Cyprus publishes amendments to VAT law

Cyprus publishes amendments to VAT law

According to the latest reports, Cyprus published the amendments to the VAT Law in the Official Gazette on 20 August 2020. The main amendments are summarized as follows:

1. The new definition of “legal entity” for VAT purposes. “Entity” includes a company, partnership, association, or club, whether formed in accordance with the provision of any law or regulation;
2. The chargeback rules for services and ancillary goods for the construction, demolition, repair, or maintenance of any civil engineering project are amended. Customers should apply a reclaim (take into account VAT themselves) when such services are provided by someone, and not only when the supplier is subject to value-added tax, as previously required;
3. A new article 11E is introduced, providing that if persons registered as VAT payers purchase the following types of high-value goods for business purposes, they must apply a rebate:
   – mobile phones;
   – integrated circuit mechanisms such as microprocessors and central processing units prior to their integration into end-user products;
   – game consoles, computer tablets, and laptops;
4. With regard to the aforementioned refund for high-value goods, it is envisaged that the purchase of such goods by persons not registered as a VAT payer will be taken into account when determining whether the registration threshold for VAT purposes has been met;
5. Changes to VAT refund rules include:
   – the refund will be suspended without interest if the tax return has not been filed by the time the VAT refund is applied;
   – the deadline for applying for a refund is 6 years from the end of the relevant tax period unless the Tax Commissioner approves the exception.
6. Some administrative rules have been amended, including:
   – the penalty for late filing of the VAT return has been increased from 51 euros to 100 euros, and in cases where the reverse charging rules are not applied correctly, a penalty of 200 euros is introduced per return, with the maximum fine being 4,000 euros;
   – the deadline for filing an objection to the assessment of another decision or actions of the tax commissioner is officially set at 60 days;
   – new rules are introduced for the registration and deregistration of unidentified persons carrying out taxable activities in Cyprus, that is, persons who do not have a commercial establishment in Cyprus or any other permanent establishment associated with the activities carried out;
7. It is stipulated that some of the international passenger traffic carried out in Cyprus is not subject to VAT.

The amendments generally enter into force on 20 August 2020. The new rules for charging high-value goods back will come into effect on October 1, 2020. New penalties for misapplication of the reverse charging rules are effective from 1 July 2021.

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