Recent amendments on the VAT legislation

VAT on Construction Services

The VAT Department announced recently an amendment on the VAT treatment of construction services. As from 9th of March 2012, provision of construction services from a VAT registered person to another VAT registered person qualifies for zero rate VAT. The supplier should clearly state in the sales invoice the VAT number of the buyer which
should be verified through the website of VIES. The buyer should account for VAT in accordance with the reverse charge procedures where the buyer self charges VAT and on the same time claims it back.

The construction services include builders, carpenters, real estate developers, architects, civil engineers, painters, plumbers, services for installation of aluminum doors and windows, metallic construction buildings, excavators and road constructions. The reason
for this change is to boost the cash flow of the immovable property sector which currently suffers in Cyprus from the economic crisis.

VAT Refunds

The VAT authorities announced that any unpaid VAT refund amounts exceeding 3 months will be imposed with interest. In accordance with the recent amendment, the VAT refunds should be paid back to the businesses within three months. Failure to refund the amount will be imposed with interest. This treatment is similar to tax refunds.

The new amendment will boost the cash flow in the Cyprus economy and will give motivation to the VAT authorities to refund the unpaid amounts to the businesses.

VAT on Acquisition or Construction of Principal Private Residences  

As from 1st of October 2011, the acquisition or construction of principal private residence is subject to 5% VAT rate instead of 17%. This law applies only for Cypriot citizens or citizens of other Member States who live permanently in Cyprus.

An amendment was published on 24th of May 2012 which includes also acquisition or construction of principal private residences from citizens of countries outside the European Union. 

Increase in the standard VAT rate 

As from 1 March 2012, the standard VAT rate was increased from 15% to 17%. The supplies subject to 5% and 8% remained unaffected.

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