VAT for SaaS Companies in Cyprus

SaaS as a digital service for VAT

Software-as-a-Service is a digital service for VAT purposes — it is delivered electronically, automated and the technology is central to the service itself. This classification is important because digital services have specific place of supply rules that override the general B2B and B2C rules in some circumstances. For SaaS the place of supply follows the customer's location for B2C sales — not the supplier's. For B2B sales the general B2B rule applies — place of supply is where the customer belongs.

B2B SaaS sales — reverse charge

When a Cyprus SaaS company sells to a VAT-registered business in another EU country — Germany, France, the Netherlands — the reverse charge applies. The Cyprus company invoices without VAT. The customer declares the VAT on their own return. The key requirements are obtaining the customer's VAT number before issuing the invoice, validating it on VIES and retaining the validation record. If the VAT number is invalid the supply defaults to B2C and Cyprus VAT or OSS rules apply instead.

B2C SaaS sales — OSS and local rates

When a Cyprus SaaS company sells to an individual consumer — or a business that cannot provide a valid VAT number — in another EU country the digital services B2C rule applies. The place of supply is where the consumer is located. A French consumer is charged French VAT at 20%. A German consumer is charged German VAT at 19%. Once cross-border EU B2C SaaS revenue exceeds €10,000 per year OSS registration is required to report and pay all EU VAT through one Cyprus quarterly return.

Subscription billing and VAT invoices

SaaS companies typically bill on a subscription basis — monthly or annual. Each billing cycle creates a VAT point and requires a VAT invoice or equivalent tax document issued within 30 days of the billing date, or by the 15th of the following month for reverse-charged services to EU businesses. For B2B customers the invoice must show the customer's VAT number and state that reverse charge applies. For B2C customers the invoice must show the applicable local VAT rate and amount. Recurring billing platforms and payment processors can often automate this — ensure the VAT logic is correctly configured.

Non-EU SaaS customers

SaaS revenue from customers outside the EU — UK, US, UAE, India — is generally outside the scope of Cyprus VAT for B2B customers. The place of supply for B2B services is where the customer is established — outside the EU in these cases. No Cyprus VAT is charged. For individual consumers outside the EU the general B2C rule places the supply in Cyprus — 19% Cyprus VAT would technically apply — though enforcement on non-EU B2C sales is limited in practice and OSS does not cover non-EU consumers.