Cyprus introduces 3% VAT rate and adds goods to 0% VAT list

On Thursday, 13 July 2023, the Cyprus Parliament enacted a super-reduced 3% value added tax (VAT) rate and extended the application of 0% VAT for goods used by people with disabilities.

0% VAT applicable (preamendment VAT for products at 5%)

Goods to which 0% VAT now applies include:

• Typewriters with Braille characters and special electronic typewriters (e.g., electronic pocket communication devices) (C.N. 84.69)1 and new type embossing typewriters (C.N. 84 72 90 80) for people with disabilities
• Wheeled and other vehicles for the disabled, including those with motor/otherwise within C.N. 87.13 exclusively for personal use by people with disabilities

Goods/services subject to new 3% VAT

Goods subject to the 3% VAT include:

• Books, newspapers and periodicals provided in either physical or electronic form or both (including brochures, prospectuses and similar printed material, children's illustrated books and tracing — coloring books, printed or handwritten musical scores, hydrographic charts), excluding publications intended mainly for advertising purposes and publications consisting wholly or mainly of video or audio content music; production of publications by nonprofit organizations and services related to their production (C.N. 49.01 — 49.05)
• Books for people with disabilities (C.N. 85.23)
• Special lifting devices (stairs, lifts, similar lifting equipment) for people with disabilities
• Wheelchairs and other vehicles for people with disabilities
• Orthopedic items and appliances including medical surgical belts or bandages and crutches
• Splints and other devices/items for fractures, prosthetic items, devices and hearing aids for the deaf, and other devices that are hand-held, carried by persons, or inserted into the human body for the purpose of filling a deficiency or treating a disability; parts and accessories for these goods are excluded

Services subject to 3% VAT include:

• Street cleaning, sewage and refuse collection performed by private entities; services provided by state, local authorities and public law bodies are excluded
• Waste treatment or waste recycling
• Debut performance of theatrical, musical, dance or classical plays

Next steps for businesses

Businesses trading in goods and services affected by this legislation should consider wider obligations, including aspects around stock taking (i.e., counting inventory) and tax points (i.e., time of supply) before implementing new VAT rates.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Cyprus Ltd.

• George Liasis
• Georgios Pitsillis
• Maria Raspa
• Elpida Papachristodoulou
• Iacovos Kefalas
• Simos Simou

Published by NTD's Tax Technical Knowledge Services group; Carolyn Wright, legal editor

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.

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