VAT on Services in Cyprus

VAT rates on services in Cyprus

The default position for services in Cyprus is the standard 19% rate. Professional services — accountancy, legal, consulting, marketing, IT, management — are all standard-rated at 19%. Certain categories of service are specifically exempt or subject to reduced rates. And cross-border services have their own place of supply rules that determine which country's VAT applies.

Exempt services in Cyprus

• Financial services — loans, deposits, foreign exchange, securities transactions, insurance
• Medical and dental services provided by regulated healthcare professionals
• Hospital and healthcare institution services
• Educational services provided by recognised educational institutions
• Social welfare services
• Postal services provided by the national postal service
• Certain cultural services — museums, galleries, theatres in specific circumstances
• Residential property rental — long-term lettings to tenants as their home

Services at the 9% reduced rate

• Restaurant and catering services — food and non-alcoholic beverages
• Hotel and tourist accommodation
• Passenger transport services within Cyprus
• Cinema, theatre and similar entertainment tickets

VAT on professional services

Accountancy, legal, consulting, IT, marketing, PR, architecture, engineering and most other professional services are standard-rated at 19% in Cyprus. If you provide professional services to Cyprus clients you must charge 19% VAT if you are VAT registered. If you provide professional services to VAT-registered businesses in other EU countries the reverse charge applies — you invoice without VAT and your customer accounts for it in their country. If you provide services to consumers in other EU countries the place of supply is Cyprus and 19% applies.

Financial services — the exempt complication

Financial services are exempt from VAT — no VAT is charged on interest, loan fees, FX spreads, securities commissions or insurance premiums. This sounds straightforward but creates complexity for any business that provides both financial and non-financial services. The financial elements are exempt — input VAT on related costs is irrecoverable. The non-financial elements are taxable — input VAT is recoverable. Partial exemption applies and the apportionment calculation requires careful attention.

Cross-border services — who pays where

For B2B services supplied to VAT-registered businesses in other countries the general rule is that the place of supply is where the customer is established. No Cyprus VAT is charged — the customer applies reverse charge in their own country. For B2C services supplied to consumers the general rule is that the place of supply is where the supplier is established — Cyprus. Cyprus VAT applies. There are important exceptions for digital services, property-related services and certain other categories.