VAT on Freight Forwarding and Shipping in Cyprus

The VAT framework for transport services

VAT on transport and freight services is determined by a combination of place of supply rules, the nature of the journey and who the customer is. The general principle is that international transport — movement of goods to or from outside the EU — is zero-rated. Intra-EU transport of goods between businesses is subject to reverse charge in the customer's country. Domestic transport within Cyprus is subject to 19% standard rate. Passenger transport has its own reduced rate rules. The complexity comes from ancillary services, mixed journeys and the interaction with customs and import procedures.

VAT rates on transport services — quick reference

Zero-rating for international freight

The zero-rating for international freight applies to the transport of goods to destinations outside the EU. This includes sea freight, air freight and road transport where the final destination of the goods is outside the EU. The zero-rating applies to the entire transport charge — not just the portion outside EU borders. A shipment from Cyprus to the US is zero-rated on the full freight charge including the initial EU leg of the journey. Evidence requirements for zero-rating are strict — you must retain documents confirming the goods left the EU: export declarations, bill of lading, airway bill, CMR documents.

Freight forwarding and intermediary services

Freight forwarders typically arrange transport on behalf of their clients rather than providing transport themselves. The VAT treatment of freight forwarding services follows the place of supply rules for intermediary services and the general B2B rule. For B2B freight forwarding services the place of supply is where the customer belongs — applying the general rule. A Cyprus freight forwarder arranging shipments for a UK business accounts for UK VAT via reverse charge. For B2C freight forwarding the place of supply is where the transport takes place which can create obligations in multiple countries for cross-border journeys.

Documents required to support zero-rating on international freight

• Export declaration — EX1 or equivalent customs export document
• Bill of lading for sea freight — confirming vessel, destination port and goods description
• Airway bill for air freight — confirming flight, destination and goods
• CMR consignment note for road freight to non-EU destinations
• Proof of payment from the customer
• Commercial invoice for the goods being transported
• Any customs clearance documentation at the destination country

Ancillary services — loading, unloading, storage

Services ancillary to transport — loading, unloading, handling, storage and warehousing where directly related to international transport — generally follow the same VAT treatment as the main transport service. Storage that is genuinely preparatory to international export can be zero-rated if it can be demonstrated to be part of the export supply chain. Storage that is separate from any specific international movement is subject to normal VAT rules — typically 19% for business storage services with the place of supply being where the storage takes place.

Import VAT and freight costs

When goods are imported into Cyprus from outside the EU import VAT is charged on the customs value — the value of the goods plus insurance and freight costs to the point of entry into the EU. The freight cost is therefore part of the customs value and VAT is charged on it as part of the import VAT calculation — even though the freight service itself may be zero-rated when invoiced to the importer. This distinction between the zero-rating of the freight service and the inclusion of freight in the import VAT base is sometimes a source of confusion in practice.