VAT Guide for Freelancers in Cyprus

Cyprus VAT policy is based on the "destination principle" of the European Union VAT system. This means that VAT is payable to the country's government where the product or services are consumed, regardless of where you're supplying them from. So, if you have clients in Cyprus, you have to comply with Cyprus's VAT rules. VAT is administered by the Cypriot Tax Department, which is also responsible for publishing content related to the management of the Cypriot VAT system. 

The standard VAT rate in Cyprus is 19%, with reduced rates of 9%, 6%, and 0% applied based on the products you sell. If you're a freelancer looking to learn more about how VAT works in Cyprus, keep scrolling! 

Cyprus VAT Rates

What are the different VAT rates in Cyprus? The Cyprus government levies four different VAT rates, and freelancers must charge the amount that applies to their products and services.

  • The Standard Rate - Unless the items or services you offer are in the reduced rate or zero-rated category, you should charge the standard VAT rate of 19%.
  • The Reduced Rate of 9% - The reduced rate of 9% applies to products such as air and road passenger transport, restaurants and cafes, hotel accommodations, etc.
  • The Reduced Rate of 5% - The Reduced rate of 5% applies to items like non-alcoholic drinks, medical equipment for disabled people, books, entrance fees to cultural events and amusement parks, music composers and content writers, take away food, collectors' items, and antique arts, etc.
  • The Zero Rate - When products are zero-rated, they are still VAT-taxable, but the rate of VAT you must charge your consumers is 0%. This rate applies to international transport, goods purchased on international flights, etc. Although there are no charges on zero rated products, you should record sales of goods and services and create a report based on your returns.

 

Services in the public interest (ambulance, postal services, not-for-profit organizations, etc.) and insurance, financial aid, and mutual funds management are exempt from VAT.

When should you register for VAT?

The VAT threshold in Cyprus is €15,600, so if your yearly turnover exceeds €15,600 or you have a reason to believe that your expected turnover within the next 30 days will exceed €15,600, you should immediately register for VAT. Delayed registration is fined €85 per month after the due date. This VAT threshold of €15,600 is subject to change, and it is advised to stay updated on the most recent VAT threshold before you register for VAT.

After you register for VAT, you need to submit reports quarterly (every three months). While yearly turnover is an important parameter to determine eligibility for VAT registration, there are other scenarios when you must register for VAT

How to register for VAT in Cyprus

If you are identified as self-employed and taxable in Cyprus, you must prepare the following for submission:

  • Documents containing information about your annual revenue, taxable financial transactions, and bank account information.
  • Original signed application of the freelancer to apply for VAT.
  • Identification:
    • A copy of your Cyprus identity card (if you are a Cyprus citizen)
    • A copy of the certificate of registration from the civil registry and the migration department. (If you are a European Citizen)
    • A copy of the residency card from the civil registry and the migration department. (If you are a Non-European Citizen)

 

If you are a permanent resident or citizen of Cyprus or other EU countries, you do not need a fiscal representative. However, if you are an expat freelancer looking to sell your goods or services to Cyprus, you require a fiscal representative.

To register for VAT, you must submit the documents mentioned above either directly at the closest Tax Department or by post at the PSC Cyprus. The certificate will be issued to you within 8-12 days. The 'effective date of registration' is the day on which you registered. From this date forward, you must pay VAT to the Tax Department.

You can also register using the Mini One-Stop Shop, an EU-wide tax system that allows you to consolidate all of your EU VAT in one single tax return. This scheme is optional but convenient and especially useful if you have customers in multiple countries within the EU, including Cyprus. MOSS allows you to avoid registering in each Member State of consumption. To learn more, click here.

Alternatively, Xolo can help you register for VAT as a freelancer in Cyprus and handle all the necessary paperwork on your behalf. With Xolo Go, you use a slice of our company as a legal framework to invoice your clients, regardless of if they're across town or across an ocean.

Financial Obligations of VAT Registered Freelancers in Cyprus

Registering for VAT is only the first step. From the day of your registration's effective date, you must:

  • Charge the correct VAT rate
  • Pay any VAT owed to the Tax Department of Cyprus every quarter
  • File VAT returns
  • Maintain VAT records and a VAT account.

Furthermore, every VAT-registered individual is required to:

  • Keep track of all purchases and transactions,
  • Keep a running total of their VAT account, and
  • Make sure their VAT invoices are accurate.

 

If you opt to use the VAT Mini One-Stop Shop (MOSS) services, you must maintain your VAT records for at least six to ten years. These records can be stored electronically, on paper, or in a software application. Your records should be precise, readable, complete, and simple to comprehend. As a freelancer, you must maintain a record of the following things:

  • Printed copies of the invoices you send out,
  • Received invoices
  • Agreements on sell-billing.
  • The self-billing vendors' names, addresses, and VAT numbers.
  • Notes (debit/credit)
  • Records of imports and exports.
  • You cannot claim VAT on records of items that have been received and sent.
  • You must also preserve records of bank statements, check stubs, cash books, till rolls, and paying-in slips in addition to your VAT account.

 

Getting overwhelmed? At Xolo, we can help you to future-proof these vital documents by automatically generating, storing, and maintaining them electronically in our servers for as long as you need them.

How Xolo Can Help?

The tax registration process can be tricky at times, but we hope this guide has helped clear your doubts about Cyprus VAT regulations! If you’re still confused about the different schemes and numbers and paperwork, Xolo offers a range of solutions that handle all the hassle while you focus on your core competencies. 

With Xolo Go, you can easily freelance and invoice your clients, even without a registered company or LLC. 

  • Signing up takes only 10 minutes, and once you do, taxation, corporate compliance, and all the tricky VAT calculations are all automatically taken care of in the background!
  • We charge a flat rate of 5% from every withdrawal to your personal bank account. No surprise fees, no contracts, and no BS.
  • Xolo Leap is the easiest and most effective way to create your own company through Estonian e-Residency! Reduce time spent on mundane business administration and focus on what you do best!
  • We offer different tiers of service depending on the solopreneur’s, or as we call them, Xolopreneur's, individual needs.
  • Once you get your business set up, you can run it from anywhere in the world! So whether you’re looking to gain access to the EU market or a digital nomad - this is the place for you! 

 

Simply put, we do the hefty work for you so that you can enjoy the freedom of freelancing. So connect with us immediately, and we’ll help you get your one-person business up and running in Cyprus in no time!