Value Added Tax (VAT) is imposed on the provision of goods and services in Cyprus.
Taxable person levy VAT on their taxable supplies (output tax) and are charged with VAT on the goods and services they receive (input tax). Payment to the government is required when the output tax during the VAT period is greater than the total input tax. If the input tax exceeds the income tax, the surplus input tax is credited and credited against the forthcoming output VAT.
Refund of the balance of input VAT can be obtained in the following cases:
- Upon the expiry of the period (three years) from the date when the VAT became refundable;
- The government may decide to carry over the balance to the next taxable period and compensate it for the tax due during this period;
- When input VAT refers to transactions subject to zero rates;
- When the input VAT relates to the acquisition of a company’s fixed assets;
- When the input VAT refers to transactions that are not subject to VAT but would be subject to VAT if they were carried out in Cyprus;
- When the input VAT relates to tax-exempt financial and insurance transactions in relation to non-European Union customers.
When purchasing goods between companies registered in the European Union (goods subject to excise duty or new vehicles), the seller does not have to pay VAT upon receipt of the goods in Cyprus. However, he must account for VAT by using acquisition accounting, which implies a normal entry in the company’s books. Thanks to this posting, the seller collects VAT from himself and at the same time claims KGO compensation based on the connection with the taxable delivery. No additional costs are incurred on the basis of such a posting.
Cancellation of input VAT.
Input VAT cannot be refunded in the following cases: Implementation of purchases that are used for exempt supplies. Importing, renting, or buying sedan cars. Hospitality and leisure and entertainment expenses, excluding expenses related to employees and managers. Housing expenses for executives.
Companies with a turnover of more than 15.600 euros per year or an expected turnover of more than 15.500 euros in the following month are required to register as VAT payers. Businesses purchasing products from the other Member States of the European Union for an amount exceeding 10.252 in any calendar year are also required to register.
In accordance with the current VAT – legislation of Cyprus and the European Union, which entered into force on January 1, 2010, companies with a turnover of fewer than 15.600 euros, or carrying out supplies that do not include VAT, but for which the amount of VAT is approved, no longer have the choice of registering or not registering, in which case registration is mandatory. Exempt products and services and capital sales are excluded when calculating annual sales for registration purposes.
An individual doing business in Cyprus or a company registered in Cyprus that provides goods and services only outside Cyprus is eligible to register as a VAT payer and, therefore, to cover all VAT hanged on expenses, provided that such supplies were would be taxable in Cyprus if provided in Cyprus.
VAT Declaration and VAT Payment.
Submission of VAT – declarations are carried out on a quarterly basis, and VAT payment must be made on the tenth day of the month following the month in which the tax period ends. In the event that an individual who is a VAT payer applies for different deadlines for filing declarations, then such a request must be satisfied by the tax authorities (for VAT). If the input tax in a quarter exceeds the output tax, then this difference is refunded or carried over to the next VAT quarter.
Trade management within the European Economic Community.
Entrepreneurs who trade within the European Economic Community, for example, buy and sell products from one EU country to another EU country, just fill out the following forms:
- Acquisitions within the European Economic Community:
Intrastat – Delivery.
Inclusion in the VAT declaration (on a general basis).
- Delivery within the European Economic Community:
Intrastat – Dispatch Summary of delivery (with VIES)
Inclusion in the VAT return (on a general basis from 0%).
Intrastat forms are submitted to the VAT authorities on the tenth day after the end of the month declared in the form. Forms (VIES) are filed with the same tax authorities within 40 days of the end of each calendar quarter.