CyprusManual

VAT registrations and simplifications in Cyprus

When do I need a Cypriot VAT number?

Generally, a foreign business must register for VAT in Cyprus as soon as a taxable supply is made. The following are the usual examples of taxable transactions:

  • Domestic supply of goods not reverse charged: A supply of goods located in the Cyprus where reverse charge does not apply requires a VAT registration of the supplier.
  • Supply of services not reverse charged: Foreign non-established businesses supplying services on which Cyprus VAT is due by the supplier must register for VAT. These services are rather exceptional, as the general B2B rule would apply.
  • Export: Exporting goods to a non-EU country requires a VAT number before the export is made.
  • Intra-Community acquisition: Acquiring goods from another Member State where all conditions for intra-Community movements are met requires the customer to register for VAT.
  • Intra-Community supply: Supplying goods to another Member State is also a taxable transaction that obliges the supplier to register for VAT. 
  • Distance sales: When applicable in case the Seller has not joined OSS. See the E-commerce manual for more information.

There is a registration threshold for Cypriot established companies amounting to EUR 15,600, although voluntary registration is possible in case of performing taxable transactions below the referred threshold. However, non-established businesses cannot benefit from the registrations threshold.

The forms required to complete for a Cypriot VAT registration are the form TD2001 and TD1101

The business liable to register for VAT purposes in Cyprus must apply for the registration within 30 days.

Find here the Cypriot registration forms. Also, find here, here and here general information about the VAT registration process in Cyprus, published by the tax authorities.

Fiscal representative requirements in Cyprus

For businesses established in the EU the appointment of a Cypriot fiscal representative is optional. However, non-EU businesses must appoint a fiscal representative when registering for VAT purposes in Cyprus, unless the country of establishment has signed a reciprocity agreement. In principle, only Norway and Israel have signed reciprocity agreements with Cyprus.

The fiscal representative is jointly and severally liable for the transactions performed by the foreign company represented. must be established in Cyrpus and will be liable for all the operations of the foreign company in Cyrpus.

Marosa provides fiscal representation services through local partners.

Find here a brief official article about the requirement for non-EU businesses of appointing a fiscal representative in Cyprus.

VAT groups in Cyprus

Cyprus has introduced the VAT group regime as an option in its VAT system. Members of a VAT group are treated as a single taxable person for VAT purposes.

A VAT group may be formed by taxable persons closely bound by financial, economic, and organizational links. Financial links exist when the same person or business controls the other entities of the group. Organizational links exist when there is a common structure. Economic ties exist where the activities of the controlled entities are of similar nature; the activities are complementary; or, the activities of some member are for benefit of the others. 

In addition, the following VAT grouping rules apply in Cyprus:

  • Cypriot VAT grouping is optional.
  • Intra-group transactions are disregarded for VAT purposes.
  • Every group member is jointly and severally liable for the VAT debts and penalties of the entire group.
  • Foreign companies not incorporated in Cyprus may be part of a VAT group.
  • The VAT group must submit a single VAT return and pay the VAT for the activities of all the group members. There must be a representative for the VAT group.
  • There is no minimum time period for the VAT groups to exist.

Find here the related forms for VAT grouping in Cyprus.

Consignment and Call-off stock in Cyprus

The EU introduced a call-off stock simplification that all EU Member States must implement. This was put into place so that businesses that operate under a consignment stock structure do not have to VAT register in the country of destination. Cyprus has introduced consignment stock simplification.

Check out our article on the EU call-off stock simplified VAT rules for more detailed information.

Cypriot Bad Debt Relief

The bad debt regime applies to scenarios where an invoice has been issued with VAT, reported in the VAT return and the VAT amount has been paid to the tax authorities but the whole price has not been collected from the customer.

This is often due to the client´s bankruptcy, insolvency, or simple missed payments to suppliers. In the EU, most countries allow taxpayers to recover the VAT initially paid to the authorities, however, the conditions change from one country to another.

Cyprus allows for bad debt relief provided that the following conditions are met:

  • You have paid the VAT to the Tax Authorities
  • You have deleted the transactions from the accounts and included it on a separate bad debt account.
  • You have taken the necessary steps to claim the debt from the customer.
  • The debt has remained unpaid for 12 months counted from the date of the transaction.

If you meet the above conditions, you can claim the VAT refund to the tax authorities within 4 years from the date on which the debt became due and payable, or from the transaction date, whichever is later.

In order to claim the VAT refund of the bad debt you need to deduct the VAT amount in your VAT return.

When your customer is a taxable person, you must send a communication within 7 days from the submission of the VAT return, informing about the bad debt relief.

Find the official guidelines from the Cyprus authorities on bad debt relief, information Form 14.

Cypriot Import Deferral and Postponed VAT Accounting

Cyprus has not introduced any simplification measure to deal with import VAT. Therefore, there is no postponed import VAT accounting mechanism or import VAT deferral.

Cypriot Customs and VAT warehouses

Customs or bonded warehouses are available for goods that have not cleared customs in the EU (T1). VAT and excise duties are not due when these goods are directly placed in the Customs warehouse. As soon as they exit this regime, these amounts are due. Sales within the customs warehouse are zero-rated.

VAT warehouses are available for cleared goods (T2). These goods have already paid customs duties. The conditions are similar to those of Customs warehouses. The goods allowed are those included in Appendix V of the VAT Directive.

Find here application forms for tax warehousing in Cyprus. Also, find here more information about customs warehouse, and here about bonded warehouse. Finally, find here the official EU guidelines on Customs’ special regimes.

Special VAT schemes in Cyprus

Find below the list of main special VAT schemes in Cyprus:

  • The small businesses or special exemption regime. When the threshold of EUR 15,600 is not exceeded, small established businesses are not required to register for VAT purposes in Cyprus. Still, small businesses may opt to register for VAT purposes in Cyprus. Find here additional information. The special email address of contact for these businesses is: sme@tax.mof.gov.cy
  • Farmers.
  • Travel agents.
  • Margin scheme.
  • Investment gold.

The special VAT schemes applicable in Cyprus are regulated in Chapter XII Special regimes, art. 310 and following RO Fiscal Code.

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