Cyprus - Increase in the Standard VAT rate from 15% to 17%

Still the second lowest rate in the EU

The standard VAT rate has increased from 15% to 17% for supply of goods and services, as from 1 March 2012. Therefore, all the supplies of goods and services that were taxable with the standard VAT rate of 15%, from 1 March 2012 are to be taxable with 17%.

The supplies of goods and services that fall under the zero VAT rate or are exempt from VAT continue to have the same treatment for VAT purposes even after 1 March 2012. In addition, please note that the change in the standard VAT rate will not affect the reduced rates of 5% and 8%.

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. For instance, when the goods/services were delivered or respectively performed 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%.

Despite the above increase of the VAT rate by 2%, Cyprus still enjoys one of the lowest rates in the EU, and combined with its very low indeed corporate tax rate (10%), Cyprus will still be a favorable jurisdiction for establishment of trading and other types of companies.