VAT Place of Supply Rules in Cyprus

Why place of supply matters

The place of supply rule determines which country has the right to charge VAT on a transaction. If a supply is made in Cyprus Cyprus VAT applies. If the place of supply is Germany German VAT applies — even if the supplier is in Cyprus. Getting place of supply wrong means either charging VAT in the wrong country — creating a liability in the correct country while overcollecting in the wrong one — or failing to charge VAT at all where it is due. Both errors attract penalties.

Place of supply for goods

For goods the place of supply is generally where the goods are located when the supply takes place. For goods that are not transported — collected from the seller's premises — the place of supply is where the goods are located at the time of supply. For goods that are transported the place of supply is where the goods are when transportation begins. For goods installed or assembled by the supplier the place of supply is where installation takes place. Goods exported outside the EU are zero-rated in the country of dispatch.

Place of supply for goods — summary

Place of supply for services — the general rule

For services the place of supply depends on whether the customer is a business or consumer. The B2B general rule — business to business — is that the place of supply is where the customer belongs. If a Cyprus business receives consultancy from a UK firm the place of supply is Cyprus — Cyprus VAT applies via reverse charge. The B2C general rule — business to consumer — is that the place of supply is where the supplier belongs. If a Cyprus business provides consultancy to a French individual the place of supply is Cyprus — Cyprus VAT at 19% applies.

Key exceptions to the general rule — services with special place of supply rules

• Services related to immovable property — where the property is located, regardless of B2B or B2C
• Passenger transport — where the transport takes place proportionally
• Restaurant and catering services — where the services are physically carried out
• Short-term hire of means of transport — where the vehicle is put at customer's disposal
• Cultural, artistic, sporting, scientific, educational and entertainment services — where the event takes place for B2C
• Telecommunications, broadcasting and digital services to consumers — where the consumer is located
• Intermediary services B2C — where the underlying transaction takes place

Place of supply for digital services — the special rule

Digital services supplied to consumers — B2C — have their own place of supply rule. The place of supply is where the consumer is located — not where the supplier is based. This means a Cyprus SaaS company selling to French consumers must charge French VAT at 20%, not Cyprus VAT at 19%. The OSS registration scheme was created specifically to manage this obligation — allowing suppliers to register once in Cyprus and report all EU B2C digital service sales in a single quarterly return.

Property-related services — the immovable property exception

Services that are directly related to immovable property are always subject to VAT in the country where the property is located — regardless of where the supplier or customer is based. This exception covers: estate agents and property finders, architects, engineers and surveyors, construction and building services, property management, hotel and holiday accommodation, and legal services specifically related to property transfers. A Cyprus architect designing a building in Germany must charge German VAT on their fees — not Cyprus VAT.

Determining where a business customer belongs

For the B2B general rule the place of supply is where the customer belongs — typically where their business is established. For a customer with a single establishment this is straightforward. For customers with multiple establishments — a head office in Germany and a branch in Cyprus — the supply is made to whichever establishment actually uses the service. If the Cyprus branch uses a consultancy service the place of supply is Cyprus even if the contract is with the German head office. Getting this right requires due diligence on which establishment is the actual recipient.