Increase of Cypriot rates of VAT

2013-02-11

Increase of Cypriot rates of VAT

vat 

 The Parliament of Cyprus has recently voted amendments to the rates of VAT in Cyprus.  According to the new legislation, the following changes will take place: 

S/N

Details

Effective period/date

1

The standard rate of VAT has increased from 17% to 18%

From 14 January 2013 to 12 January 2014

2

The standard rate of VAT will increase from 18% to 19%

As from 13 January 2014

3

The reduced rate of VAT of 8% will increase to 9%

As from 13 January 2014

 

The reduced rates of VAT of 5% and 0% will remain the same.

As per the provisions of the legislation, taxable persons have the obligation to carry out a stock count of their products affected by the above changes in the VAT rates.  Such stock count must be both quantitative and qualitative. The stock count must take place on the close of the day prior to the change in the VAT rates, and the results of the stock count should be maintained in the appropriate record/register for a period of 6 years.

 As an example, the amendment in the VAT legislation mentioned in point 1 above may affect a VAT registered business in one or more of the following ways:

 (a)    Invoices for services issued to the business by Cypriot providers, which are currently subject to the standard VAT rate of 17%, these will bear VAT at the rate of 18% as from 14 January 2013

(b)   If the business purchases products/goods from suppliers in Cyprus, on which currently VAT at the rate of 17% is charged, these will bear VAT at the rate of 18% as from 14 January 2013

(c)    If the business provides/sells products or services to Cypriot customers which are currently subject to the standard VAT rate of 17%, it must charge VAT at the rate of 18% as from 14 January 2013

(d)   If the business provides/sells services to non-business persons (e.g. physical persons who do not have a VAT number) in other EU member states  which are currently subject to the standard VAT rate of 17%, it must charge VAT at the rate of 18% as from 14 January 2013

(e)   If the business receives services from companies/persons outside Cyprus which are subject to the reverse charge in Cyprus and the activities of the business are wholly or partly VAT exempt, then the business may need to pay VAT in Cyprus at the rate of 18% instead of 17% as from 14 January 2013

(f)     If the business physically imports products in Cyprus from third countries (non-EU member states), on which VAT at the rate of 17% is currently paid, it will pay VAT at the rate of 18% as from 14 January 2013

 As an example, the amendment in the VAT legislation mentioned in point 1 above should not be expected to affect a VAT registered business for the following type of transactions:

(a)    Purchases of products from a VAT registered supplier in one EU member state and sale/transfer of the same products to a customer in another EU member state (triangular trade transactions with simplification procedures)

(b)   Sale of products to businesses outside the European Union (exports)

(c)    Sale of services to VAT registered persons in other EU member states (where the place of supply of the services is the place where the recipient of the service is established) i.e. transactions where 0% VAT is currently charged

(d)   Receipt of services from companies/persons outside Cyprus which are subject to the reverse charge in Cyprus and the activities of the business are not VAT exempt

(e)   If the business is entitled to claim full refund of the VAT charged on the invoices issued by local providers e.g. Consulco, then the increase to the VAT rate should have a neutral effect

Interest on VAT refundable amounts

On 19 October 2012, an amendment in the Cypriot VAT legislation was published in the National Gazette, which provides for the repayment of VAT refunds together with interest.

According to the above amendment, businesses which file a claim for VAT refund should be entitled to repayment of the relevant amount together with interest (currently 5%) in case the repayment is delayed for a period exceeding 4 months from the date the claim has been submitted.

In the event that the VAT Commissioner is in process of carrying out an investigation in relation to a submitted claim, then the VAT Authorities are granted an extension of another 4 months to repay the refundable amount without interest (i.e. in such cases, the VAT authorities have 8 months in total).

The above legislation will become effective 4 months following its publication in the National Gazette (i.e. effective as from 19 February 2013).

Long-term hiring of means of transport

New rules relating to the long-term hiring of means of transport to non-taxable persons have become effective as from 1 January 2013.  The relevant changes are set out in the below table:

 

 

Details

 

Place of supply before 1 January 2013

Place of supply after 1 January 2013

Long-term hiring of means of transport to non-taxable persons

In the country of belonging of the provider of the service

In the country of establishment or permanent address or usual residence of the recipient

Long-term hiring of vessels (pleasure boats) to non-taxable persons

In the country of belonging of the provider of the service

(a) If the supplier provides the service from the business or other fixed establishment of his business which is located in the country in which the vessel is actually put at the disposal of the client:  In the country where the vessel is actually put at the disposal of the client

 

(b) If the supplier does not provide the service from the business or other fixed establishment of his business which is located in the country in which the vessel is actually put at the disposal of the client:  In the country of establishment or permanent address or usual residence of the recipient