General Information about VAT
VAT is charged on every taxable supply of goods or services, that is on every supply of goods or services made within the Republic, by a taxable person in the course or furtherance of any business carried on by him, other than a supply exempted in accordance with the provisions of the Law. Additionally, VAT is charged on the importation of goods into the Republic.
VAT is an indirect form of taxation intended to burden consumption expenditure. It is an indirect tax because the trader / taxable person acts as an agent of the VAT Service, collecting VAT from customers / consumers on its behalf and returning the tax to the Republic.
VAT is imposed on supplies and collected at every stage of the production, transportation and distribution of goods and services.
Taxable person
Tax chargeable on any supply of goods or services is a liability of the person making the supply. Taxable person is every person, natural or legal, resident in the Republic or abroad, who carries on a business and has registered as such in the VAT Register or he is liable to be registered according to the provisions of the VAT legislation.
The term “business” has a very broad sense and means any economic activity carried out in an independent way regardless of the purpose or results of such activity. The term “business” includes any trade, profession or vocation.
Employees or other natural persons who are bound to any employer by a contract of employment or by other legal relation, which creates relationship of employer and employee, are not considered to be carrying out an economic activity and therefore they are not considered as taxable persons.
In addition the VAT legislation provides that Governmental Authorities, Local Authorities and Public Authorities are not deemed to be taxable persons for the supplies of goods or services made by them in carrying out their mission. There are, however, certain supplies explicitly defined in the legislation, for which the aforementioned persons are considered taxable persons.
The supplies of goods or services made by a person who is not considered as taxable, are not VAT chargeable. On the other hand when this person buys goods or services, he is charged with VAT as if he was the final consumer.
Supplies of goods and services
VAT is charged on every taxable supply of goods or services, that is on every supply of goods or services made within the Republic, by a taxable person in the course or furtherance of any business carried on by him.
As a general rule a supply of goods or services is considered to be taxable if made for consideration. Nevertheless, the Law provides that specific supplies are considered to be taxable even if made for no consideration.
The supply of any goods is treated as made in the Republic if the goods are in the Republic. The supply of any services is treated as made in the Republic if the person supplying them is in the Republic.
As an exception, the legislation provides that the supply of certain services should be treated as taxable even if made by a person who is in another country and received by a person who registered in the Republic.
Place and time of supplies of goods and services
The supply of any goods is treated as made in the Republic if the goods are in the Republic. The supply of any services is treated as made in the Republic if the person supplying them is in the Republic.
As an exception, the legislation provides that the supply of certain services should be treated as taxable even if made by a person who is in another country and received by a registered person who is in the Republic.
A supply of goods is treated as taking place at the time of the removal of the goods or at the time when the goods are made available to the person to whom they are supplied. A supply of services is treated as taking place at the time when the services are performed.
As an exception to the above, if an invoice is issued or a payment is received before or an invoice is issued within 14 days after the removal of the goods and the performance of services, the supply of goods or services is treated as taking place at the time the invoice is issued or the payment is received.
Registration
Liability to register
Taxable Supplies
According to the VAT legislation, every person making taxable supplies is liable to be registered in the following cases:
(i) At the end of any month, if the value of his taxable supplies in the period of one year then ending has exceeded €15.600
(ii) At any time, if there are reasonable grounds for believing that the value of his taxable supplies in the period of thirty days then beginning will exceed €15.600.
A person who by virtue of (i) is liable to be registered, is obliged to notify the VAT Commissioner of his liability by submitting an “Application for Registration in the VAT Register” (Form VAT 101) to the local VAT Office, within thirty days of the end of the relevant month and his registration is effective as from the end of the month following the relevant month or from such earlier date as may be agreed between the person and the VAT Officer.
If a person is liable to be registered by virtue of (ii), he is obliged to notify the VAT Commissioner of his liability by submitting an “Application for Registration in the VAT Register” (Form VAT 101) to the local VAT Office, before the end of thirty-day period to which the liability arises and the registration is effective as from the beginning of this period.
Failing to comply, the person is liable to a levy of €85 for every month or part of month of the delay or refusal or omission.
It is clarified that the liability of a taxable person to be registered exists whether or not he has submitted an application for registration. The VAT Commissioner is authorized by the Law to register a taxable person retrospectively, that is from the date that person was, according to the Law, liable to registration. If a taxable person liable to registration neglects to be registered, he is still liable to pay tax on all the supplies he made from the date he was liable to registration.
It is noted that persons making zero-rated supplies are also liable to be registered.
Entitlement to register
A person not liable to be registered is entitled to be registered in the following cases:
(i) Voluntary registration
If a person makes taxable supplies the value of which does not exceed the thresholds that would make him liable to be registered, then he is entitled to apply for voluntary registration by submitting an “Application for Registration in the VAT Register” (Form VAT 101).
(ii) Intending traders
If a person engages in a business and intends to make taxable supplies of goods or services, he is entitled to apply to be registered as intending trader by submitting an “Application for Registration in the VAT Register” (Form VAT 101) .
The registration is effective from the date of the application or any other previous date as may be agreed between the VAT officer and the taxable person.
Additionally, farmers are entitled to voluntary registration, regardless of the value of the supplies they make in the period of one year, which consist of agricultural products of their own produce or agricultural services.
Relevant to the above is the information leaflet 3 “Registration in the VAT Register”.
Acquisitions
Any person making acquisitions in Cyprus is liable to be registered:
(a) at the end of any month , the total value of that person´s acquisitions from all other member States in the year beginning from 1 January has exceeded the registration threshold of €10.251,61; or
(b) at any time that there are reasonable grounds to believe that the value of the acquisitions that person would be making in the following 30 days alone will be over the registration threshold of €10.251,61;
A person making acquisitions according to the previous paragraph is liable to notify his/her obligation to be registered on Form VAT 106. Failure to comply, renders the person liable to a levy of €85 for every month of the delay or refusal or omission.
Where the acquisitions of any person does not exceed the threshold of €10.251,61, then that person may register for making acquisitions in Cyprus voluntarily.
Further information on Acquisitions may be found in information leaflet 3A “Acquisitions and Distance Sales”.
Distance Sales
Any person making distance sales (sales from a person established in another member State), is liable to register for VAT purposes in Cyprus and account for VAT in Cyprus, if in the period starting from the 1st January of the year, the value of distance sales exceeds €35.000. This person is liable to notify liability to register on Form VAT 105. Failure to comply, renders the person liable to a levy of €85 for every month of the delay or refusal or omission.
There is also the right for voluntary registration when the threshold is not reached.
Further information on Acquisitions may be found in information leaflet 3A “Acquisitions and Distance Sales”.
Cancellation of registration
When and how is the registration of a person cancelled;
Registration is cancelled in the following cases:
(i) Cancellation of registration due to decreasing business turnover:
Where any registered person notifies the VAT Commissioner that the value of taxable supplies in one year has fallen below €13.668,81 and applies for cancellation of his registration, then αν authorised VAT officer, if satisfied of this fact, shall cancel the registration with effect from the date of the notification or from any other later date as may be agreed between the VAT Commissioner and that person.
(ii) Cancellation of registration due to termination of taxable supplies or termination of the intention to make taxable supplies
When a registered person ceases to make taxable supplies and is not entitled to remain registered or ceases to have the intention to make taxable supplies, he has to notify the VAT Commissioner of that fact within 60 days of the date of the termination, by submitting an “Application for Cancellation of Registration” (Form VAT 204). Failing to comply, the person is liable to a levy of £50. If an authorised VAT officer is satisfied of the fact of the termination he shall cancel the registration with effect from the date that the person ceased to make taxable supplies or ceased to have the intention of making taxable supplies or from any other later date as may be agreed between the VAT officer and that person.
(iii) Retrospective cancellation of registration
When the VAT officer is satisfied that on the day when a registered person was neither entitled nor liable to be registered, the VAT officer can cancel the registration and the cancellation takes effect as from the above date.
Further information on Deregistration for the cases referred to in paragraphs (i) to (iii) above, may be found in information leaflet 4 “Deregistration”.
(iv) Deregistration in the case of Distance Sales
A person registered for making or intending to make distance sales in Cyprus, is liable to notify deregistration when he no longer makes or intends to make distance sales in Cyprus and he is not liable to register in Cyprus for nay other taxable transactions.
(v) Deregistration in the case of Acquisitions
A person registered for making or intending to make acquisitions in Cyprus, is liable to notify deregistration when he no longer makes or intends to make acquisitions in Cyprus.
Further information on Deregistration for the cases referred to in paragraphs (iv) and (v) above, may be found in information leaflet 3A “Acquisitions and Distance Sales”.
Transfer of Going Concern
The transfer of a business as a going concern is outside the scope of VAT if all of the following apply:
- All, or an autonomous part, of a business (assets, stocks, goodwill) is transferred
- The transferor is a taxable person
- The transferee is or becomes a taxable person
- The transferee continues, without a substantial pause, to carry out a business of the same nature
In this case the transferor must not charge any amount as VAT and the transferee is not allowed to credit any amount as input tax, even if the transferor has by mistake charged an amount as VAT. If as a result of the transfer the transferor terminates taxable supplies, he must notify within sixty days the VAT Service by submitting an “Application for Cancellation of Registration” (Form VAT 5). Furthermore, if the transferee becomes liable to be registered, then he has to notify within thirty days the VAT Service by submitting an “Application for Cancellation of the VAT Registration” (Form VAT 204).
If both the transferor and the transferee wish, they may submit an “Application for the Transfer of VAT Rights and Obligations” (Form VAT 103), upon which, if approved, the transferor has to hand over his accounting books and records to the transferee and the transferee will take up all previous rights and obligations of the transferor. The transfer of rights and obligations is allowed if the whole of the business is transferred, the transferor’s registration is cancelled and the transferee is not already a registered person but becomes liable to be registered or is registered voluntarily. By submitting the aforementioned form, the registration of the transferor will automatically be cancelled therefore there is no need for submitting an “Application for Cancellation of the VAT Registration” (Form VAT 204). However, the transferee still has to submit an “Application for Registration in the VAT Register” (Form VAT 101) in order to be registered.
Relevant to the above is the information leaflet 7 “Transfer of Going Concern
VAT Rates
On which supplies is VAT charged at the standard rate of 15%, at the reduced rates of 5% and 8%, which supplies are zero-rated and which supplies are exempted?
VAT is charged on every supply of goods or services at the standard rate of fifteen per cent (15%). The reduced rate of 5% is imposed on the supply of coffins, services supplied by undertakers, services of writers, artists, on the supply of fertilizers, foodstuff for animal, live animals, seeds, non bottled water, newspapers, books, periodicals, certain products for persons with special need, ice cream, certain types of nuts (salted etc), transport of passengers and their accompanying luggage with urban and rural buses, the letting of camping sites and caravan parks.
As from 19 October 2007, the following are taxable at the reduced rate of 5%:
· hair salon services,
· repair and maintenance of private households (based on specific condition)
· animal feedstuff
· confectionary product
· bottled water
· Juices
· pharmaceutical products that were previously taxed at the standard rate of 15%
· entry fees to theaters, cinemas at sports events, luna parks and similar cultural events
As from the 1st August, 2005, the following are taxable at the reduced VAT rate of 8%: transport of passengers and their accompanying luggage within Cyprus, with urban, suburban and rural taxis as well as with tour and suburban buses.
The VAT reduced rate of 8% is also imposed as from the 1st January, 2006 on the services of restaurants and the supply of food in the course of catering except the supply of alcoholic beverages wine and beer, which is chargeable at 15%, as well as on the provision of accommodation in the hotel sector or in sectors with a similar character. As from the 1st January, 2006, the transport of passengers and their accompanying luggage by sea, within Cyprus is taxable at the VAT rate of 8%.
Certain supplies of goods or services are zero-rated; the supply, hiring and repair of sea-going vessels and aircrafts, the supply of services to meet the direct needs of sea-going vessels, the supply of goods entered into customs regime, the supply of medicines and food – except the supply of food in the course of catering. In addition, a supply of goods is zero-rated if the VAT Commissioner is satisfied that the goods have been exported or supplied to a registered person in another member state.
No VAT is charged on supplies of goods or services which are exempted under the VAT legislation; leasing or letting of immovable property, the supply of immovable property with the exception of buildings or parts of buildings and the land on which they stand if the application for a building permit was submitted after the 1st May, 2004, financial services, lotteries, medical care, social welfare, education, sports, cultural services, insurance transactions etc.
Since the establishment of V.A.T. legislation on the 1/7/1992 the changes for V.A.T. rates are shown in the table that follows:
V.A.T. Rates
Dates / Periods Standard Rate Reduced Rate 1 Reduced Rate 2
01/07/1992 - 30/09/1993 5% --- ---
01/10/1993 - 30/06/2000 8% --- ---
01/07/2000 - 30/06/2002 10% 5% ---
01/07/2002 - 31/12/2002 13% 5% ---
01/01/2003 - 31/07/2005 15% 5% ---
01/08/2005 - today 15% 5% 8%
Taxable Value
VAT is charged on the value of any taxable supply of goods or services. The value of every taxable supply of goods or services is taken to be the amount paid for this supply excluding the tax. If on this amount the tax chargeable is added, the result is called consideration; that is the whole amount paid for the supply including VAT.
Under certain circumstances, explicitly defined in the Law, the value of a supply is taken to be its open market value.
In the importation of goods VAT is charged on the taxable value of imported goods which includes the dutiable (Customs) value, duties and other taxes, levies and charges collected by reason of importation of goods and the costs by way of importation of goods.
Importation of goods
VAT is charged on all imported goods regardless of the importer being a taxable person or not.
In the importation of goods of goods, VAT is considered to be an imports duty and is charged as if it were a duty of Customs.
Customs Enactments are applied on imported goods with such exceptions or adaptations as regulated by the VAT legislation.
In certain cases, the importation of services, that is the supply of services from abroad to Cyprus, is treated as a taxable supply of services made by the recipient, if he is a taxable person.
Tax returns, tax payment and credit
Every taxable person is liable to submit Tax Declarations (Form VAT 4) and pay the tax that may be due, usually every three months. Tax declarations relate to certain tax periods that are made known to the taxable person at the stage of his registration. The VAT Service dispatches tax declarations to the last known address of a registered person. The liability to submit tax declarations exists regardless of the relevant form being received or not by the taxable person. Thus, if he has not received it on time, he should contact the VAT Office of his district and ask for the form to be reissued.
On the tax declarations, taxable persons calculate their output tax (the tax on supplies of goods or services they made during the relevant tax period and the VAT calculated on the acquisition of goods from other member States) .
Books and Records
What books and records must be kept and for how long?²
According to section 43 and the Tenth Schedule of the VAT Law, every taxable person must keep books and records and preserve them for at least seven (7) years after the completion of the entries or deeds written therein, unless the VAT Commissioner, by relevant notification to the person concerned, fixes otherwise. Every taxable person has to keep books and records of all the taxable supplies of goods or services he makes or receives for the purpose of his business and for intracommunity transactions he makes. Books and records must be kept up-to-date, with adequate information and in a manner that enables taxable persons to use them to calculate the payable or claimable amount of tax and fill in tax declarations. Books and records must also be kept in a manner that VAT officers can easily examine them in order to verify VAT declarations but this manner should not be contrary to business practices. In addition VAT legislation provides for special arrangements concerning keeping books and records in connection with the special regimes i.e. Retail Schemes, Profit Margin Schemes etc.
Taxable persons must keep and preserve the required books and records at the premises of the business.
Relevant to the above is chapter VIII of the VAT Guide, information leaflet 10 and information leaflet 12A on the Margin Scheme for Tour Operators. published by the VAT Service.
VAT Invoice
When is a VAT invoice issued;
As a general rule, every registered taxable person,
- who makes taxable supplies of goods or services to other taxable persons in Cyprus
- makes a supply of goods or services, other than an exempt supply, to a person in another member state
- receives a payment on account from a person in another member state for a supply that he has made or intends to make, is required to provide them with VAT invoices.
This obligation does not apply if the supply involved is:
- zero-rated;
- made for no consideration;
- made by a taxable person that uses the Profit Margin Scheme.
Registered retailers may issue the "retail invoice", if the customer is a taxable person and asks for a tax invoice, provided that the consideration is below €85,43.
Tax Assessment
VAT is a self-assessed form of taxation. VAT is assessed via the act of submission of tax declaration.
If, however, the VAT Commissioner concludes that the true facts are different, the amount of tax due is defined and assessed, under the provisions of the VAT Law and the interested person is informed accordingly.
A tax assessment is issued where the VAT Commissioner concludes that:
- a taxable person has failed to make the returns required,
- a taxable person has failed to keep any necessary documents and afford facilities to verify such returns,
- it appears such returns are incomplete or incorrect,
- an amount was paid to a taxable person in the form of refund of tax and such amount should not have been paid,
- an amount was credited in the interest of a taxable person and such amount should not have been credited,
- a taxable person fails to give account for any goods he acquired or imported in the course or furtherance of his business.
The tax assessment is an executory administrative act of the VAT Commissioner, for which an objection may be submitted to the Minister of Finance or an appeal to the Supreme Court may be filed.
Recovery of tax and debts
The VAT Commissioner may recover the tax due by a civil action, forfeiture and seizure of goods and – in the case of a debt due by a company of limited liability – by filing a petition for liquidation.
Powers of control and investigation of tax fraud
The VAT Commissioner and authorized VAT officers are empowered by the VAT legislation, among others, to:
· enter premises
· enter and inspect premises
· require the production of information
· inspect, copy and remove documents
· take samples of goods
· require security
Certain acts or omissions relevant to VAT constitute offences, for which penalties are imposed by the courts, over and above the administrative fines imposed by the VAT Commissioner. The powers of the VAT Commissioner in connection with the investigation of offences extend to searching the premises – with or without a warrant – and seizing conclusive evidence.
Special Regimes – Schemes
VAT legislation provides for special arrangements that establish Special Regimes for specific persons.
The Special Regimes-Schemes according to the VAT legislation are the following:
· Special Regime for Farmers
. Special Regime for Taxis
· Special Regime for Travel Agencies and Tour Operators
· Special Regime for Retailers – Retail Schemes
Other special arrangements are:
· Rrofit Margin Schemes for Second-hand Goods Scheme
· Retail Export Scheme
Farmers
Farmers do not fall within the provisions of VAT Law as regards the supply by them of unprocessed agricultural products of their own produce or agricultural services. However, farmers are entitled to voluntary registration. They may also, under certain conditions be eligible for the Special scheme for farmers.
Special scheme for urban taxis
The special scheme is an alternative system in relationship with the operation of the normal VAT system, for the registration of the owners of urban taxis. Persons that own up to two licenses for use of an urban taxi and work exclusively for the transportation of passengers and their luggage are mandatory registered in the special scheme for taxis.
Tour operators and Travel Agencies
Under this scheme the method of calculation of the taxable value for travel agencies deviates from the general rules. As taxable value of package tours is taken to be the travel agent΄s gross margin resulting after the deduction from the total amount paid of the actual cost to the travel agent.
Retail Schemes
Under these schemes the method of calculation of the taxable value and the output tax of supplies of goods or services deviates from the general rules. Additionally, special arrangements are provided concerning the books and records that the retailers must keep. The use of a scheme by retailers is optional.
Profit margin for Second-hand Goods and works of art
Under this scheme again the method of calculation of the taxable value for the supply of eligible goods deviates from the general rules along with the books and records that a taxable person is required to keep. The tax due is taken to be included in the gross margin of the trader, provided that such margin has been realized. The use of the scheme is optional for the trader.
Retail Export Scheme
The operation of this scheme is optional for the registered retailer. Under the scheme, a supply of goods, on which the positive rate of VAT was originally imposed, is converted to a zero-rated supply, through correction of the VAT Account, after the retailer receives an invoice, certified by the Customs that the goods were exported.
Objections
If any person disagrees with a decision of the VAT Commissioner i.e. for registration, imposition of levy, tax assessment etc he may file:
(i) An objection to the VAT Commissioner
According to section 51A of the Value Added Tax Laws of 2000 through 2004 any person may appeal in writing to the VAT Commissioner within 60 days from the date of the notification to this person of a VAT assessment. The appeal must be written and supported by the relevant evidence.
(ii) A request to the VAT Commissioner to reconsider
Based on section 29 of the Constitution a person may ask the VAT Commissioner to reconsider a decision or an act of the VAT Service (excluding the VAT assessment). The request must be written and supported by the relevant evidence.
(iii) An objection to the Minister of Finance
According to section 52 of the Value Added Tax Laws of 1990 through 2000 any person may appeal in writing to the Minister of Finance within 30 days from the date of the notification to this person of the relevant decision of the VAT Service, provided that the person has paid all the amounts payable by him or has deposited a money deposit to the VAT Commissioner. Also according to section 53 of the Value Added Tax Laws of 2000 through 2004 any person may appeal in writing to the Minister of Finance within 60 days from the date of the notification to this person of the relevant decision of the VAT Service, provided that the person has paid all the amounts payable by him or has deposited a money deposit to the VAT Commissioner The Minister examines the legality as well as the substance of the tax dispute.
(iv) An appeal to the Supreme Court
Based on section 146 of the Constitution, any person may file an appeal to the Supreme Court against an executory administrative act of the VAT Commissioner within 75 days from the date of the notification to this person of the relevant act. If the above person has already filed an objection to the Finance Minister he will have to wait for the decision of the Minister and if he continues to disagree, then he may file an appeal to the Supreme Court against the decision of the Minister.
(v) Complain to the Ombudsman
There are no time limitations for the submission of a complaint. The Ombudsman may examine the substance of the tax dispute and conduct any investigation necessary to decide on the complaint under examination.
Rights
Under the VAT Legislation a taxable person has, among others, the following rights:
(i) Entitlement to registration: If a person makes taxable transactions the value of which does not exceed the thresholds of registration as defined in the legislation, he is entitled to apply to be registered voluntarily.
(ii) Entitlement to cancellation of registration: Where any registered person notifies the VAT Service that the value of taxable supplies in one year has fallen below €13.668,81 and the VAT officer is satisfied of that fact, then the registration is cancelled.
(iii) Right to deduct or refund of input tax: under the prerequisites set by the legislation.
(iv) Right to file an objection to the Minister of Finance. Additionally, right to file an objection to the VAT Commissioner, a request to the VAT Commissioner for reconsideration of a decision (Section 29 of the Constitution), an appeal to the Supreme Court (Section 146 of the Constitution), a complaint to the Ombudsman.
(v) Right to choose a Special Scheme: Retail Schemes, Second-hand Goods Schemes, Retail Export Scheme, Special Schemes for Farmers.
Obligations
According to the VAT legislation, every taxable person is liable, among others, to:
(i) Be registered if the value of taxable supplies of goods or services exceeds the thresholds as set by the VAT Law.
(ii) Notify their liability to be registered within 30 days of the date that the liability emerged.
(iii) Notify the termination of taxable supplies or of the intention to make taxable supplies within 60 days of the date of the termination.
(iv) Pay a levy of €85 for every month or part of month of the delay or refusal or omission to comply with point (i) and (ii) above and €85 for the delay or refusal or omission to comply with point (iii) above.
(v) Submit tax declarations not later than the 10th day following the end of the month following the end of each tax period.
(vi) Pay the tax due not later than the 10th day following the end of the month following the end of each tax period.
(vii) Pay a levy of €51 for the delay or refusal or omission to submit a tax return.
(viii) Provide other taxable persons with tax invoices.
(ix) Retailers must issue a tax invoice, if the customer is a taxable person and asks for one and if the consideration exceeds €85.
(x) Issue tax invoices at the prescribed time.
(xi) Pay any amount that has been assessed or reassessed by the VAT Commissioner.
(xii) Produce certain documents relating to input tax upon request by the VAT Commissioner.
(xiii) Give such amount of security, upon request by the VAT Commissioner, for that amount of tax payment.
(xiv) Not make any taxable supplies, if the VAT Commissioner requires so, unless the taxable person furnishes the VAT Commissioner with any form of security for securing payment of the tax concerned.
(xv) Pay any amount that has been charged as VAT on an issued invoice.
(xvi) Pay an additional levy equal to 10% of the amount which the taxable person neglects or refuses to pay.
(xvii) Pay interest at 9% in cases where the taxable person continues to neglect or refuses payment of any amount due after 30 days.
(xviii) Keep books and records for the purposes of verifying the supplies of goods or services which the taxable person makes or receives.
(xix) Provide every facility that may be required by the VAT Commissioner for the purpose of examination by any person authorized by the VAT Commissioner of any books and records.
(xx) Preserve books and records for at least seven years, unless the VAT Commissioner fixes otherwise.
(xxi) Pay a levy of €85 for the omission to comply with the above – points xix and xx.
(xxii) Notify the VAT Commissioner of such facts and information in respect of any change or alteration of circumstances and conditions of the business.
(xxiii) Furnish to the VAT Commissioner such information relating to the goods or services or the supplies of goods or services or importation.
(xxiv) Produce for inspection and search at such time and place as may be reasonably required any documents relating to the business.
(xiv) Pay a levy of €85 for the omission to comply with the above – points xxiii – xiv.
(xxvi) Provide samples of goods to enable the correctness of their tax treatment to be examined.
Foreign enterprises doing business in Cyprus
If a trader is not resident in the Republic – in the case of a natural person or the legal person is based abroad – carries out a business in Cyprus and is liable or entitled to registration in the VAT Register of the Republic, the VAT officer may appoint a person who is resident in the Republic and is recommended by the trader, to act on behalf of the trader for VAT matters (a VAT representative) or require security for the protection of public revenue.
It should be noted that for persons resident in another member state or legal persons incorporated in another member state, there is no obligation to appoint a Vat representative.
ZERO-RATING OF INTRA-COMMUNITY SUPPLIES
Prior to 1st May 2004 (accession of Cyprus in the EU) all exports of goods to destinations outside Cyprus, qualified for the zero rate of VAT. This continues to be the case for exports to countries outside the EU. However, under the EU VAT arrangements, as from that date a Cypriot trader registered for VAT may zero-rate the supply of goods to a customer in another Member State (MS) provided that:
- The customer is registered for VAT in the other MS,
- The customer’s VAT registration number is obtained and retained in the supplier’s records,
- This number, together with the supplier’s VAT registration number is quoted on the sales invoice,
- The goods are dispatched and transported to the other MS,
- The supplier retains appropriate commercial documentary evidence that the goods have been removed from Cyprus,
- The supplier submits the Recapitulative Statements to the VAT Service.
PURPOSE OF THE VIES SYSTEM
VIES (VAT Information Exchange System) contributes to the effectiveness of this new VAT regime and provides a mechanism for preventing and deterring of the abuse of the VAT zero-rating provisions on intra-community trade of goods and detecting unreported movements of zero-rated goods between MS. An integral part of the system is a requirement that each MS must store and process specific information which it collects from its traders about their supplies to other MS.
OBLIGATIONS OF TRADERS UNDER VIES
Under the EU and the national legislation regulating VIES, any VAT-registered person who supplies goods to a VAT-registered person in another MS has to submit the Recapitulative Statement declaring all the intra-community supplies made during a calendar quarter. The Statement must be submitted to the VAT Service until the tenth day of the second month following the calendar quarter to which the statement relates. If a person fails to comply, this person is liable to a penalty of fifty one euro (€51) for every month of non-compliance, the maximum being three months. Non-compliance that continues after the three months, constitutes a criminal offense and a convicted person may incur an additional fine of up to two thousand five hundred sixty two euro (€2562).
Moreover, the relevant legislation provides that the submitted Recapitulative Statement should not be incomplete or contain inaccuracies, such as wrong VAT numbers of the customers in other MS. If a submitted Recapitulative Statement is incomplete or contains inaccuracies, the taxpayer should submit a corrective statement within two months following the calendar quarter to which the Recapitulative Statement relates. In opposite case, a penalty of fifty one euro (€51) is imposed.
Therefore, taxpayers are urged to check the validity of the VAT number given to them by their customers in other MS either by contacting the VIMA Section of the VAT Service or via the relevant web page of the EU at the following address:
http://www.europa.eu.int/comm/taxation_customs/vies/en/vieshome.htm
The traders are advised to study the VIES Trader’s manual, in which they may find more detailed information about the Recapitulative Statement. The manual is written in Greek and can be found in the «Publications» section.
PURPOSE OF THE INTRASTAT SYSTEM
In January 1993, frontier controls on the movement of goods between EU member states were abolished and importers and exporters in EU trade no longer were 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 internal 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 obligation on traders to submit periodic declarations of their trade. The INTRASTAT returns are submitted to the VAT Service each month and concern arrivals from, as well as dispatches to other member states.
OBLIGATIONS OF TRADERS UNDER INTRASTAT
As from May 1st 2004, each VAT-registered person who supplies goods to or/ and receives goods from other member states (the value of which is exceeding the statistical threshold), is obliged to submit the INTRASTAT return for arrivals as well as dispatches to the VAT Service each month.
According to the EU regulation, the Cyprus government defines each year thresholds expressed in annual values of intra-Community trade, below which parties are exempted from providing any INTRASTAT information. The thresholds are defined separately for arrivals and dispatches and they may change each year. For 2009, the «exemption thresholds» are €55.000 for arrivals and €55.000 for dispatches, and the «simplification thresholds» are €1.500.000 for arrivals and €1.200.000 for dispatches. For 2010, the «exemption thresholds» are €75.000 for arrivals and €65.000 for dispatches and the «simplification thresholds» are €1.500.000 for arrivals and €1.200.000 for dispatches.
The return must be submitted to the VAT service until the tenth day immediately following the end of the month to which the return relates.
For Intrastat declarations of periods until 31/12/2009, if a person fails to comply, this person is liable to a penalty of eight euros (€8) for each working day of non-compliance, the maximum being thirty working days. As from 1/1/2010, if a person fails to comply, this person is liable to a penalty of fifteen euros (€15). Non-compliance that continues after the thirty working days constitutes a criminal offence and a convicted person may incur an additional fine of up to two thousand five hundred and sixty two euro (€2.562).
Also, according to the amendment of the Law N. 38(I)/2004, for Intrastat declarations of periods until 31/12/2009, if a person submits the INTRASTAT return and this report contains substantial omission and/ or inaccuracy and does not inform the VAT Commissioner within sixty days of the end of the relative period, this person is liable to a penalty of fifty one euro (€51). As from 1/1/2010 according to the amendment of the Law N. 38(I)/2004, for Intrastat declarations of periods until 31/12/2009, if a person submits the INTRASTAT return and this report contains substantial omission and/ or inaccuracy and does not inform the VAT Commissioner within sixty days of the end of the relative period, this person is liable to a penalty of fifty one euro (€15).
AGENTS
A trader may appoint an agent to make and submit the INTRASTAT return on his behalf. Under the national legislation, if an agent is appointed, the agent must be a forwarder as defined by the article 74 of the Customs Code Law 2004. It is particularly noted that the nomination of the agent does not, in any way, diminish or alter the legal obligations of the trader concerned. Any pursuit action initiated by the VAT Service will be concentrated on the trader concerned, not the agent.
The traders are advised to study the INTRASTAT trader’s manual, in which they can find more detailed information about the completion of the INTRASTAT return. The traders can find the manual in the chapter ‘’INTRASTAT’’. The manual is written in Greek.
The above information was obtained from the relevant government department.