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20 February 2012

Increase in the Standard VAT rate in CYPRUS from 15% to 17%

The standard VAT rate will increase from 15% to 17% for supply of goods and services in CYPRUS, as from 1 March 2012.

Therefore, all the supplies of goods and services that are taxable today with the standard rate of 15%, from 1 March 2012 will become taxable with 17%.

The supplies of goods and services that fall under the zero VAT rate or are exempt from VAT will continue to have the same treatment for VAT purposes even after 1 March 2012.

In addition, the change in standard VAT rate will not affect the reduced rates of 5% and 8%.

With the forthcoming increase in the standard VAT rate from 15% to 17%, the transitional provisions of Article 55 of the VAT Law apply, based on which a taxable person selling goods or providing services has the choice of applying the old VAT rate (15%) or the new VAT rate (17%), but only for certain cases.

Based on the transitional provisions, a taxable person has the right to choose in the following cases:

When the goods were delivered before 1 March 2012 and the payment was made and/or the invoice was issued after 1 March 2012, then the taxable person may apply the VAT rate of 15%.

Obligations of the taxable person that is affected from the change in the standard VAT rate from 15% to 17% :

With the forthcoming change in the standard VAT rate from 1 March 2012 and based on the provisions of the VAT Law, every taxable person has an obligation to conduct a stock count for those products that are affected by the change in the VAT rate. The stock count includes both a physical stock count and a valuation of the stock. The stock count must be conducted at the end of the last working day before the new VAT rate comes into effect (i.e. 29 February 2012).

For the construction industry a census must be conducted for the work performed until the end of the last working day before the new VAT rate comes into effect (i.e. 29 February 2012) which will be invoiced with a VAT rate of 15%.

If a contract for a supply is concluded before the change in the VAT rate but the transaction occurs after the change in the VAT rate, then the amount of consideration must be increased by an amount equal to the change (i.e. the new VAT rate of 17% must be applied) unless the terms of the contract state otherwise.

Please contact info@servpro.com.cy for more information.

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