Some important amendments to the VAT law of Cyprus have been published in the Official Gazette of the Republic on 20 August 2020. The ones most relevant to international business entities in Cyprus are briefly presented below. Unless otherwise stated the amendments are applicable as from 20 August 2020.
New definition of legal person
The new definition of “legal person” brings the VAT law in line with the Income Tax law. The term includes a company, partnership, association, or club regardless of whether it is established in accordance with the provisions of any law or regulation.
Services related to civil engineering projects
As per article 11B of the VAT law a customer must account for VAT on the acquisition of certain services and associated goods in relation to the construction, demolition, repair, or maintenance of any civil engineering project assuming the supplier was a taxable person. Following the amendment, the provision applies for the provision of such services and related goods by any person, irrespective if this person is considered as taxable for VAT purposes or not.
VAT refunds
VAT refunds will from now on be suspended where Income/Corporation Tax returns have not been submitted by the date of submission of the VAT refund claim. Furthermore, such refund suspension cases will not be eligible to interest on the refundable amount for the period of suspension.
Unless exceptionally permitted by the Tax Commissioner, it is no longer possible to submit VAT refund applications after six years from the end of the relevant tax period.
Penalties
The penalty for failure to submit a VAT return by the deadline has been increased from EUR 51 to EUR 100.
A penalty of EUR 200 per VAT return has been introduced for cases where the reverse charge provisions in relation to the receipt of services from abroad (applicable as from 1 July 2021) or to the receipt of services and/or goods by other Cypriot established traders (applicable as from 1 October 2020) is not or is incorrectly applied. The total penalty may not exceed EUR 4,000.
Filing an Objection
The period within which an objection may be submitted concerning assessments and other relevant decisions or acts of the VAT Authorities is legally set at 60 days.
Non-established persons
New provisions related to VAT registration and de-registration of persons with no business or any other fixed establishment in Cyprus related to the taxable activities carried out in Cyprus (termed as “non-established” persons) have been introduced.
