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Understanding Cyprus VAT: A Guide for Beginners

Like all EU member countries, Cyprus follows the European VAT Directive which sets the rules for VAT registration, compliance, rates, returns and related filings. If you are either a sole trader or limited company looking to get a better understanding of all things VAT, keep reading. We will take you through some of the most commonly asked questions.

What is VAT?

VAT or Value Added Tax is the tax added to the value of all goods and services, both offline and online. The total amount of VAT a consumer has to pay depends on the cost of the product or service. In Cyprus, there are 5 main rates of VAT:
19% standard rate – standard VAT added to goods and services sold in the island
9% lower rate – the VAT rate applicable to certain hospitality, travel and catering services.
5% lower rate – the VAT rate applicable to publishing media, pharmaceutical products, entrance to amusement parks, cinema and theatre tickets, supply of water.
0% zero rate – the VAT rate applicable to the exportation of goods and ship management activities.
Exempt – financial services, medical care, social welfare, education, sports, insurance

Who is required to register for VAT in Cyprus?

Not only Cyprus individuals (physical persons) and companies but international companies operating through subsidiaries and branches, as well as groups of companies are required to pay VAT in Cyprus. Additionally, clubs, foundations, limited liability companies and partnerships are also subject to VAT.

Is VAT registration mandatory?

VAT registration is mandatory once your business crosses the VAT threshold, which is currently at €15.600. If you expect your VAT taxable turnover to cross this threshold or if you had a taxable turnover of more than €15.600 over the last 12 months, you should register for VAT. If your chargeable income doesn’t (or isn’t expected to) cross this threshold, you don’t need to register for VAT, but you can opt-in voluntarily. Bare in mind that the Cyprus Tax Authorities are becoming stricter with the evidence they are willing to accept when registering for VAT voluntarily.

What documents are required for VAT registration?

The Cyprus Tax Department will require the appropriate forms to be completed and submitted with the following documentation:
● Identification cards passports of directors
● Evidence of reaching the VAT registration threshold (where applicable)
● The company’s Certificates of incorporation, Directors, Shareholders and Registered office
● VAT certificate to prove the business is registered for VAT elsewhere in the EU (where applicable)

How is the tax period determined in Cyprus?

The individual or company has to report its VAT position by filing a ‘Tax Declaration’ form (currently is only available in Greek) every three months. If the VAT return is not submitted on time (one month and 10 days after the end of the last month in the quarter), Cyprus authorities will impose a penalty of €100, plus a 10% penalty on any VAT due and not paid.

Our friendly team of tax experts have the knowledge and insights to assist you through the maze of VAT rates and compliance so don’t hesitate to reach out on +357 70 008812 or for additional information or support. We would be happy to help you manage the common challenges of dealing with VAT.

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