What is the VAT rate in Cyprus?
The standard VAT rate in Cyprus is 19%. This rate applies to most goods and services sold within the country. In addition, Cyprus applies three reduced rates, as shown in the table below.
For most entrepreneurs moving to Cyprus or setting up a Cyprus Ltd, the standard rate of 19% is the rate that applies to their services.
VAT in Cyprus is governed by VAT law (Law 95(I)/2000), which is aligned with European VAT Directive 2006/112/EC. Cyprus is a full EU member, meaning the European VAT framework applies here in its entirety.
| Rate | Category | Examples |
|---|---|---|
| 19% standard | Most goods & services | Consultancy, software, electronics, professional services |
| 9% reduced | Accommodation & transport | Hotels, restaurants, passenger transport, sports event tickets |
| 5% reduced | Basic needs & social goods | Food, non-alcoholic beverages, medicines, books, newspapers, housing |
| 3% super-reduced | Very limited categories | Certain printed matter, cultural events, waste collection, aids for the disabled |
| 0% zero rate | Export & Intra-EU B2B | Exports outside the EU, intra-EU supplies to VAT-registered companies, international services |
Source: Cyprus Tax Department. VAT exemptions (including financial services, education, and medical care) apply separately and are not included in this table.
How much VAT is there in Cyprus? (The short answer)
For most business transactions: 19%.
Do you sell food, medicines, or books: 5%. Do you run a hotel or restaurant: 9%. Do you export goods outside the EU or invoice B2B to VAT-registered EU companies: 0%.
If you are a service company (consultant, SaaS, agency, freelancer) working with clients outside Cyprus via a Cyprus Ltd, most outgoing invoices are subject to a zero rate under the B2B place of supply rules. In that case, you do not charge any VAT at all. More on that later.
When do you need to register for VAT in Cyprus?
Mandatory registration threshold: €15,600 in taxable turnover over a continuous period of 12 months.
You are also required to register if you expect to exceed this threshold within the next 30 days.
Other reasons for mandatory registration:
- Intra-Community acquisitions of goods exceeding €10,251.61 per calendar year
- Receipt of services from abroad where Cyprus is the place of supply (B2B reverse charge rules apply and may require registration, even if your domestic turnover is minimal)
- Suppliers not established in Cyprus must register in Cyprus from the first euro of taxable supply, without a threshold
Voluntary registration is possible and often worthwhile. If you fall below the threshold but wish to reclaim input VAT on business expenses (office space, equipment, professional services), voluntary registration is beneficial. It also instills confidence in EU business customers who expect a VAT number on invoices.
Place of service: why this is crucial for Cyprus companies
This is where most entrepreneurs who move to Cyprus and set up a business go wrong. VAT is not a purely Cypriot matter. The place of supply rules determine which country has the right to levy VAT on a specific transaction.
B2B services (sales to other companies)
The place of supply is where the client is established. If your Cyprus Ltd invoices a German GmbH for consultancy work, you do not charge Cypriot VAT. The German company processes it in Germany via the reverse charge mechanism. Your invoice is issued at 0%.
B2C services (sales to private individuals):
The place of supply is generally where you, as the supplier, are established. Your Cypriot company would then charge 19% Cypriot VAT to private customers.
Digital/TBE services to EU consumers:
As soon as your EU-wide B2C turnover exceeds €10,000 per year, VAT becomes due in the consumer's country. You can easily arrange this via Cyprus's Union OSS (One-Stop Shop), so you do not have to register for VAT separately in each EU Member State.
Practical scenario for the typical Cyprus-Consult client:
A Dutch entrepreneur moves to Cyprus, establishes a Cyprus Ltd, and continues to serve his European business clients (VAT-registered companies in the Netherlands, Germany, and Belgium).
He invoices at a zero rate via the B2B place of supply rules. His Cypriot company pays 15% corporate income tax on profits; he distributes dividends as a Non-Domain with 0% dividend tax. VAT plays hardly any role in his core activities.
VAT registration in Cyprus: the process
Registration takes place via the Cypriot Tax Authority (TAXISnet portal). The process includes:
- Submitting the VAT registration form (VAT Form 101)
- Submission of business registration documents and proof of business activity
- Received your Cypriot VAT number (format: CY + 9 digits)
- VIES registration if you are going to make intra-community supplies
The processing time is typically 1 to 3 weeks. VAT registration upon the incorporation of a Cyprus Ltd usually takes place simultaneously with the company registration.
VIES registration is separately mandatory prior to your first intra-community supply. Monthly VIES declarations are due no later than the 15th of the following month.
VAT compliance deadlines in Cyprus
| Obligation | Frequency | Deadline |
|---|---|---|
| VAT return (standard) | Quarter | 10th of the 2nd month following the end of the quarter |
| VIES declaration | Monthly | 15th of the following month |
| Union OSS declaration | Quarter | End of the month following the end of the quarter |
| Invoice issuance | Per transaction | Within 30 days of the taxable event (15th of the following month for intra-EU) |
| Record retention obligation | N/A. | At least 6 years old |
Late filing results in fines and interest. The Cypriot tax authorities are intensifying enforcement of VAT compliance, particularly for companies purchasing cross-border services (where the reverse charge mechanism applies).
Reverse charge mechanism: what owners of a Cyprus company need to know
If your Cypriot company purchases services from abroad (an American developer, a Google Ads subscription, a Belgian accountant), the B2B place of supply rule applies: Cyprus is the place of supply. Your company must declare the VAT itself via the reverse charge mechanism: you declare it as both export and import VAT in your return. The net effect is usually zero if your business activities are fully taxable, but it may require VAT registration even if you have not yet reached the turnover threshold of €15,600.
Cyprus also applies a domestic reverse charge mechanism for:
- Construction services
- Specific high-risk goods (certain scrap, selected electronics)
- Ownership transfers in connection with loan restructurings
VAT exemptions in Cyprus
Certain sectors are fully exempt from VAT (not a zero rate, which means they cannot reclaim input tax):
- Financial services and insurance
- Medical and dental services
- Education by recognized institutions
- Rental of real estate (residential properties)
- Postal services
This is relevant if you are considering setting up a Cypriot holding or financing structure. Exempt transactions affect your right to deduct input tax. If your company performs both taxable and exempt activities, pro rata rules apply, and you need an accountant to calculate the correct deduction fraction.
VAT and the establishment of a Cyprus company: the practical picture
For most entrepreneurs setting up a Cyprus Ltd through Cyprus-Consult, VAT is a secondary matter compared to the broader tax picture. The main attractions are the corporate tax rate of 15%, the Non-Dom regime (0% on dividends for 17 years), and the IP Box (2.5% effective rate on qualified IP income).
VAT becomes relevant in specific situations:
- You have Cypriot customers or local revenue above the threshold of €15,600.
- You want to reclaim input VAT on start-up costs (office, equipment, incorporation costs).
- You sell digital services B2C to EU consumers and need OSS registration.
- You purchase services from foreign suppliers, meaning the reverse charge mechanism applies.
For most service companies working with international B2B clients through a Cyprus Ltd, the VAT position is straightforward: outgoing invoices at a zero rate, reverse charge on purchased foreign services, and no Cypriot VAT on core turnover.
Frequently Asked Questions: VAT in Cyprus
How much VAT is there in Cyprus? The standard rate is 19%. Reduced rates of 9%, 5%, and 3% apply to specific categories. Exports and intra-EU B2B deliveries are subject to a zero rate.
Does a Cypriot company always have to register for VAT? No. If your taxable turnover remains below €15,600 and you do not have intra-Community acquisitions above the threshold or receive services from abroad that trigger the reverse charge mechanism, registration is optional.
If I move to Cyprus and set up a company, do I charge my customers 19% VAT? Almost certainly not, if your customers are businesses. Under the B2B place of supply rules, you do not charge Cypriot VAT on services provided to VAT-registered companies in other countries. Your invoices leave the premises empty.
Can I reclaim VAT on my company's start-up costs? Yes, if you register for VAT (possibly voluntarily). Input VAT on legitimate business expenses is deductible from the VAT due.
What is the VAT number format in Cyprus? CY followed by 9 digits (e.g. CY12345678X).
Next step
Are you setting up a Cyprus Ltd or moving to Cyprus and want to know how VAT fits into your overall structure? The VAT question is typically answered during the first meeting, along with corporate tax, Non-Dom status, and right of residence.
[Schedule a free introductory meeting with Cyprus-Consult] for a complete picture of your tax position as a Cyprus resident and business owner.
