Value Added Tax – An Overview of Value Added Tax (VAT) in Cyprus
Value Added Tax (VAT) in Cyprus is a charge on most goods and services sold in Cyprus. Ultimately the person who consumes the goods pays the tax. But to administrate it, it is charged and reclaimed by every supplier down the chain.
The standard rate in Cyprus is currently 15%. There are other rates, depending on the product or service concerned.
To simplify, any business will pay VAT on all purchases (known as input tax) and will charge VAT on sales it makes (output tax). Any business receiving more output than input tax has to pay the difference at least once a quarter. Likewise, if the situation is in reverse, you will be refunded with the difference.
You must register for VAT in Cyprus if the value of your taxable turnover has exceeded the VAT registration threshold (currently €15.600) in a 12-month period, or in the next 30 days alone. That means keeping a close eye on your sales; always looking back over the last 12 months rolling,
It’s important to note the threshold is measured on turnover, not just the profit of your business. The authorities are not concerned whether you make a profit or not where VAT is concerned. When you start up, it’s worth looking ahead at the cost implication to your customers when you have to begin adding VAT to the prices.
In Cyprus you can actually apply to become VAT registered even if your turnover is below this threshold. There are often business benefits for doing this, especially if you have to buy a lot of supplies early on. You will be able to offset that VAT against the VAT you charge and potentially get a small refund. To find out if this is a benefit to you, give your accountant a call.
Once you are VAT registered, you will need to change your invoices and be 100% on top of your paperwork. The Cyprus authorities take a very dim view of businesses that are late with their quarterly VAT returns. It’s certainly worth retaining a bookkeeper to make this process easier for you (and so you can focus on the important things in your business).
As with any tax issues, we advise you to consult an accountant before you decide.
