VAT on goods (When is considered IN-OUT scope of Cyprus VAT)
1. Intra-community Sale of Goods i.e. within EU borders
- When a Cyprus company sells goods which are physically located in Cyprus to an EU VAT registered company (B2B) the Cyprus company must not charge VAT on goods (0%) on its invoice as the recipient of the goods will self charge local VAT by applying the reverse charge method.
Note: the system for checking whether the EU company is VAT registered is http://ec.europa.eu/taxation_customs/vies/
- When a Cyprus company is engaged in intra-community sales of goods then it must also register for Intrastat Despatches purposes if the current registration threshold of euro 55.000 for a year is reached (note that usually the Intrastat registration threshold changes every year). The Intrastat Returns are monthly and submitted by the 10th day of the month following the reporting month. The penalty for late submission of Intrastat Returns is €15 per Return.
- In addition the Cyprus company must be registered to the VIES register and declare the intra-community sales of goods in its monthly VIES returns. The VIES Return is also monthly and is submitted by the 15th day of the month following the reporting month. The penalty for late submission of VIES Returns is €50.
2. Sale of goods by a Cyprus Company to a company outside EU (Export of goods) and the goods are physically situated in Cyprus at the point of their sale
- The sale of goods by a Cyprus Company to a non EU company is a transaction which is subject to VAT on goods at the 0%.
3. When goods are physically situated outside Cyprus at the time of their sale and the sale is made by a Cyprus Company to:
- an EU company (VAT registered)
- to another Cyprus company (VAT registered)
- to a non EU company
- to EU or non EU individuals (B2C) but the goods are physically situated outside Cyprus at the time of their sale.
- All the above cases are outside the scope of Cyprus VAT since the goods are not physically located in Cyprus at the time of their sale. This possibly will create a VAT obligation to the Cyprus Company in the country where the goods are physically located at the point of their sale.
4. Triangular Trade and Sales of Goods
- Triangular trade exists when we have 3 EU VAT registered companies which are registered in 3 different EU countries.
- In addition in order to have a triangulation there must be only one movement of goods, from the EU country of the seller directly to the EU country of the buyer without the goods to move through the country of the intermediate agent.
- The invoices issued must state the phrase ‘’Article 141 – Simplified procedure’’ in order to declare that there is a triangular transaction.
- None of the two companies which issue invoices must charge VAT on their invoices. Only the actual recipient of the goods must self charge VAT on goods in his country using the reverse charge method.
- Companies which are engaged in triangular sales of goods must register for VAT and also for VIES purposes and declare these sales on their monthly VIES returns.
5. Distance Selling (Sales of goods to Cyprus persons, not companies) by suppliers resident in another EU country
- The registration threshold for distance selling of goods from an EU resident company to Cyprus resident individuals (B2C transaction) is euro 35.000 per year.
- When the foreign company is engaged in distance selling in Cyprus in excess of the threshold, the company is obliged to register for VAT purposes in Cyprus and charge Cyprus VAT on goods at the standard rate of 19% on the invoice that will issue to the Cyprus customer (person).
6. Sales of goods by a Cyprus company to persons resident within the EU (B2C transaction with an EU person (goods send from Cyprus)
- When a Cyprus company sells goods to EU resident individuals (B2C transaction) and the goods are sent from Cyprus to the EU country then this sale is subject to VAT in Cyprus at the standard rate of 19% unless the VAT threshold for distance selling of goods is exceeded in that other EU country.
- In case where the VAT threshold for distance selling is exceeded in the other EU country, an obligation for VAT registration in that other EU country will exist and the Cyprus company will need to be registered and VAT will need to be charged in the other EU country at the appropriate VAT rate.
- Some examples of distance selling EU VAT thresholds:
- Germany €100.000
- United Kingdom £70.000
- Greece €35.000
- Spain €35.000
7. Sales of goods by a Cyprus company to persons not resident within the EU (B2C transaction with a non EU person (goods send from Cyprus)
- When a Cyprus company sells (exports) goods to non EU individuals (B2C transaction) and the products are sent from Cyprus to the non EU country then this sale is a 0% export of goods, thus no Cyprus VAT must be charged on the invoice to be issued to the individual. If the threshold of euro 15.600 is reached then there is an obligation for VAT registration in Cyprus.
8. Intra-community Acquisition of Goods
- The registration threshold for Intra-community acquisition of goods is euro 10.252
- When a Cyprus company purchases goods from another EU Member State company (no VAT charged by the seller on its invoice) and the goods physically arrive in Cyprus, the Cyprus Company must self charge Cyprus VAT at the rate of 19% on the value of the goods (reverse charge method). This is an accounting entry in the books of the company and the VAT self charged is declared on the quarterly VAT return.
- The recoverability of this VAT self charged will depend on the nature of the activities of the company.
- In addition the company will need to be registered for Intrastat Arrivals if the value of the goods acquired are in excess of the current registration threshold of Intrastat Arrivals which is euro 100.000 per year. Intrastat Returns are monthly and submitted by the 10th day of the month following the reporting month.
9. Purchase of goods by a Cyprus company from a non EU company (Importation of goods)
- When a Cyprus company purchases/imports goods from a company outside EU then this purchase must not be treated under the reverse charge method and subsequently no VAT to be self charged by the company under the reverse charge provisions.
- Cyprus VAT will be paid by the Cyprus Company at the point where the goods will be cleared from the Cyprus Customs & Excise Department.
- This VAT which is paid will be recoverable for the company provided that the activities of the company grant the right to recover the input VAT paid.
Author: Marinos D Marinou Tax Planning specialist at D Marinou & Co EST 1988 offering a range of corporate services including company incorporation, audit, vat and tax planning in Cyprus companies and international Clients.