New VAT amendments have been recently voted by the Parliament and are in force since their publication in the Official Gazette of the Republic on the 20th of August 2020. The amendments include, inter alia, the following changes:
–MEASURES MOST LIKELY TO AFFECT INTERNATIONAL AND LOCAL BUSINESSES:
A. Credit balance VAT
- The TAX Commissioner has the right to suspend the payment of VAT credit balance in case where a taxable person cases where taxpayers have failed to comply with the obligation to submit income tax returns. The refund is suspended until the taxpayer complies with the relevant obligations. In case of such suspension, no default interest is calculated on the credit balance.
- The right to request refund of a VAT credit balance can be submitted after the lapse of six (6) years from the end of the VAT period in which it arose. Any requests submitted after the six-year deadline has elapsed will be examined at the discretion of the Tax Commissioner.
B. Change and increase of penalties
The financial charges of article 45 are amended as follows:
- the penalty for late submission of VAT returns is increased from €51 to €100;
- non-compliance with a reverse charge under Articles 11, 11A, 11B, 11C, 11D, 11E and 12A will result in the imposition of €200 per VAT return which may not exceed a total of € 4,000. The penalties in relation to the non-application of the reverse charge mechanism will apply as of 1st July 2021.
C. Obligations for VAT registration of Non-resident taxpayers in the Republic
Taxpayers who are not established in Cyprus but are engaged or expect to be engaged in taxable activities in Cyprus in the course of their business, will have the obligation to register for VAT purposes, without a VAT registration threshold.
D. Deadline for submitting an objection to the Tax Commissioner
The deadline for submitting an objection to the Tax Commissioner is set at 60 days from the date of the notification of the decision of the Commissioner to the taxpayer.
–MEASURES MOST LIKELY TO AFFECT LOCAL BUSINESSES:
A. Extension of reverse charge under Article 11B for construction
- Article 11B which shifts the obligation to account for VAT on construction services from the supplier to the recipient of the services, widens in scope to capture transactions that are supplied by non-taxable persons.
- This means that even if the supplier is not a taxable person registered for VAT purposes, the recipient (himself being a taxable person) would still have an obligation to self-account for VAT on services or services together with goods in relation to construction, modification, demolition, repair or maintenance of a property in the course of business.
B. Reverse charge for local electronic goods transactions (e.g. mobile phones).
- As from 1 October 2020, new provisions are being adopted (Article 11E) where VAT is now imposed by the recipient by the method of reverse charge on local deliveries of goods fall into the categories such mobile phones, other devices operating in networks, microprocessors, central processing units, gaming consoles, tablets and laptops.
- The reverse charge is mandatory where the recipient is a taxable person at the time of the transaction and receives the goods in the course of an exercise or for the purposes of promoting a company’s business activity.
C. Passenger Transportation Services
Passenger transportation services to and from the Republic are subject to the zero rate VAT to the extent the transport takes place within the Republic.