Cyprus’s Value Added Tax (VAT) system

Cyprus’s Value Added Tax (VAT) system is governed by EU VAT directives and local legislation. Below is a detailed breakdown of the VAT registration, filing, and deregistration processes to help businesses comply with local regulations.

VAT registration in Cyprus

Mandatory registration thresholds:

  • Resident businesses: Entities must register for VAT if their taxable turnover exceeds €15,625 threshold within the preceding 12 months or is expected to exceed this threshold in the next 30 days period.
  • Non-resident businesses: Businesses making acquisitions in Cyprus are liable to register if, at the end of any month, the total value of acquisitions from all other member states in the year beginning from January 1 has exceeded €10,251.61.

Voluntary registration:

Businesses with taxable supplies below the mandatory threshold can opt for voluntary VAT registration. This is particularly beneficial for entities anticipating future growth or those wishing to reclaim input VAT on purchases.

Required documents:

  • Completed Form VAT 101 (Application for VAT Registration).
  • Certificate of Incorporation (for companies).
  • ID/passport copies of directors/shareholders.
  • Proof of business activity (e.g., invoices, contracts).
  • Bank account details.
  • Lease agreement (if applicable).

Registration process:

Submit the application and documents to the Cyprus Tax Department.

The Tax Department reviews the application (typically 10–15 working days).

How to VAT filing Cyprus?

    • Monthly: Mandatory for businesses with annual turnover exceeding €1 million.
    • Quarterly: Default for businesses with turnover below €1 million.
    • Annual: Optional for small businesses (requires prior approval from the Tax Department).
  • Deadline: Returns must be filed by the 10th day of the second month following the reporting period (e.g., Q1 return due by May 10).

How to pay Cyprus VAT payment?

  • VAT owed must be paid by the filing deadline.
  • Payment methods: Bank transfer, JCCSmart, or direct debit.

How to get VAT refunds?

  • Excess input VAT can be claimed via the Tax Portal.
  • EU businesses may file refund claims through the EU VAT Refund Portal.

VAT related penalties

  • Late Filing: €100–€200 + €10/day for delays beyond 30 days.
  • Late Payment: 10% penalty + 1.75% monthly interest.

How to VAT deregistration in Cyprus?

When to deregister

  • The business ceases taxable activities.
  • The business is sold/closed.
  • Taxable turnover falls below the threshold (voluntary deregistration).

Reverse charge mechanism
Applies to:

  • Services received from non-resident suppliers.
  • Intra-EU acquisitions of goods.
    The recipient (Cyprus business) accounts for VAT instead of the supplier.

VAT rates in Cyprus

  • Standard rate: 19% (applies to most goods/services).
  • Reduced rates: 5% (e.g., electricity, hotels), 9% (e.g., restaurants, catering).
  • Zero rate: Exports, intra-EU supplies, international transport.

VAT Groups
Related companies may register as a VAT group to file consolidated returns (conditions apply).

Key Notes:

  • Non-resident businesses must appoint a Cyprus-based fiscal representative (except EU/EEA entities).
  • Failure to register on time may result in penalties (€200–€500 + interest on unpaid VAT).