CyprusManual

Reverse Charge in Cyprus

Reverse charge for non-established companies in Cyprus

According to Art. 194 of the VAT Directive, Member States may implement an optional reverse charge on supplies made by non-established businesses. Cyprus has introduced this reverse charge on supplies of services located in Cyprus.

Where a non-established supplier provides services located in Cyprus to a taxable person in Cyprus, the domestic reverse charge applies.

  • Supplier requirements
    Not established in Cyprus
  • Customer requirements
    Taxable person registered for VAT in Cyprus
  • Scope
    Supplies of services located in Cyprus
  • Supplier requirements
    Not estabished nor VAT registered in Cyprus
  • Customer requirements
    Taxable person registered for VAT in Cyprus
  • Scope
    Supply of goods with installation in Cyprus

The domestic reverse charge on services is rather exceptional as it would only apply where the B2B general rule on services does not apply. This is, for example, the case for supplies of services connected to immovable property.

Reverse charge on B2B Services in Cyprus

Article 196 of the VAT Directive requires the reverse charge mechanism on all services subject to the B2B rule introduced in art. 44 of the same Directive. The B2B rule locates the transaction where the business customer is located. In case the customer is a private individual, B2C rules locate the transaction where the supplier is located.

According to the general B2B rule, any business resident outside Cyprus supplying services to a Cypriot-based customer will not charge any VAT and the transaction will be reverse charged by the customer.

There are however several exceptions to this rule. Where these exceptions apply, reverse charge is still applicable in Cyprus provided the following conditions are met:

  • Services connected to immovable property are located where the property is located.
  • Passenger transport services will be located where the transport takes places (apportioned if necessary).
  • Catering services are located where the catering takes place.
  • Short-term leasing of means of transport is located where the vehicle put at the disposal of the customer.
  • Access to conferences, fairs, and exhibitions is located where the event takes place.

The general rule may also be deviated where the supplier has a permanent establishment in the country of the customer and the PE has intervened in the supply.

Find out more about the rules for B2B services in the EU here.

Reverse charge on specific goods and services in Cyprus

Domestic reverse charge may also apply on certain domestic supplies of goods and services. This reverse charge applies also to established taxpayers and regardless of the status of the supplier:

  • Construction services, including repair, maintenance and demolition. The customer must be registered for VAT purposes in Cyprus in order to apply the reverse charge mechanism to the transaction.
  • Supply of scrap and waste materials. The customer must be registered for VAT purposes in Cyprus in order to apply the reverse charge mechanism to the transaction.
  • Supplies of mobile phones, integrated circuits and games consoles, PC tablets and laptops. The customer must keep separate records for six years concerning the purchase of these goods.

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