VAT

Imposition of tax

Value Added Tax is imposed on the supply of all goods and services in Cyprus, on the acquisition of goods from other Member States and on the importation of goods from third countries.

Rates

Standard rate

The standard rate applies to the suppliers of all goods and services in Cyprus which are not subject to the zero rate, the reduced rate or are not exempt.

Reduced rate 9%

The reduced rate of 9% applies to:

• All restaurant and catering services (including the supply of alcoholic drinks, beer, wine and soft drink)
• Accommodation in hotels, tourist lodgements and any other similar lodgements including the provision of holiday lodgements
• Transportation of passengers and their accompanying luggage within the Republic 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

Reduced rate 5%

The reduced 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 or pharmaceutical products and vaccines that are used for health care, prevention of illnesses and as treatment for medical or veterinary purposes
• The supply of animals used for the preparation of food
• Entry fees to circus, festivals, luna parks, concerts, museums etc
• Entry fees at sports events and fees for using athletic centres
• Hairdressing services
• Renovation and repair of private households after three years of first residence
• Supply of catering services from school canteens
• Acquisition or construction of residence (subject to conditions)

Reduced rate 3%

The reduced rate of 3% was introduced on 21 July 2023 and applies to the following supplies:

• Books, newspapers, and periodicals (including those in electronic formats).
• Audiobooks for disabled persons.
• Certain orthopaedic items and appliances; splints, supports, and other fracture items and devices; certain prosthetic items; and certain devices to facilitate hearing and other medical devices or implants.
• Street cleaning, refuse collection, and waste treatment services, other than the supply of such services by public authorities, local authorities, and bodies governed by public law.
• Disposal and treatment of wastewater and evacuation of septic and industrial tanks.
• Admission to theatrical, musical, or dance performances or classical works.

Zero rate

The zero rate applies to:

• The exportation of goods
• Supply, modification, repair, maintenance, chartering and hiring of sea-going vessels, which are used for navigation on the high seas and carrying passengers for reward or used for the purpose of commercial, industrial or other activities
• Supply, modification, repair, maintenance, chartering and hiring of aircrafts, used by airlines operating for reward mainly of international routes
• Supply of services to meet the direct needs of sea going vessels and aircrafts
• Transportation of passengers from the Republic to a place outside the Republic and vice versa using seagoing vessel or aircraft
• Supplies of gold to the Central Bank of the Republic etc
• International passenger transportation, to the extent that it take place within Cyprus
• Braille typewriters and special electronic typewriters for disabled persons.
• Wheelchair-type buggies and other vehicles intended exclusively for the personal use of disabled persons.

Furthermore, the following goods are subject to 0% VAT from 4 of November 2024 to the 31 December 2025:

• Baby milk (in liquid or powder form)
• Baby and adult diapers
• Products for feminine hygienic protection
• Certain types of fresh fruit
• Certain types of fresh or frozen vegetables

Exemptions

Exempt supplies include:

• Rental of immovable property
• Financial services (with some exceptions)
• Hospital and medical caring services
• Postal services
• Insurance services
• Disposal of immovable property where the application for building permission has been submitted prior to 1 May 2004
• Educational services at all levels of education under certain conditions

Who is obligated to register

Every individual or company is obligated to register if:

a) At the end of any month, the value of taxable supplies recorded in the last 12 months exceeds €15.600 or at any point in time the value taxable supplies are expected to exceed €15.600 in the next 30 day

b) Provides services to a VAT registered person within European Union with nil registration threshold

c) Is involved in the acquisition of goods from other EU member states (relates to persons who offer exempt supplies of goods and services or are non profitable organisations) with registration threshold of €10.250

d) Offers zero rated supplies of goods or services

e) Acquires a company on a going concern basis

f) A taxable person from abroad makes distance sales of goods to Cyprus in excess of €10.000 and does not opt to use the One Stop Shop

Right for registration

Persons who trade outside the Republic, in goods or services which would have been taxable if they were provides within Cyprus, Groups of companies and Divisions of Companies.

VAT returns and payment / refund of VAT

Any registered person has to submit a quarterly VAT return, online via the Taxisnet system, not later than the 10th day following the end of the month following the end of each VAT period and pay the VAT due.

Every taxable person who makes a claim for VAT refund will be entitled to repayment of the VAT amount with interest, in the event that 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 time period of four months is extended to eight months.

Administration of intra-community trading and intra-community services

Business that undertake intra- community trading, i.e. acquisitions and sales of goods and supply of services from/to EU member states need to complete the following forms:

Intra-Community Acquisitions

1. Intrastat – Arrivals of Goods
2. Inclusion in the VAT return (on a total basis)

Intra-Community Supplies

1. Intrastat –Departures of goods
2. Recapitulative statement for supplies of goods and services (VIES form)
3. Inclusion in the VAT return on a total basis

When and how are they submitted

INTRASTAT forms are submitted to the Tax department within 10 days from the end of the related month, in electronic form only provided that the supplies of a taxable person exceed the registration threshold for Intrastat purposes.

The VIES form, is submitted to the Tax department within 15 days from the end of the related month in electronic form only.

Penalties and interest

Imposition of the reduced rate 5% on the acquisition and/or construction of residences for use as the primary and permanent place of residence

As from 8 June 2012 the reduced rate of 5% applies to the acquisition and/or construction of residences to be used by eligible persons (residents of the Republic or/and other EU member states or other non EU member states) as the primary and permanent place of residence, only after obtaining a certified confirmation from the Commissioner.

The statutory declaration may be filed at any stage at the time of construction of the residence or in case of supply prior to the eligible person obtaining possession.

As from 1 November 2023 there are new provisions for the application of the reduced VAT rate of 5%. According to the new rules:

• The reduced VAT rate of 5% applies on the first 130 square meters of the buildable area and up to a total value of €350.000,
• provided that the total value does not exceed €475.000 and the buildable area does not exceed 190 square meters.

Any residence exceeding 190 square meters of buildable area and/or having a total cost of more than €475.000 will be subject to VAT at 19% on the total value.

In case of a person with disabilities, the reduced rate of 5% applies on the first 190 square meters provided that the total value does not exceed €475.000.

For families with more than three children, for any additional children over three, the total buildable area increases by 15 square meters (however there is no change in the thresholds of €350.000 and €475.000).

Transitional provisions have been introduced and apply in the following cases:

1. applications for the reduced VAT rate of 5% are submitted to the Tax Department by 16 June 2026, and
2. the application for planning permission was submitted to the competent authority by 31 October 2023.

In the cases where the transitional provisions apply, the reduced VAT rate of 5% applies only to the first 200 square meters of the buildable area of the residence, with no maximum cap on the size or value of the residence.

A person who has exercised the right to purchase a residence with a reduced rate of VAT is eligible to exercise this right again for the purposes of the purchase of another residence before ten years have elapsed, only if:

• that person has ceased to use the residence as the primary and permanent place of residence before the period of ten years has elapsed;
• has notified the Tax Commissioner within 30 days from the day the property was ceased being used as a residence; and
• has paid the difference between the reduced VAT rate and the standard VAT rate as were applicable during the time of delivery or construction of the residence which corresponds to the remaining of the ten-year period that the residence was not used as his primary residence.

Obligation for a customer to account for VAT for the acquisition of certain goods

As from 1 October 2020, a taxable person who purchases the below goods, for business purposes, must account for VAT in Cyprus under the reverse charge provisions as per Article 11E of the VAT Law. On its invoice, the supplier must not charge the costumer VAT and must include the customer’s VAT number.

• Mobile Phones
• Integrated circuit mechanisms, for example microprocessors and CPUs, prior to their integration into end-user products
• Game consoles, tablets and laptops