cyprus VAT rate of 5% applies to:

  • The supply of foodstuff.
  • The supply of prepared or unprepared foodstuff and/ or beverages (excluding alcoholic drinks, beer, wine, and soft drinks) or both, irrespective of whether the goods are delivered from the supplier to the customer or taken away by the customer.
  • The supply of pharmaceutical products and vaccines that are used for health care, prevention of illnesses, and treatment for medical or veterinary purposes.
  • The supply of live animals is used for the preparation of food.
  • Books, newspapers, and magazines.
  • Entry fees to theatres, circuses, festivals, parks, concerts, museums, etc.
  • Entry fees at sports events and fees for using athletic centers.
  • Hairdressing services.
  • Renovation and repair of private households after three years of the first residence (see details below).
  • Supply of catering services from school canteens.
  • Acquisition or construction of residence (subject to conditions, see details below).
  • All restaurant and catering services (including the supply of alcoholic drinks, beer, wine, and soft drinks).
  • Accommodation in hotels, tourist lodgements, and any other similar lodgements including the provision of holiday lodgements.
  • Transportation of passengers and their accompanying luggage within Cyprus using urban, intercity, and rural taxis and tourist and intercity buses.
  • Supply of services to meet the direct needs of sea-going vessels and aircraft.
  • Transportation of passengers from Cyprus to a place outside Cyprus and vice versa using a seagoing vessel or aircraft.
  • Supplies of gold to the Central Bank of Cyprus.
  • International passenger transportation to the extent it takes place within Cyprus territory.

7. New 3% VAT Rate and Zero Rate Goods

Starting from June 15, 2023, a 3% VAT rate and zero rate VAT will apply to certain goods and services in Cyprus.

1. Reduced 3% VAT Rate for the Following Goods and Services:

  • Admission fees for the first performance of theatrical plays, musical and dance works, and classical works.
  • Cleaning, collection, and waste treatment services, excluding those provided by State Authorities, Local Government Organizations, and public law organizations.
  • Disposal and treatment of sewage, and discharge of tanks and industrial tanks.

2. Reduction of the VAT Rate from 5% to 3% for the Following Categories of Goods Intended for the Promotion of Cultural Goods and the Service of Citizens with Special Needs:

  • Delivery of books, newspapers, and magazines, excluding those for advertising purposes.
  • Special lifting devices.
  • Wheelchairs.
  • Orthopedic products.

3. Extension of the Zero Rate VAT to Include the Following Items for the Personal Use of Blind and Disabled Persons:

  • Special electronic typewriters.
  • Chair-type carriages and other vehicles.

From May 5, 2023, to October 31, 2023, a 0% VAT rate is applied to basic goods such as bread, milk, eggs, baby food, diapers, and feminine hygiene products.

From September 22, 2023, to April 30, 2024, a 0% VAT rate is applied to basic goods such as coffee and sugar.

From November 17, 2023, a 0% VAT rate is applied to meats and vegetables falling under the specific codes provided in the amendment, as part of the government’s targeted measures to support households in Cyprus.

8.  Cyprus VAT exemptions

Cyprus VAT-exempt supplies include:

  • Rental of immovable property for residential purposes.
  • Second-hand buildings.
  • Financial services (with certain exceptions).
  • Hospital and medical caring services.
  • Postal services.
  • Insurance services.
  • Disposal of immovable property where the application for building permission has been submitted before 1 May 2004.
  • Educational services at all levels of education under certain conditions.
  • Certain cultural educational and sports activities.
  • Lottery tickets and betting coupons for football and horse racing
  • Μanagement services provided to mutual funds

9.  Claiming VAT in Cyprus

Right to VAT deduction in Cyprus

  • Cyprus input VAT can be claimed on expenditure up to the proportion of the asset’s use for business purposes. Cyprus applies this principle to immovable, movable property, as well as to intangible assets.
  • Exemptions with VAT right to a deduction on zero VAT rate supplies subject to the provisions of the Cyprus VAT Law
  • Intra-community supplies of goods are considered outside the scope of Cyprus VAT with the right of deduction.

Exemptions without the right VAT deduction

  • Exemptions as described in the Cyprus VAT Law
  • Supplies in the public interest

10.  Recoverability of VAT before VAT registration

Input VAT in Cyprus can be recovered for the period before registration:

  • three years for goods (unless the goods were consumed before the date of registration)
  • six months for services.

11. Non-recoverable input VAT in Cyprus

In Cyprus, VAT input cannot be recovered on:

  • Entertainment expenses except where these are solely for Directors and employees;
  • Purchase of saloon car unless used for qualifying purposes (i.e., resale, passenger transport for reward (taxi, bus), rental, or for driver instruction); (input VAT on running and maintenance expenses of saloon cars is allowable, to the extent the saloon car is used for business purposes)
  • Accommodation expenses for entertainment purposes and for business associates (input VAT on Directors and employee-related expenses is allowable)
  • Input VAT that is directly or indirectly attributable to insurance services or financial transactions, unless the recipient is based outside of the EU
  • VAT on invoices not issued in the name of the business
  • VAT incorrectly charged to the business

12. Input VAT recovery following input tax apportionment
When the input tax does not entirely concern the purchase of goods and services for the business or does not entirely concern supplies with the right to deduct VAT, then an apportionment is made to calculate the amount of input tax that can be recovered. Apportionment takes place as follows:

  1. Apportionment between economic and non-economic activity e.g. a company that carries out activities and owns investments in subsidiary companies
  2. Apportionment between incomes with the right to deduct VAT and income without the right to deduct VAT e.g. a company that carries out exempted activities inside and outside the European Union.

VAT recovery by Holding Companies in Cyprus

In Cyprus, the acquisition and holding of shares in a company are generally not considered an economic activity, which means any input tax cannot be claimed. Simply owning shares and receiving dividends does not constitute the exploitation of goods to obtain lasting income. Dividends are viewed as a result of share ownership rather than an economic activity.

However, the acquisition and holding of shares can be considered an economic activity if accompanied by direct or indirect involvement in the management of the company. For instance, if both companies share common management or if the holding company manages or coordinates the affairs of its subsidiaries, any input tax can be claimed. In these situations, the dividend received is regarded as a consideration for the management services provided.

The acquisition of shares for control purposes, leading to the holding company’s involvement in managing the companies in which it holds shares, is also considered an economic activity. Such management services can be procured from third parties and resold. Legal services, business administration services, and public relations services are deductible only if the holding company uses them to supply goods or services. If these services are used for the benefit of other subsidiaries, the input tax on such services cannot be deducted.

When a holding company in Cyprus engages in both economic and non-economic activities, the input tax must be apportioned accordingly under the previous paragraph.

13. Cyprus VAT returns and payments

All persons liable to Cyprus VAT must file a quarterly return within 40 days following the end of each quarter and pay the balance between output VAT (collected) and input VAT (paid).

Electronic submission of VAT returns is compulsory, through the Tax Department portal Tax For All.

VAT-registered persons have the right to request a different submission period. The approval of the Tax Commissioner is required. The Tax Commissioner also has the right to ask a taxpayer to file VAT returns for a different period.

14. Refund of VAT in Cyprus

Claim for a VAT refund is made electronically through the Cyprus tax department portal – Tax For All (TFA).

Every taxable person who claims a VAT refund will be entitled to repayment of the VAT amount with interest, if the repayment is delayed for a period exceeding four months from the date of the submission of the claim.

In case a VAT audit regarding the claim is conducted by the Commissioner, the period of four months is extended to eight months.

VAT refunds are made via bank transfer. Refunds can be obtained by submitting an online application through the tax portal provided an IBAN has been previously provided.

As of 20 August 2020, the following also apply regarding VAT refunds:

  • VAT refunds will be suspended where income tax returns have not been submitted by the submission date of the VAT refund claim. In addition, no interest will be payable on a VAT refund for the period during which the refund is suspended; and
  • VAT refund applications cannot be submitted after six years after the end of the relevant tax period. Any requests submitted after the six years have elapsed will be examined at the discretion of the Tax Commissioner.

In detail, the immediate refund of the excess input VAT can be achieved in the following cases:

  1. A period of four months has elapsed from the date of VAT refund
  2. Input VAT that cannot be offset against output VAT until the last VAT period of the year following the year in which the VAT period in which the credit was generated falls
  3. Input VAT related to transactions with zero rate
  4. Input VAT related to the purchase of the company’s capital assets
  5. Input VAT relating to transactions that do not fall within the scope of VAT but would be subject to VAT if they had taken place in Cyprus
  6. Input VAT related to exempt financial and insurance services provided to customers residing outside the EU (services for which the right to recover the relevant input VAT is granted)

15. Cyprus VAT refund to foreign businesses

VAT refund to EU businesses. The refund application is submitted electronically through the portal of the Tax Authorities of the country in which the claimant is established. The relevant portal for Cyprus can be found using the following link:

https://refund-eu.vat.mof.gov.cy/VATiSee/index_cyprus_vat_en.html
  • VAT refund to non-EU businesses. Businesses outside of the EU can reclaim input VAT on the purchase of goods and services in Cyprus, or VAT that was imposed on imports in Cyprus.
  • VAT refund can be claimed on business-related expenses including those of employees and Directors

16. VAT recoverability on doubtful debts in Cyprus

A taxable person may claim VAT on bad debts, provided that VAT has been paid on the transaction, a period of 12 months has elapsed, the claim is lodged within four years, and the taxable person has proved that the necessary measures have been taken to a collection of the amount due, a customer is a taxable person and the supplier must inform the customer about the submission of the claim within seven days from the date of submission of the claim.

17. Correction to the VAT accounts

The correction to the VAT accounts must:

  • Be done in the tax period in which the error was detected.
  • State the tax return it concerns.
  • Refer to the relevant documents.
  • The total of errors should not exceed the amount of €1,708.60

In case the total amount of errors exceeds the amount €1,708.60 or 3 years have passed, the prior approval of the VAT Commissioner is necessary by sending a relevant letter and submitting all the information.

18. Important VAT consideration in invoicing

Where applicable an invoice should include:

Sufficient description to identify goods or services;

the amount of any cash discount provided;

Name, address, and VAT registration number of VAT reference to reverse charge or if the VAT is payable by the recipient including the VAT number of the provider;

For domestic VAT reverse charge reference to domestic law i.e., Article 11A,11B, 11C, 11D, 11E, and 11F.

Reference to the triangular transaction where the invoice is issued as an intermediary in triangulation

An invoice for VAT purposes must be issued within thirty days of the time of the supply.

Invoices can be issued in foreign currencies. However, the total amount of VAT must also be stated in Euros.

19. Timepoint of VAT payment

The time point of VAT payment is for goods the date they are available or delivered and for services the date they are performed or

if the invoice is issued or payment is received earlier or

if an invoice is issued within 14 days of the supply of the goods or the provision of services

Note: The invoice should be issued within 30 days from the day the service was performed or the goods were delivered.

If services are rendered on an ongoing basis and payments are received regularly or from time to time, there is a tax point at a time.

20. Cyprus VAT groups

Cyprus VAT group is possible where financial links exist between taxable persons. Only taxable legal persons incorporated in Cyprus may be part of a VAT Group. All taxable person’s VAT numbers are canceled and the group obtains a new common VAT number under the representative member’s name.

21. VAT treatment of vouchers
A voucher is an instrument (whether in physical or electronic form) that contains an obligation to accept it as consideration, or partial consideration, for a supply of goods or services. It does not include discount vouchers, an instrument functioning as a ticket, or postage stamps.
For “single-purpose” vouchers the VAT is due on the underlying goods and services at the time of issue of the voucher.
For “multi-purpose” vouchers the VAT due on the underlying goods and services is accounted for at the time of redemption of the voucher.

22. VAT penalties and Interest table applicable in Cyprus

VAT Penalties and Interest  
VAT late registration €85 for every month of delay
Late submission of VAT return €100 for each return
Late payment of VAT 10% of the amount due plus interest
VAT Late de-registration €85 one-off
Failure and/or incorrect application of the reverse charge for transactions falling under Articles 11, 11A-11E, and 12A of the Cypriot VAT Legislation (Valid from 1 July 2021). €200 for each VAT return. The total penalty may not exceed EUR 4,000.
Late submission of VIES return €50 for each statement
Penalty for late submission of corrective VIES return €15 for each return
Omission to submit the VIES return constitutes a criminal offense The maximum penalty is €850
Penalty for omission to keep books and records for 6 years €341

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