1. VAT in Europe
3. VAT in Cyprus

VAT in Cyprus

VAT Deduction Limits in Cyprus

Input VAT is generally deductible as long as the goods or services are used for business purposes. Unlike most EU countries, Cyprys only restricts VAT deduction on a few items.

• The following supplies are subject to special rules concerning input VAT deduction:
• Input VAT from the purchase or hire of saloon cars is not deductible, unless for resale, or other qualifying purposes.
• Accommodation, foodstuffs, and entertainment, unless for employees, is not deductible.
• Business gifts of a value less than EUR 17 are 100% deductible.
• Mobile phone, advertising, attendance to conferences and training, fuel expenses, etc. are 100% deductible.

A valid and fully compliant VAT invoice must be issued for each expense on which VAT is deducted.

Statute of Limitations in Cyprus

The statute of limitations in Cyprus is six years.

The statute of limitations period determines the periods on which the tax authority can go back to review the information declared, and apply additional VAT assessments, penalties, or interests. However, voluntary corrections of the reported data can only go back 3 years, after which, the tax authorities must approve such voluntary correction.

Also, the statute of limitations determines the period a taxpayer can voluntarily correct any errors on past submissions, and deduct input VAT.

Tax point rules in Cyprus

The tax point is the time when VAT becomes due. VAT due should be distinguished from VAT payable. VAT is due when the tax point occurs. VAT is payable between the day after the end of the reporting period and the due date to submit and pay the VAT return.

• General rule: VAT becomes due when the goods are put at the customer’s disposal, or when the services are completed.
• Invoice issuance: if an invoice is issued up until the 14th day after the tax point date following the general rule, then the invoice date becomes the tax point. The invoice needs to be sent to the customer in order to create the tax point. If that time has passed without the issuance of an invoice, then the tax point is determined according to the previous general rule.
• Supplies of goods with installation: the tax point is the day the goods are made available to the customer.
• Advanced payments or prepayments: the tax point is at the moment of receiving the prepayment or deposit.
• Continuous supplies of services: there is a tax point every time an invoice is issued or a payment is received, whichever occurs earlier.

Find here an overview of the tax point rules in Cyprus.