VAT in Cyprus. Registration, filing of reports, and deregistration. Service offer

We provide our clients with the following services in this connection:

• VAT registration (both voluntary and compulsory);
• VIES registration;
• INTRASTAT registration;
• checking if provided documents fully reflect the company’s economic activity in the reporting period (quarter, month);
• keeping VAT records;
• preparation and filing of quarterly VAT returns;
• preparation and filing of monthly VIES and INTRASTAT reports;
• registration for the OSS (One-Stop Shop) when selling electronic goods and services in the EU, distantly selling physical goods within the EU;
• consulting services for all the above matters.

In case your Cypriot company does not need to be VAT-registered any longer due to change in kinds or regions of activity, cessation of activity or another reason, we also provide services in VAT deregistration of a company according to the current Cypriot corporate and tax legislation.

*Detailed information on the cost of services is presented below.

When conducting business using a Cypriot company one should take into account matters related to Value Added Tax (VAT). The tax was introduced in Cyprus in 1992. In most EU countries, including Cyprus, a company is not obliged to register for VAT purposes while its sales turnover in the country is under the registration threshold (in Cyprus, the threshold is 15 600 EUR; in the case of importing goods to Cyprus from other EU countries, the registration threshold is 10 251.61 EUR). Voluntary VAT registration is also possible.

Registration as a VAT payer is compulsory in the following cases:

• there is reason to believe that the taxable turnover will exceed the registration threshold in the following 30 days (for example a contract for a relevant sum has been entered into);
• at the end of the month the taxable turnover for the previous 12 months actually exceeded the registration threshold;
• the company receives services that must be included in financial statements according to the reverse charge method and that exceed the registration threshold.

After a Cypriot company has been VAT-registered and obtained a VAT number, it must quarterly prepare and file a VAT return and pay arising tax within 40 days of the date of the end of the reporting period.

The reporting period for VAT is 3 months appointed by the Tax Department (those may be any months; for example, February, March, and April, and then 3-month periods).

The standard VAT rate in Cyprus is 19%. There are also reduced rates of 5% and 9%, zero rate, and cases of exemption from VAT. For further information on this matter we recommend that you contact our tax specialist (we could arrange such a consultation upon request).

In January 1993, frontier controls on the movement of goods between EU member states were abolished and importers and exporters in EU trade were no longer required to complete customs documentation. Therefore, in order to fill the gap that was created concerning the collection of statistics information, the EU introduced a system known as INTRASTAT. The system was designed to ensure that statistics of intra-EU trade could be collected in a way which would maintain the quality of the statistics and the timeliness of their collection.

The system places the obligation on traders to submit periodic declarations of their trade. The INTRASTAT returns are submitted to the Tax Department each month and concern the movement of goods within the EU.

As from 1 May 2004, each VAT-registered person who exports goods from Cyprus to other EU countries or imports goods to Cyprus from other EU countries (the value of which exceeds the statistical threshold), is obliged to submit each month to the Tax Department an INTRASTAT return for imports (Intrastat Arrivals) and / or exports (Intrastat Dispatches) of goods to / from Cyprus via TAXISnet (electronic tax return filing system).

According to the EU regulations, the Cyprus government defines each year thresholds expressed in annual values of intra-union trade, above which traders must get registered and provide INTRASTAT information. The thresholds are defined separately for imports to Cyprus and exports from Cyprus and may change every year. As INTRASTAT replaced customs declarations in the EU (it is essentially a system for collecting statistics on the movement of goods which only concerns physical movements), it does not apply to services.

For 2023, the «exemption thresholds» were 270 000 EUR for imports to Cyprus from other EU countries and 75 000 EUR for exports from Cyprus to other EU countries, and the «simplification thresholds» were 2 700 000 EUR for arrivals and 5 800 000 EUR for dispatches. For 2024, the «exemption thresholds» are 320 000 EUR for imports to Cyprus from other EU countries and 75 000 EUR for exports from Cyprus to other EU countries, and the «simplification thresholds» are 2 700 000 EUR for arrivals and 5 800 000 EUR for dispatches[1].

The return must be submitted to the Tax Department by the tenth day of the month immediately following the month to which the return relates.

Besides INTRASTAT there is also the VAT Information Exchange System (VIES): if a company trades in goods and services with companies incorporated in other EU countries, it must register for the VIES irrespective of the sales amount, i.e. unlike INTRASTAT, the VIES does not set registration thresholds.

A VIES return must be filed within 15 days after the end of the month in which such sale was made. However, after VIES registration, a VIES return must be filed even if no relevant transactions were made in that month.

In the EU, a VAT number can be checked at the official website of the VIES. This system is open and makes it possible to check validity of VAT numbers of companies incorporated in the EU.

Since 1 January 2015, all taxpayers from the European Union (EU) as well as those outside the EU who provide electronic services in EU countries must pay VAT at the location of the buyer of the service whether or not the buyer is a taxpayer (B2B / business-to-business) or an end user (B2C / business-to-consumer). In other words, the tax must go to the budget of the EU country in which the goods or services in question are consumed.

The MOSS (mini One-Stop Shop) also became effective in the EU on 1 January 2015 to simplify the application of the new legal requirements. The MOSS was designed to facilitate the fulfilment of the VAT registration and payment obligations by taxpayers who provide telecommunication, broadcasting and electronically supplied services to end users (B2C) in EU member states. The simplification was that when using the MOSS, the taxpayer did not have to register for VAT in each EU member state. MOSS registration was voluntary.

On 1 July 2021 the mini One-Stop Shop was extended to lose that “mini” and become just the OSS. The OSS does not only apply to telecommunication, broadcasting and electronically supplied services but also to cross-border supplies to end users in the EU and sale of other services to individuals taxable at the location of the consumer.

So, the One-Stop Shop / OSS is an electronic portal that since 1 July 2021 enterprises can use to fulfil their VAT obligations when selling goods and services to end users in the EU. Enterprises must apply the VAT rate of the EU country to which the goods are sent or in which the services are provided.

The OSS substantially simplifies VAT administration for online sellers and companies that have electronic interfaces throughout the EU as it enables them to:

• electronically register for VAT in one EU country for all distance sales of goods within the EU and provision of services to retail consumers (B2C);
• declare and pay VAT on all supplies of goods and services in a single electronic quarterly return;
• interact with the tax department in their EU country in their mother tongue even if sales take place abroad.

Who can use the OSS portal and for what supplies?

1. Taxable person established in the EU for:
   1. distance selling of goods in the EU;
   2. provision of B2C services in the EU country where it is established;
2. Taxable person not established in the EU for:
   1. distance selling of goods in the EU.
3. Companies that have electronic interfaces (online marketplace, platform, etc.), irrespective of the place of incorporation, that distantly sell goods within the EU.

The new special VAT Import One Stop Shop (IOSS) Scheme is introduced for distance sales of goods imported from non-EU countries. The company is not required to obtain a VAT number in EU countries if the cost of one consignment is under 150 EUR. It enables suppliers that sell cheap goods sent or transported from a non-EU country to customers in the EU to declare and pay VAT. If the IOSS is used, imports to the EU are exempt from VAT. Standard import rules apply to higher-cost goods.

How to register for the OSS?

Each EU country has on online OSS portal where since 1 April 2021 enterprises can register and that can be used in respect of transactions made since 1 July 2021.

This single registration is valid for all the above supplies that meet the criteria.

What has changed since 1 July 2021?

Online sellers

Earlier, EU companies who sold goods to individual buyers located in another EU country had to register for VAT and pay VAT in the country where the buyer was located if the registration threshold was exceeded in that country (35 000 EUR to 100 000 EUR).

On 1 July 2021 that rule was abolished and a new single threshold was set for all EU countries at 10 000 EUR. Until this new threshold is exceeded, national VAT rules can be applied to cross-border sales (including the exemption of small and medium-sized business entities). If the sales exceed this threshold, VAT must be paid in the EU country where buyers are located. In the case of exceeding this threshold, enterprises can register for the OSS and easily declare and pay VAT.

The OSS allows companies to avoid VAT registration in each EU country where it has clients and only register in one country and file quarterly VAT returns electronically. The OSS also makes it possible to pay VAT that will be distributed from the budget of this country and paid via a secure telecommunication network to other EU countries to which, according to the filed return, the company sold goods and provided electronic services.

Electronic interfaces

The European Commission clarifies that an electronic interface should be understood as a broad concept, which could include a website, portal, gateway, marketplace, platform, application program interface (API), etc.

Since 1 July 2021, if an electronic interface is used for distance selling of goods by a seller not established in the EU to a buyer in the EU, the company that owns such an electronic interface is deemed the seller and must fulfil VAT obligations in the countries where goods are sold. To simplify the declaration and payment of this VAT the company that owns the electronic interface now can register in the OSS portal.

When does a company that owns an electronic interface become obliged to pay VAT on sales?

A company that owns an electronic interface becomes obliged to declare and pay VAT when the interface is used for the following supplies of goods performed by the actual seller not established in the EU to buyers in the EU:

• distance sales of goods within the EU;
• supplies of goods in the domestic market.

An electronic interface is deemed to have been used to sell goods when it allows the buyer and the seller to interact via that electronic interface where the final result is the sale of goods to that buyer.

VAT deregistration takes place in the following cases:

• Decrease of sales turnover.

If a registered person informs the Tax Commissioner that their annual taxable sales have gone under 13 668.81 EUR and files a deregistration application, then the authorized VAT inspector after verifying this information deregisters the person effective on the date of filing the notice or another later date agreed by the Tax Commissioner and that person.

• Cessation of taxable sales or the intent to perform them.

If a registered person ceases to perform taxable sales and loses the right to be VAT-registered or does not intend to perform taxable sales any longer, it must inform the VAT Commissioner of that fact within 60 days after the cessation by submitting a deregistration application. If the authorized VAT inspector verifies this information, they will deregister the person effective on the date when the person ceased to perform or lost the intent to perform taxable sales or another later date agreed by the tax inspector and that person.

• Deregistration in the case of distance sales.

A person registered as performing or planning to perform distance sales in Cyprus must file a deregistration application if it does not perform any longer or does not plan to perform distance sales in Cyprus and is not required to be registered in Cyprus for other taxable transactions.

• Deregistration in the case of transactions of purchase of goods*.

A person registered as purchasing or planning to purchase goods in Cyprus must file a deregistration application if it no longer purchases or does not plan to purchase goods in Cyprus.

• Backdated deregistration.

If the authorized VAT inspector makes sure that on a certain date the registered person had neither the right not the obligation to be VAT-registered, the inspector can deregister the person effective on that date.

*Any person purchasing goods in Cyprus that were imported from other EU countries must register:

• at the end of any month in which the total cost of goods purchased by that person in all other EU countries during the year starting on 1 January exceeded the registration threshold of 10 251.61 EUR; or
• at any time when there are reasonable grounds to believe that the cost of goods that the person will purchase during the following 30 days will exceed the registration threshold of 10 251.61 EUR.

If the cost of goods purchased by a person does not exceed the threshold of 10 251.61 EUR, that person can register for VAT voluntarily.

In the case of late registration, deregistration or filing of VAT statements, penalties are imposed on the company and some measures may be taken in respect of directors of the company who failed to fulfil their obligations.

In the case of late VAT registration an 85 EUR penalty is imposed for each month of delay.

Late filing of VAT returns – 100 EUR for each return.

Late payment of VAT – fine of 10% of the VAT amount + penalty charged at an annual rate of 1.75% of outstanding tax amount and fine (penalties are charged for each full month).

Late deregistration – 85 EUR (one-time payment).

Late filing of an INTRASTAT form results in a 15 EUR penalty for each form. If a person commits this violation during a long time (over 30 days), it commits a criminal offence: the guilty person may be imposed with an additional penalty of up to 2 562 EUR.

Late filing of a recapitulative statement for goods and services (VIES form) results in a 50 EUR penalty for each statement (reminder: after registration in the system a VIES return shall be filed monthly). If this violation is committed for a long time, it is considered a criminal offence: if a person is found guilty of this offence, it may be imposed with a penalty of up to 850 EUR.

There are other VAT-related violations and respective sanctions; for further information and evaluation of your situation please contact a tax specialist (we could arrange such a consultation upon request).

To avoid adverse consequences when working with a Cypriot company, please timely fulfil your obligation to file financial statements and tax accounts and pay taxes.

[1] Information on thresholds was collected at the official website of the Cyprus Tax Department.

[2] The cost of services is effective as of July 2024.