On 20 August 2020, a number of amendments to Cyprus’s VAT Law were published in the country’s Government Gazette. Most of them are now in force, and all are of critical importance to anyone doing business on the island.
New Definition of Legal Person
As a result of the amendments, the term “legal person” now includes any:
That applies whether or not the legal person is established as per the provisions of any law or regulation. This amendment brings the definition of legal persons for VAT purposes in line with that under the Cypriot Income Tax Law.
Extended Scope of Article 11B
As per article 11B of the VAT Law, customers must account for VAT upon the acquisition of the following services related to civil engineering projects:
What’s more, in some cases, customers must account for VAT upon the receipt of goods provided in the context of the above services.
Previously, Article 11B applied only where the service provider was a taxable person for VAT purposes. However, the amended provision now applies to any persons providing such services and, where applicable, goods.
Introduction of a New Article 11E
The amendments also introduce an entirely new provision: Article 11E. It draws on Cypriot reverse charge provisions and requires customers to account for VAT upon acquiring the following high-value goods:
- Mobile phones
- Game consoles, tablets, and laptops
- Integrated circuit mechanisms (ICs) that are yet to be integrated into end-user products. These include microprocessors and central processing units (CPUs).
However, Article 11E applies only where:
- Customers receive the goods for business purposes; and
- Are taxable persons for VAT purposes at the time of the transaction.
Sellers are not required to charge VAT on the sale of goods provided that the customer’s VAT number is indicated on the invoice.
In cases where a customer has not been registered for VAT purposes, purchases such as the ones above will be taken into account when assessing whether they have passed the threshold for VAT registration.
As per the new amendments, the authorities will suspend VAT refunds where income tax returns have not been submitted by the date of submission of the VAT refund claim.
Furthermore, no interest shall be payable on refunds for the time during which the refund is suspended.
Finally, applications for VAT refunds must now be submitted within six years from the end of the relevant tax period. Exceptions will be allowed only upon the explicit approval of the Tax Commissioner.
The penalty for failing to submit a VAT return by the stipulated deadline is increased from EUR 51 to EUR 100.
As per Article 11, in case the reverse charge provisions are not applied properly in the context of the receipt of services from abroad, a EUR 200 penalty shall be imposed. The same also applies to the receipt of goods and/or devices by other Cyprus-based traders (see Articles 11A–11E). The sum total of the penalty, however, may not be larger than EUR 4,000.
Deadline for Lodging Objections
The period during which an objection may be raised with the Tax Commissioner is now 60 days. This applies to tax assessment and other decisions or acts by the Tax Commissioner, as per Article 52A of the VAT law.
Registration and De-Registration of Non-Cyprus Established Persons
Schedule I of the VAT Law is now amended to include provisions relating to the VAT registration and de-registration of “non-established” persons that carry out taxable activities in Cyprus.
A “non-established” person is a person that does not have any fixed establishment – business or otherwise in Cyprus for the purposes of carrying out the business.
Definition of “Renovation”
Schedule V of the VAT Law has now expanded this term to also allow “additions” to an old private residence to qualify for a reduced VAT rate of 5%. However, for a residence to be deemed old, a minimum of three years must have passed since its first use.
Zero Rate for International Transport
Schedule VI of the VAT Law provides that international passenger transport taking place within Cyprus is now subject to a zero VAT rate.
All changes mentioned here enter into force from the date of their publication in the Government Gazette or 20 August 2020.
The only exceptions are:
- The new Article 11E, which enters into force from 1 October 2020.
- The imposition of penalties where reverse charge provisions are not correctly applied will enter into force on 1 July 2021.
For more information on all Cyprus VAT and Tax matters, please contact us at firstname.lastname@example.org. We will be happy to assist you.