Article 11b Cyprus VAT: Construction Reverse Charge
Article 11b of the Cyprus VAT Law applies domestic reverse charge to construction services between VAT-registered contractors. Subcontractors invoice without VAT — main contractors account for it.
In this guide
How Article 11b reverse charge works for construction in Cyprus. Which services are covered, how subcontractors invoice and what main contractors report.
- Standard rate
- 19%
- Registration threshold
- €15,600
- Capital Goods Scheme, property
- 10 years
- Keep VAT records for
- 6 years
Applies to
B2B construction
Both parties VAT registered
Subcontractor
Invoices without VAT
Net amount only
Main contractor
Accounts for VAT
Output + input
Net VAT effect
Zero
For taxable contractors
What is Article 11b?
Article 11b of the Cyprus VAT Law introduces a domestic reverse charge mechanism specifically for construction and installation services supplied between VAT-registered contractors in Cyprus. The provision was introduced to prevent missing trader VAT fraud in construction supply chains — a pattern where subcontractors charged VAT to main contractors but disappeared before remitting it to the Tax Department. Under Article 11b the subcontractor issues an invoice without VAT and the main contractor accounts for the VAT on their own return.
Services covered by Article 11b
- Construction of buildings, structures and civil engineering works
- Demolition of buildings and site clearance
- Electrical installation and wiring works
- Plumbing and heating system installation
- Air conditioning and ventilation installation
- Plastering, rendering and dry lining
- Carpentry, joinery and glazing works
- Tiling, flooring and painting when part of a construction contract
- Scaffolding and temporary works provision
- Supply and installation of materials as part of a construction contract
- Hire of construction plant with an operator
The key conditions for Article 11b to apply
Article 11b applies only when both the supplier and the recipient of the construction services are VAT-registered in Cyprus. If the main contractor is not VAT registered the subcontractor must charge VAT at the standard rate — reverse charge cannot apply. If the subcontractor is not VAT registered they cannot make Article 11b supplies at all. The services must also fall within the defined categories — not all services provided on a construction site fall within Article 11b.
Article 11b — who charges what in different scenarios
| Scenario | VAT treatment |
|---|---|
| Subcontractor (VAT reg) to main contractor (VAT reg) | Article 11b — reverse charge, no VAT on invoice |
| Main contractor (VAT reg) to client (VAT reg) | May still be reverse charge if client is also a contractor in the chain |
| Contractor to end client (not VAT reg) | Standard VAT — contractor charges 19% |
| Subcontractor to main contractor (main not VAT reg) | Subcontractor charges 19% standard VAT |
| Supply of materials only without installation | Standard VAT — Article 11b does not apply to goods only |
| Architect or design services only | Standard VAT — professional services not construction works |
How to invoice correctly under Article 11b
A subcontractor invoice under Article 11b should show the net amount of the works, zero VAT and a clear notation referencing Article 11b — for example: 'VAT reverse charge applies under Article 11b of the Cyprus VAT Law. The recipient is required to account for VAT.' Never add VAT to an Article 11b invoice. If you do the main contractor will account for VAT on their return AND pay the VAT on your invoice — paying twice. Recovering the overpaid amount is a protracted process.
What the main contractor puts on their VAT return
The main contractor receives a reverse charge invoice with no VAT. They must then declare the VAT on their own return as both output VAT (as if they supplied the construction service) and input VAT (as a business purchase). For a fully taxable contractor these two entries cancel out and the net VAT effect is zero. The output VAT entry goes in the reverse charge output box and the input VAT goes in the reverse charge input box — shown separately from standard-rated output and input. The Tax Department reviews whether reverse charge has been correctly applied in construction sector audits.
Key takeaways
- ●Article 11b applies domestic reverse charge to construction services between VAT-registered contractors in Cyprus
- ●Both supplier and recipient must be VAT registered for Article 11b to apply
- ●Subcontractors invoice without VAT — main contractors declare both output and input VAT on their return
- ●Supply of materials without installation is not covered by Article 11b — standard 19% applies
- ●Never add VAT to an Article 11b invoice — the main contractor will pay VAT twice and recovery is difficult
Frequently asked questions
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