1. VAT Reverse Charge for B2B Services in Cyprus

In Cyprus, cross-border B2B services are generally subject to the VAT reverse-charge mechanism. Under this rule, the recipient of the service (the customer) accounts for VAT instead of the supplier, provided that the recipient is a taxable person. Holding companies without economic activities are not considered taxable persons and are excluded from this mechanism.

Identifying Cyprus VAT Reverse Charge Transactions

To determine if the reverse charge applies, the following factors should be considered:

  • The type of persons involved (B2B transactions).
  • The nature of the transaction (e.g., supply of goods or services, intra-community acquisition, or import of goods).
  • The place of supply and where the transaction is taxed.
  • Possible exemptions under Cyprus VAT law.
  • Whether the VAT obligation falls on the supplier or recipient under the reverse charge mechanism.

Application of the Reverse Charge Mechanism

  • VAT is payable by the Cyprus recipient for B2B transactions involving services supplied by a taxable person not established in Cyprus or the Member State of the recipient, provided the place of supply is in Cyprus and the services fall under Parts I and II of the Thirteenth Annex of the Cyprus VAT Law.
  • The reverse charge does not apply to services described in the Sixth and Seventh Annex of the Cyprus VAT Law.

Services Subject to Reverse Charge

The reverse charge applies to specific services under Parts I and II of the Thirteenth Annex, including:

  • Installation supplies.
  • Services related to immovable property.
  • Transportation of passengers and goods.
  • Hiring of goods, subject to conditions.
  • Telecommunications services.
  • Short-term hiring of means of transport.

Simplified Explanation

Under the reverse charge mechanism, the recipient of the service charges (output) VAT and determines the right to deduct (input) VAT.

Conclusion

The Cyprus VAT reverse charge mechanism ensures compliance with EU VAT principles and applies to specified cross-border B2B transactions under Cyprus VAT law. Proper classification and documentation are crucial for accurate VAT reporting.

2.General Overview of the VAT Reverse Charge in Cyprus


VAT reverse charge in Cyprus
The relevant article of the Cyprus VAT law
Delivery of Gas and Electricity: Applies when gas and electricity are delivered by persons outside the Republic of Cyprus. 11A

Construction Services:

  • Taxable persons involved in construction must apply the VAT reverse charge on domestic suppliers not registered for VAT purposes.
  • This obligation extends to self-charging VAT for services or services combined with goods related to construction, modification, demolition, repair, or maintenance of immovable property.
  • The mechanism also applies when the supplier is not a taxable person for VAT purposes.
11B
Trade of Specific Goods: Includes transactions involving specific goods, such as scrap metals. 11C

Disposal of Immovable Property in Loan Restructuring: Applies to the disposal of immovable property and plots transferred to a borrower as part of loan restructuring.

 11D
Supply of Certain Electronic Devices:
  • Includes devices such as mobile phones, integrated circuit mechanisms (e.g., microprocessors and CPUs), game consoles, computer tablets, and laptops.
  • The seller issues invoices without VAT, and the purchaser is responsible for self-accounting for output VAT under the reverse charge mechanism.
  • The supplier must:
    1. Not charge VAT on the invoice.
    2. Include the customer’s Cyprus VAT number on the invoice.
    3. Obtain written confirmation that the electronic device will be used for business purposes.
    4. Collect evidence that the customer is registered for VAT purposes in Cyprus.
11E

Unwrought and Semi-Wrought Precious Metals: A new provision introduced on 7 October 2022 extends the reverse charge mechanism to transactions involving these goods.

 11F

 

How Can We Help

Please contact us to share any questions you have about the above topic

Contact details

Tel. +357 22 340000

Email: [email protected]

The authors expressly disclaim all and any liability and responsibility to any person, entity, or corporation who acts or fails to act as a consequence of any reliance upon the whole or any part of the contents of this publication.

Accordingly, no person, entity, or corporation should act or rely upon any matter or information as contained or implied within this publication without first obtaining advice from an appropriately qualified professional person or firm of advisors, and ensuring that such advice specifically relates to their particular circumstances.