1. VAT Registration Obligations in Cyprus

VAT registration is obligatory for persons performing a business activity, including importing goods, receiving services from EU Member States and non-member States, or engaging in specific taxable activities. Below are the key scenarios that trigger VAT registration:

Obligation for VAT registration in detail

  1. Intra-Community Services:

    • Any person engaged in the supply of intra-community services for which the recipient must account for VAT under the reverse charge provisions is required to register (nil threshold).

  2. Intra-Community Acquisitions:

    • VAT registration is required if, at the end of any month, the total value of acquisitions from other EU Member States during the 12 months beginning on 1 January exceeds €10,251.61.
    • Registration is also required if it is anticipated that the value of acquisitions will exceed €10,251.61 within the next 30 days.

  3. Distance Sales:

    • As of 1 July 2021, under the EU-wide One-Stop-Shop (OSS) system, a common threshold of €10,000 applies for distance sales across all EU Member States. If a seller exceeds this threshold, they must register for VAT in the country of the customer or use the OSS system to report VAT.

  4. Acquisition of Goods Related to Exempt Supplies:

    • Persons who provide exempt supplies of goods and services must register if their intra-community acquisitions exceed the threshold of €10,250.

  5. Non-Established Persons:

    • Non-established persons (legal entities or individuals) who are engaged in taxable activities in Cyprus, without a fixed establishment in Cyprus, must register for VAT purposes. There is no threshold for such registrations.
    • EU persons do not need to appoint a VAT representative in Cyprus. Non-established persons engaged exclusively in zero-rated activities can apply for an exemption from VAT registration.
    • Taxable persons established in the United Kingdom and carrying out taxable transactions in Cyprus are also exempt from appointing a VAT representative.

 

2. Right for Voluntary VAT Registration

Persons and entities have the right to register voluntarily for VAT in specific cases, even if they do not meet the mandatory thresholds. Examples include:

  1. Trading Outside Cyprus:

    • Persons trading in goods or services outside Cyprus, which would have been taxable if provided within Cyprus, may register voluntarily for VAT.

  2. Groups and Divisions of Companies:

    • Groups of companies or divisions of companies may register under Cyprus VAT grouping provisions to manage VAT collectively.

 

3. Intra-Community Trade
Persons engaged in intra-community trade with other EU Member States must complete the following declarations:

  • For Acquisitions:

    • Intrastat-Arrivals: Required if the business exceeds the Intrastat reporting threshold for arrivals.
    • VAT Return: Total acquisitions are entered in the VAT return, accounting for both output VAT (self-assessed) and input VAT (reclaimable).

  • For Supplies:

    • Intrastat-Shipping: Required if the business exceeds the Intrastat reporting threshold for dispatches.
    • Summary Table of Intra-Community Transactions (VIES statement): Required for reporting supplies of goods and certain services to VAT-registered persons in other EU Member States.
    • VAT Return: Supplies are entered in the VAT return at a 0% rate, as they qualify as exempt intra-community supplies.

 

4. VIES

Taxable persons engaged in intra-community supplies of goods and/or services to VAT-registered persons in other EU Member States must register with the VIES (VAT Information Exchange System). These persons are required to submit monthly electronic VIES statements (summary tables), detailing all such transactions.

The VIES statement applies to:

  • Intra-community supplies of goods.
  • Services where the recipient accounts for VAT under the reverse charge mechanism in their Member State.

The VIES statement must be submitted by the 15th day of the month following the reporting period. Transactions with non-EU countries or purely domestic supplies are not included in the VIES statement.

 

5. Management of Intra-Community Transactions (Cyprus Intrastat)

Companies involved in intra-community transactions, such as the acquisition and/or supply of goods to/from EU Member States, are required to comply with Intrastat reporting requirements. These companies must submit monthly electronic Intrastat declarations if their transactions exceed the relevant thresholds.

The current Intrastat reference thresholds for Cyprus are as follows:

  • Arrivals:

    • Exemption limit: €320,000 (no Intrastat declaration is required below this threshold).
    • Simplification limit: €2,700,000 (detailed reporting is required above this threshold).

  • Dispatches:

    • Exemption limit: €75,000 (no Intrastat declaration is required below this threshold).
    • Simplification limit: €5,800,000 (detailed reporting is required above this threshold).

Intrastat declarations apply exclusively to the movement of goods within the EU and do not include services.

 

6. Chain Transactions within the EU for VAT Purposes

Chain transactions for VAT purposes occur when:

  • Goods are supplied successively involving at least three parties.
  • The goods are transported or dispatched from one EU Member State to another.
  • The goods are sent directly from the first supplier to the final customer.
  • The transport or dispatch is arranged by the intermediary or a third party on their behalf.

General Rule:

  • When the intermediary arranges the transport or dispatch, the transport is attributed to the supply to the intermediary.
    • The first supplier makes an intra-community supply to the intermediary.
    • The intermediary makes an intra-community acquisition in the Member State of destination and subsequently makes a domestic supply to the final customer.

Derogation:

  • If the intermediary provides the first supplier with the VAT number of the Member State where the transport begins, the transport is attributed to the supply from the intermediary to the final customer.
    • The first supplier makes a domestic supply in the Member State of dispatch.
    • The intermediary makes an intra-community supply, and the final customer makes an intra-community acquisition in the Member State of arrival.

 

7. Simplified VAT Procedure in the Case of Triangular Transactions

Triangular transactions involve three parties located in three different EU Member States. The simplified VAT procedure applies under the following conditions:

  • The supplier makes an intra-community supply of goods from their Member State to the intermediary.
  • The intermediary, who is registered for VAT in a different Member State but not established in the final customer’s Member State, makes an intra-community acquisition of the goods in the Member State where the final customer is located.
  • The intermediary’s acquisition is for the purpose of an onward supply to the final customer, who is a taxable person registered for VAT in their Member State.
  • The goods are transported directly from the supplier’s Member State to the final customer.

Under the simplified procedure:

  • The intermediary issues an invoice to the final customer without VAT, stating that the reverse charge mechanism applies.
  • The final customer is responsible for accounting for the VAT due on the supply made by the intermediary.

This procedure eliminates the intermediary’s obligation to register for VAT in the Member State of the final customer, simplifying compliance.

 

8. Triangular Trade and Triangular Simplification – VAT Treatment

In a triangular trade scenario under the triangular simplification:

  1. The supplier’s intra-community supply and the intermediary’s intra-community acquisition are excluded from VAT obligations in their respective Member States.
  2. The intermediary must use the VAT number of the Member State of the final customer.
  3. The intermediary reports the transaction to VIES in their Member State as a triangular transaction and indicates “triangulation” or “VAT reverse charge” on the invoice.
  4. The final customer accounts for VAT in their Member State under the reverse charge mechanism.
  5. Both the supplier and the intermediary have Intrastat obligations in their respective Member States for reporting the movement of goods.

The triangular simplification eliminates the need for the intermediary to register for VAT in the final customer’s Member State, provided that all conditions for the simplification are met.

 

9. Placement of Goods in a VAT Warehouse

Non-established taxable persons can place goods in a VAT warehouse in Cyprus. Under the VAT warehouse regime, goods stored in the warehouse are generally not subject to VAT as long as they remain there.

A taxable person may choose to register for VAT or appoint a VAT representative to manage their VAT obligations related to the warehouse. However, VAT registration is not mandatory unless the taxable person engages in activities that trigger VAT liability, such as:

  • Selling goods while they are in the VAT warehouse.
  • Removing goods from the VAT warehouse for local supply within Cyprus.

The VAT exemption applies under specific conditions, such as:

  • The goods are exported from the VAT warehouse to a destination outside the EU.
  • The goods are transferred to another VAT warehouse within the EU.

This regime simplifies VAT handling for non-established persons dealing with goods stored in Cyprus, provided that all relevant conditions are met.

 

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