VAT for Charities and Non-Profits in Cyprus

Does charitable status exempt an organisation from VAT?

No. Charitable or non-profit status under Cyprus law does not automatically exempt an organisation from VAT. VAT exemption depends on the nature of each individual supply — what is being provided and to whom. A charity making taxable supplies must register for VAT if its taxable turnover exceeds €15,600 and must charge VAT on those supplies in the same way as any commercial business. The charity's non-profit motivation is irrelevant to its VAT obligations.

Activities that may be VAT exempt for non-profits

• Social welfare and social care services provided to vulnerable individuals
• Medical and healthcare services provided by registered practitioners
• Educational services provided by recognised educational institutions
• Cultural services — museums, galleries, performances in specific circumstances
• Fund-raising events meeting specific conditions — limited number per year
• Membership subscriptions where membership does not entitle the member to specific benefits

Trading activities are taxable

Many charities and non-profits run commercial trading activities alongside their exempt core activities — charity shops, cafés, events with ticket sales, sale of merchandise. These trading activities are taxable at the standard rate or applicable reduced rate. If the combined taxable trading turnover exceeds €15,600 the organisation must register for VAT. A charity that is VAT registered can recover input VAT on costs related to its taxable trading activities but not on costs related to its exempt core activities.

Grants and donations — outside scope

Grants received by charities and non-profits are generally outside the scope of VAT where they are unconditional payments to support the organisation's activities rather than payment for specific supplies. A grant from a government body to fund general charitable operations is outside scope. A grant given specifically in exchange for the charity providing a defined service — effectively a contract for services — may be treated as payment for a taxable supply. The distinction between grant and contract is important and each arrangement should be reviewed individually.

Fundraising events

Specific exemptions may apply to fundraising events organised by qualifying non-profit organisations — for example charity dinners, raffles or concerts held to raise funds for the organisation's charitable purposes. These exemptions are subject to conditions including limits on the number of exempt events per organisation per year. Events that exceed the permitted number or that do not meet the conditions are taxable at the standard rate.