Cyprus

Goods

This guide is for e-commerce companies that sell online via web-stores or at marketplaces.

 

Web: Cyprus’s Tax Agency

 

VAT Standard rate
19%

VAT Reduced rate
5%, 9%

 

Thresholds
€35 000 (distant sales)

According to the VAT Law, any person making distance sales (sales from a person established in another Member State), is liable to register for VAT purposes in Cyprus and account for VAT in Cyprus, if, in the period starting from the 1st January of the year, the value of distance sales exceeds €35.000. Failure to comply renders the person liable to a levy of €85 for every month of the delay or refusal or omission.

There is also the right for voluntary registration when the threshold is not reached. It is noted that persons making zero-rated supplies are also liable to be registered.

Deductible VAT
To check if you have exceeded the threshold add together the total value of distance sales, you should exclude:

  • Intra-Community supplies of goods,
  • Supplies of new means of transport or of goods that are subject to excise duty,
  • Those supplies for which the margin scheme is applicable.

If you paid invoices before VAT registration you may deduct them after your registration.

Registration procedure

A person who to be registered, is obliged to notify the Tax Commissioner of his liability by submitting to the local Offices:

  • Form VAT 105
  • Valid VAT number or certificate of registration as taxable person (entrepreneur) issued by the Tax Office of the Member State the entrepreneur has established his business in (original)
  • Copy of the company statutes
  • Copy of the manager’s passport / ID
  • Copy of the certificate of registration

These documents should be sent within 30 days of the end of the relevant month and his registration is effective as from the end of the month following the relevant month or from such earlier date as may be agreed between the person and the VAT Officer.

The registration is effective as from the beginning of this period.

Tax representative

If a trader is not resident in the Republic – in the case of private individuals, or a legal person is based abroad – carries out a business in Cyprus and is liable or entitled to registration in the VAT Register of the Republic, the VAT officer may appoint a person who is resident in the Republic and is recommended by the trader, to act on behalf of the trader for VAT matters (a VAT representative) or require security for the protection of public revenue.

It should be noted that for private individuals resident in another Member State or legal persons incorporated in another Member State, there is no obligation to appoint a VAT representative.

VAT payment date

The dates for VAT payment are as follows:

  • 1st quarterly by 10th day of the second month following the end of the quarter (quarterly VAT return)

Filing VAT returns

A taxpayer must transmit tax returns to the Cyprus Tax Department by electronic means. Lovat platform supports digital submission. A tax return must be filed even if no transactions have been performed during the relevant quarter.

The dates for filing quarterly VAT returns are as follows:

  • 1st quarterly – by 10 of April,
  • 2st quarterly – by 10 of July,
  • you are not required to file any summarizing annual VAT return in Cyprus.

At the Lovat portal you can see your deadlines.

Digital services

Effective since 1 of January 2015. 

According to paragraph 18 of the Thirteen Schedule of the Cypriot VAT Law, digital services provided B2C by foreign companies are subject to Cypriot VAT if the location of the customer is Cyprus. 

 

Web: Cyprus’s Tax Agency

 

VAT Standard rate 
19% 

VAT calculation peculiarity
VAT= Total revenue * 19/119 

 

VAT Reduced rate
In Cyprus, no reduced VAT rates apply with respect to telecommunications, broadcasting and electronic services provided to non-VAT taxable persons. 

Threshold
Revenue threshold is €0 for digital servicesCyprus has implemented rules under its domestic legislation whereby taxable persons are released from the payment of the VAT where the amount due is less than 1.70 euro.  

 

Pieces of evidence

To identify customer location merchant has to collect at least two items on non-contradictory evidence. And if two of them are in Cyprus, the customer may be determined as Cypriot: 

  • Customer’s permanent address 
  • Billing address (bank or electronic payment operator)
  • IP address 
  • Telephone number 
  • The location of the customer’s fixed land line through which the service is supplied to him 
  • Other commercially relevant information 

E-services list

A digital product is any product that’s stored, delivered, and used in an electronic format. These are goods or services that the customer receives via email, by downloading them from the Internet, or through logging into a website, in particular: 

  • E-books, images, movies, and videos, whether buying a copy from Shopify or using a service like Netflix. In tax language, these products are in a category usually called, «Audio, visual, or audio-visual products» 
  • Downloadable and streaming music, whether buying an MP3 or using a service like SoundCloud or Spotify. Of course, these products also fall into the audio category 
  • Cloud-based software and as-a-Service products, such as Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS), and Infrastructure-as-a-Service (IaaS) 
  • Websites, site hosting services, and internet service providers
  • Online ads and affiliate marketing

Exemptions

  • Supplies of lotteries, betting (including horse races or football matches) and other gambling activities are VAT exempt supplies. For purposes of neutrality, the exemption applies even if these bets are supplied electronically 
  • According to the Cypriot VAT legislation, the supply of education by an eligible body (i.e., school, university or college) is an exempt supply with no right to input VAT deduction. The same provisions apply to E-learning services  

Registration procedure

Registration for the MOSS may be made online. For VAT registration non-resident businesses can apply to the Tax Department (Form T.D.2001) can be submitted either through the PSC Cyprus or by post/hand to the local Tax Department Office.  

 The application should be accompanied by the following documents: 

  • A copy of certificate of incorporation, copy of certificate of registered office address, copy of  a certificate of directors and secretary and copy of certificate of shareholders
  • A copy of certificate of registration of business name (in case of business/trade name)
  • Questionnaire for the registration of international business entities (registered companies in the Republic of Cyprus whose main business activities are carried out abroad) 

The VAT registration number is issued within one or two days. The certificate of registration is provided within 5 to 10 days. 

If a company is liable to be registered, it is obliged to notify the VAT Commissioner of his liability by submitting the application for registration before the end of the thirty-day period to which the liability arises and the registration is effective as from the beginning of this period. 

Keeping records

In Cyprus, the possibility to issue batches of electronic invoices is availableCypriot VAT invoices must be issued within six months after you delivered the product or service. Then you need to store these invoices electronically for ten years. Yes, that sounds excessive, but you must keep them on file in case any authority wants to verify your tax history. 

VAT payment date

A company involved in intra-community transactions must submit VIES declarations to the VAT Office for every calendar month by the fifteenth (15th) day of the month which follows the month for which it relates. 

Filing VAT returns

EU VAT returns are due quarterly. At the end of each quarter, you have 20 days to file and pay whatever company owe: 

  • 20 April, for the first quarter ending 31 March 
  • 20 July, for the second quarter ending 30 June 
  • 20 October, for the third quarter ending 30 September 
  • 20 January, for the fourth quarter ending 31 December 

Penalties

If there are misdeclarations or late fillings of Cyprus VAT returns, foreign companies may be subject to penalties: 

  • The penalty for late registration is EUR 85 per late month. 
  • Late filings are subject to a charge of EUR51 per return.  

 If the payment is delayed, there is a further charge of 10% on the VAT due, with additional interest on the unpaid amount which is currently set at 4.5%p.a.  

If VAT is reported incorrectly a penalty of an additional 10% on the output VAT due is imposed as well as annual interest on the output VAT and the 10% penalty charge. 

Penalties of up to 300% of the value of the output VAT will be charged for tax evasion. 

There is a six years statute of limitations for Cyprus VAT, except for fraud, in which case it is extended to twelve years.