Services provided from outside Cyprus to Cyprus Entities (Reverse Charge)

If the services listed below, which are contained in the Third Schedule of the VAT law

1. Transfers and assignments of copyright, patents, licenses, trademarks and similar rights.
2. Advertising services.
3. Services of consultants, engineers, consultancy bureau, lawyers, accountants and other similar services; data processing and provision of information (but excluding from this head any services relating to land).
4. Acceptance of any obligation to refrain from pursuing or exercising, in whole or part, any business activity or any such rights as are referred to in paragraph 1 above.
5. Banking, financial and insurance services (including reinsurance, but excluding the provision of safe deposit facilities).
6. The supply of staff.
7. The letting or hire of movable goods other than means of transport.
8. Telecommunications services, that is to say services relating to the transmission, emission, or reception of signals, writing, images and sounds or information of any nature by wire, radio, optical or other electromagnetic systems, including the transfer or assignment of the right to use capacity for such transmission, emission or reception.
9. The services rendered by an agent to his principal in procuring for the principal any of the services mentioned in paragraphs 1 to 8 of the schedule (as above).

are received by a Cyprus entity from an overseas supplier then the reverse charge is activated and a VAT liability is created in Cyprus.

The reverse charge method provides that when an entity maintains a business establishment in Cyprus or the management and control of the entity is exercised in Cyprus and receives services from abroad, irrespective of the actual place of supply, then that service is deemed to have been provided in the Republic. Consequently if the total services received exceed the limit of €15,377 per year then that entity is obliged to register for VAT purposes and impose VAT on the amount of services received from abroad as if the services were provided by the entity. Where a company provides exempted supplies, (e.g. banking operations are considered to be exempted supplies), then the VAT imposed cannot be claimed back and will result in a real cost to that entity.

However the provisions of the reverse charge are expected to be amended to exclude banking and other financial service companies. The VAT authorities have in fact submitted a revision of the law to the legal authorities proposing this exclusion. As at this update there have been no further developments.