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Amendments to VAT Law in Cyprus – Effective as of 1 October 2020

On 20 August 2020, the Cyprus Parliament passed the below amendments to the VAT law which officially came into force immediately after its publication in the Official Gazette of the Republic.

A new definition of “legal person”

A new definition of “legal person” is introduced for the purposes of the completeness of the legislation.

Article 11B

The phrase “any person” replaces the phrase “taxable person”. As a result, the taxable person receiving services for which he is liable for a reverse charge must account for VAT, regardless of whether the person providing these services is registered for VAT or not.

New Article 11E on VAT reverse charge
The reverse charge system is applied for deliveries between taxable persons related to the following goods:
– mobile phones,
– integrated circuits, such as microprocessors and central processing units
– Game-consoles, PC tablets, and laptops.
The above amendment is effective from 1/10/2020 and applies to all transactions made with a taxable person in the Republic for these goods. The obligation to the buyer is mandatory regardless of whether the seller is registered for VAT purposes.

VAT refunds

The Tax Commissioner may suspend the payment of VAT for which a taxable person has requested a refund if all relevant tax returns have not been submitted by the time of the VAT refund claim. Additionally, no interest will be paid during the period for which the refund is suspended.
VAT refund applications can be submitted within six years from the end of the relevant tax period in which the refund was created. Exceptions to this can be allowed if approved by the Tax Commissioner.

Penalties

Failure to submit a Value-added Tax return within the permitted timeframe will result in a penalty of €100 instead of €51.
In addition, a penalty of €200 will be imposed for each tax period where the reverse charge provisions are not applied correctly. The charge will not exceed a total of € 4,000.

Deadline for submitting objections

The period of 60 days within which the submission of an objection to the Tax Commissioner, is legislated.

Amendment of paragraph 2 of Article 54A of the VAT law

This concerns the procedures followed by the Tax Council and the amendment essentially reflects the already existing practice of the Commissioner or his representative presenting their views to the Tax Council.

Registration of a person not established in the Republic

New provisions are introduced in relation to the registration of a person not established in the Republic who carries out taxable activities in the Republic.
These new provisions concern the registration obligations only for persons not established in the Republic who provide services in the Republic whose place of supply is the Republic and whose services are provided to non-taxable persons. In relation to these cases, there is no registration threshold.

Change to the definition “renovation”

The term “renovation” is revised and includes, in addition to improvements and repairs to a private home, any “addition” that is made to the house. The general conditions for the application of the reduced rate remain the same.

Zero rate for international transport

The new amendment stipulates that the provision of passenger transport services from the Republic, abroad, and vice versa, to the extent that it takes place in the Republic, is subject to a zero rate. Such services relate to the transport of passengers to airports and ports. With this addition, the person providing the relevant services will be required to register for VAT purposes.

Amendment of Article 14

The reference to this provision in “building” is replaced by the phrase “immovable property” as a more correct reference and does not change anything in the existing interpretation of the provision.

Contribution by Nikos Christoforou (P. Constantinou & Co Ltd is an audit firm based in Limassol, Cyprus)

Source: P. Constantinou & Co Ltd

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