Cyprus amends local VAT law; introducing changes for VAT registrations, returns and the reverse charge mechanism for non-resident businesses in Cyprus.
The latest amendments to the VAT Act in Cyprus aim to improve collections and combat fraud at the same time. They are in effect from 20th August 2020 – unless an alternative date has been noted. Below we highlight some of the more relevant VAT changes in Cyprus that affect non-resident businesses and cross-border trade.
VAT Registration Threshold for Non-Established Businesses
Taxpayers who are not established in Cyprus but who make or expect to make taxable supplies in Cyprus in the course of their business, will have the obligation to register for VAT purposes. This is without a VAT registration threshold. The threshold was previously €15,600.
The Reverse Charge Mechanism
The application of local reverse charge mechanism for the construction industry now includes supplies by non-taxable persons. Therefore, any taxable person receiving construction industry supplies by a non-taxable person will have to account for the VAT themselves under the reverse charge mechanism.
Mobile phones and Other Electrical Devices
The changes also include new reverse charge provisions to combat fraud in the sales of mobile phones and other electrical devices. From 1 October 2020, when a taxable person buys any of the following goods, they pay VAT on the supply under the reverse charge mechanism:
- Mobile telephones, being devices made or adapted for use in connection with a licensed network and operated on specified frequencies, whether or not they have any other use
- Integrated circuit devices such as microprocessors and central processing units in a state prior to integration into end user products; in addition to
- Game consoles, tablet PC’s and laptops
In addition to the above, failure to apply the reverse charge provisions in Cyprus will result in the imposition of penalties of between €200 to €4,000 per VAT return. This new penalty regime is in effect from 1 July 2021.
Penalties for late submission of VAT returns
The penalty for the late submission of a VAT return is now €100, from €51.