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Home arrow Legal and Finance arrow Value Added Tax
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Value Added Tax PDF Print E-mail
VAT is imposed on the provision of goods and services in Cyprus, as well as on the importation of goods into Cyprus.

 

Taxable persons charge VAT on their taxable supplies (output tax) and are charged with VAT on goods or services which they receive (input tax).

 

If output tax in a VAT period exceeds total input tax, a payment has to be made to the state. If input tax exceeds output tax a repayment is due from the state.

 

VAT rates

 

The legislation provides for three tax rates:

Zero rate (0%)

Reduced rate (5%) from 1 July 2000

Standard rate (15%) from 1 January 2003

 

Zero rated goods and services include the following:

 

Exports

Food

Newpapers and magazines

Books

Commissions received from abroad for exportation of goods

Medicines

Children clothing and footwear

 

The reduced rate is imposed on hotel accommodation fees and on supplies of goods made in the course of catering with the exception of alcoholic drinks which are subject to VAT at the standard rate. The following services were added as from 1 February 2002:

 

Funeral services and supply of coffins

Road sweeping, garbage collection and recycling

Services of authors, composers, artists and critics of works of art.

 

Exemptions

 

Certain goods or services are exempt from VAT. They include:

 

Rents

Medical services

Insurance and financial services

Disposal of immovable property

 

Difference between zero rating and exemption

 

The difference between zero rating and exemption is that businesses that make exempt supplies only, are not entitled to recover the VAT with which they have been charged on their purchases, expenses or imports.

 

Irrecoverable input VAT

 

As an exception to the general rule, input VAT cannot be recovered in a number of cases which include the following:

 

When businesses make only exempt supplies.

Purchase, import or hire of saloon cars.

Entertainment and hospitality expenses (except those relating to employees and directors).

Housing expenses of directors.

Registration

 

Registration is compulsory for businesses (a) with turnover in excess of C£9.000 during the 12 preceding months (b) with an expected turnover in excess of C£9.000 in a period of 30 days. Businesses with less than C£9.000 turnover have the option to register if they wish to do so.

 

Exempted products and services, and disposal of items of capital nature are not taken into account for determining annual turnover for registration purposes.

 

Registration is effected by completing the appropriate application form.

 

VAT declaration - Payment/return of VAT

 

VAT returns must be submitted quarterly and the payment of the VAT must be made within 40 days from the end of each quarter.

 

Where in a quarter input tax is higher than output tax, and therefore a repayment is due, the difference is refundable.

 

International business companies (IBCs)

 

IBCs are subject to the same registration rules. However the activities of most IBCs fall outside the scope of VAT and thus there is no obligation for registration. If there is no obligation to register there is the option of voluntary registration.

Voluntary registration means:

 

no VAT charge on the income of the entity

refund of all VAT charged by Cypriot suppliers (subject to the exceptions mentioned above)
                                                                                                                            
                                                                                               PriceWaterhouseCoopers

 
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