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 an employer looking to hire freelancers from Cyprus, check out this guide. If you're a freelancer looking to learn more about how VAT works in Cyprus and what VAT obligations you have as a solopreneur, keep scrolling!
Cyprus VAT Rates for freelancers
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 are you obliged to register for VAT as a freelancer in Cyprus?
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 as a freelancer
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.
Legal Obligations for 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.
Simplify your invoicing and VAT management as a freelancer with your best ally - Xolo Go
Dealing with VAT, invoicing and admin aspects is always one of the biggest terrors for freelancers who have to juggle everything by yourself. It'll save you time, energy and money to delegate your work and make sure compliance is met by using tools like Xolo Go. With Xolo Go, you'll have the easiest way to create and send VAT-compliant invoices to your clients with all invoice records being kept in a very organized treasure chest. Get started with Xolo Go today and forget all worries with freelancer invoicing, VAT or finance management!