LOCAL VAT MEASURES FOR FOREIGN COMPANIES IN CYPRUS
Cyprus had simplification measures applicable for call-off stock arrangements up to 31/12/2019. If conditions were met, foreign companies were not required to register for VAT purpose locally.
Since 01/01/2020, the European simplification regime for call-off stock arrangements ("2020 Quick Fixes") entered into force and is to be applied by all Member States. This implies that all other possible national arrangements regarding call-off stock arrangements are mute and, if they provide for divergent rules, should be viewed as not in line with EU Law.
Simplification measures applicable for call-off-stock arrangements in Cyrpus up to 31/12/2019 have been withdrawn and replaced by the new European simplification VAT regime in respect of call-off stock accordingly.
Triangulation can be applied when the middleman (B) is VAT registered for others supplies in the 3rd country (Member State of destination)?
No
Triangulation regime ABC cannot be applied when the middleman B is also VAT registered in Cyprus [Member State C].
Chain transactions refer to successive supplies of goods which are subject to a single intra-Community transport. The intra-Community movement of the goods should only be ascribed to one of the supplies, and only that supply should benefit from the VAT exemption provided for the intra-Community supplies. The other supplies in the chain should be taxed and may require the VAT identification of the supplier in the Member State of supply.
However, the divergent approach amongst Member States in the application of these exemptions for cross-border transactions has created difficulties and legal uncertainty for businesses.
Optional reverse charge for supply of goods?
Yes
Reverse charge applies to supplies of goods with installation, provided:
- the supplier is not established in Cyprus and has no obligation to register for VAT in Cyprus for other reasons;
- the customer qualifies as a taxable person.
Optional reverse charge for supply of services
Yes
Where they are rendered by a taxpayer not established in Cyprus to a taxable person registered for VAT in Cyprus, the reverse charge applies to specific services, e.g. services related to immovable properties, transport services, short-term hiring of means of transport, transport of passengers or goods, etc.
Optional reverse charge (art. 194 of the VAT Directive)
Member States in which the VAT is due may provide that the person liable for the payment of VAT is the person to whom the goods or services are supplied where the transaction is carried out by a taxable person who is not established in the country in which the VAT is due.
VAT Warehousing implemented in Cyprus?
Yes
Cyprus has introduced VAT warehousing regime applicable under specific conditions.
VAT Directive
Member States may exempt the importation of goods and the supply of goods which are intended to be placed under warehousing arrangements other than customs warehousing.
Is it possible for a company to pay the import VAT via the periodical VAT return?
No
Postponed accounting via the VAT return is not possible in Cyprus. VAT on import must be paid immediately. Import VAT needs to be paid to the customs authorities upon importation [immediate payment]. A deferred payment for VAT and customs [similar delay] is however possible under specific conditions.
VAT DIrective
Member States may provide that VAT on importation does not need to be paid at the time of importation on condition that it is entered as such in the VAT return to be submitted.
VAT OBLIGATIONS IN CYPRUS
How is the tax period determined in Cyprus?
Three-month period (standard tax period)
Your company has to report its VAT position by filing a "Tax Declaration" (Form VAT 4) usually on a quarterly basis (standard tax period). However, monthly reporting period can be allowed or imposed by Cypriot VAT authorities.
VAT returns usually cover three months. They are submitted depending on the category (economic activity group) to which each taxpayer belongs. There are three categories: Category A (taxpayers who submit tax returns for the following periods: 1/01-31/03, 1/04-30/06, 1/07-30/09 and 1/10-31/12 of each year), Category B (taxpayers who submit tax returns for the following periods: 1/02-30/04, 1/05-31/07, 1/08-31/10 and 1/11-31/01 of each year) and Category C (taxpayers who submit tax returns for the following periods: 1/03-31/05, 1/06-31/08,1/09-30/11 and 1/12-28/02 or 29/02 of each year]).
When should periodical VAT return be filed?
Periodical VAT returns must be filed to Cypriot VAT authorities before the 10th day of the second month (10 of N+2) following the tax period [month/quarter] to which it relates (=> 40 days). If the VAT return is not submitted on time, Cypriot VAT authorities will impose a penalty of € 100.
VAT Directive
The tax period shall be set by each Member State at one month, two months or three months. Member States may, however, set different tax periods provided those ones do not exceed one year. The VAT return shall be submitted by a deadline to be determined by Member States. That deadline may not be more than two months after the end of each tax period.
Is this requirement laid down in the country and what is the filing deadline?
Your company is not required to file any summarizing annual VAT return in Cyprus.
VAT Directive
Member State may require taxable persons to submit a return in respect to all transactions carried out in the preceding year. That return shall provide all the information necessary for any adjustments.
Are quarterly filings allowed by the country and what is the filing deadline?
The recapitulative Statement [ESL] must be drawn up for each calendar month. ESL should be filed by electronic means to Cypriot VAT authorities by the 15th day of the month after the end of the reporting period [month]. Filing the Statement on a quarterly basis is not possible in Cyprus.
VAT Directive
The recapitulative statement shall be drawn up for each calendar month. However, Member States, in accordance with the conditions and limits which they may lay down, may allow taxable persons to submit the recapitulative statement on each calendar quarter where the total quarterly amount of intra-EU supplies of goods does not exceed either in respect of the quarter concerned or of any of the previous four quarters the sum of € 50.000 or its equivalent in national currency. The recapitulative statement shall be submitted within a period not exceeding one month.
What is the payment deadline?
The VAT due should be paid by the filing deadline for the VAT return [10th day of the month following the end of each tax period - 40 days].
Are interim payments required?
Interim payments are not required.
VAT Directive
Any taxable person liable for the payment of the VAT must pay the net amount of the VAT when submitting the VAT return. Member States may, however, set a different date for payment of that amount. Member States may require interim payment to be made.
Is any VAT credit automatically carried forward or refunded?
A VAT credit is in principle automatically carried forward to the next tax period, unless a tax refund has been applied for. VAT credits are refunded quarterly provided the conditions regarding the amount of the VAT credit and the filing date of the VAT return have been met. VAT credit can be refunded monthly through special authorization given by Cypriot VAT authorities.
VAT Directive
Where, for a given tax period, the amount of deductions exceeds the amount of VAT due, the Member States may, in accordance with conditions which they shall determine, either make a refund or carry the excess forward to the following period. However, Member States may refuse to refund or carry forward if the amount of excess is insignificant.
VAT OVERVIEW IN CYPRUS
What is the local name of the tax?
Foros Prostithemenis Axias [FPA]
What is the structure of the VAT number?
Cypriot VAT numbers have 11 characters [CY + 8 digits + 1 letter].
VAT Directive
Member States must apply a standard VAT rate [not lower than 15%] which must be the same for the supply of goods and for the supply of services. Member States may apply either one or two reduced rates [not lower than 5%] only to supplies of goods or services as listed in the Annex III of the VAT Directive.
VAT rates
Cyprus applies a standard VAT rate of 19% and two reduced VAT rates: 5% and 9%.
€ 35,000
see various thresholds applied in the EU
Any VAT question for Cyprus?
We offer you the opportunity to discuss the subject during a free videoconference.