Amendments to the Cyprus VAT Law (amending Law N.122(I)/2020)

Various amendments have been published in the Cyprus Official Gazette effective as from the 20th of August 2020 (unless specified otherwise). The most significant are the following:

1. Definition of a legal person

An addition has been made in Article 2 of Vat Law 95(I)/2000 as amended to explain the definition of the term “legal person”.

2. Changes in Article 11B

This Article provides that the customer has the responsibility to account for vat when receiving certain services and goods together with services, relating to any civil engineering project. This has been applicable when both the supplier and the customer were taxable persons. The new amendment provides that, when the customer, being a taxable person, receives such services from any person (taxable or not), he is obliged to account for the vat by applying the reverse charge mechanism.

3. Introduction of Article 11E – applicable as from 1st of October 2020

A new Article has been introduced according to which the responsibility to account for vat is shifted from the supplier to the customer, being a taxable person, under the reverse charge mechanism when the purchase is made of the below goods:

  • Mobile phones
  • Integrated circuit mechanisms such as microprocessors and central processing units prior to their integration to goods intended for end-users
  • Game consoles, tables and laptops.

4. Increase in penalties

Vat penalties have been amended as follows:

  • The penalty for failure to submit a vat return by its deadline increases from €51 to €100
  • Failing to apply correctly the reverse charge mechanism in relation to receipt of services under Article 11 and receipt of services and/or goods under the Articles 11A-11E leads to a penalty of €200 for each vat return. The total penalty may not exceed the €4,000 (applicable as from the 1st of July 2021).

5. Vat Refunds

The following amendments have been made regarding Vat refunds:

  • Vat refund applications will be suspended in cases where income tax returns have not been submitted by their due date. Furthermore, no interest will be payable on Vat refund amount for the period the refund application is under suspension.
  • Vat refund applications will not be possible to be submitted, unless approved otherwise by the Tax Commissioner, after 6 years from the end of the relevant vat period.

6. Change of definition of “renovation”

The term “renovation” has been amended to also include “additions” to private residence, hence any person renovating his residence may benefit from the reduced vat rate of 5%.

7. Zero (0%) vat on international transports

This amendment provides that international transport of passengers (from within the Republic to outside of the Republic and vice versa) is subject to 0% vat rate, making the provider of such services liable to register for Vat.

8. Registration of non-Cyprus established persons

This amendment to the first schedule of the Vat Law provides that non-Cyprus established persons carrying out taxable activities in Cyprus are obliged to register for vat without a vat registration threshold.  

9. Registration/de-registration of non-Cyprus established persons

The amendment introduces into the first schedule of the VAT law new provisions relating to the VAT registration and de-registration of “non-established” persons carrying out taxable activities in Cyprus.

A non-established person is a person that does not have a business establishment or any other fixed establishment in the Republic of Cyprus related to the business being carried out.