As of 1/1/2010, Cyprus in order to comply with the provisions of the EU Council Directives 2008/8/EC, 2008/9/EC and 2008/117/EC, amended and effected the changes shown below in the Cypriot VAT law. The amended law states the provisions on the determination of the place of supply of services and the mode of the refund VAT method relating to intra community transactions.

Who will be affected by the changes?

Businesses supplying services to overseas businesses.
Businesses receiving services from overseas businesses.
Businesses supplying goods to other EC countries.
Businesses that want to reclaim VAT incurred in another EC country.
Place of supply of services

The VAT law contains the new rules allied to the place-of-supply of services. For instance, for the taxable business, the place of supply is considered to be the place where the customer is established. For the non-taxable business, the default parameter guides that the place of supply of services is the place where the service provider is established and/or where the said service provider carries out its economic activity.

However, as in every law there are exceptions to the general rule, the same applies to the currently amended law. The exceptions below swing the place of taxation, depending on the nature of the supply and the respective residence of the customer. These are:

Services related to immovable property. The place of supply is considered to be the place where the immovable property is located.
Services related to the organisation and admission to events. The place of supply is considered to be the place where the provision of the services takes place.
Services related to the transportation of passengers. The place of supply is considered to be the place where transport takes place.
Services offered by restaurants on ships, aircrafts, trains during intra community transportation. The place of supply is considered to be the place of departure.
Other restaurant services. The place of supply is considered to be the place where the services are provided.
Short-term hire of vehicles. The place of supply is considered to be the place of disposal of the vehicle.
VAT Rate and Reverse charge

The current VAT rate in Cyprus is 15% for delivery of goods and provision of services. Under the new VAT law all persons are compelled to provide services/and or goods to be registered with the VAT authorities in an EU member state and submit the VAT Information Exchange System (VIES) form on a monthly basis. Cyprus business customers receiving cross border services after 1 January 2010 will become liable to account for Cyprus VAT on most services provided by their overseas suppliers under what is known as the �reverse charge� provisions. This means that the recipient will need to charge itself VAT on the value of services received. The supplier will no longer charge foreign VAT. This will have a further impact on businesses that are not able to fully recover VAT.

Cyprus businesses that supply services to customers where the place of supply is the customer�s country, will need to obtain the customers VAT registration number. It is essential that affected businesses have systems in place before the commencement of the new rules to ensure they are able to comply with these additional requirements and to avoid penalties.

With this process all EU member states among of them Cyprus has modernised and simplified the current rules relating to cross-border supply of services and goods, made the recovery of VAT on purchases made in other EU countries more efficient and help to counter VAT fraud.