The below was written with the purpose to provide a refresher on VAT Cyprus matters in regards to the place of supply for Cross Border Supplies of goods and services.
1. Cross Border Supplies-goods
In case of supply of goods, a person may need to consider where the supply of goods takes place in order to understand where and if it needs to be registered with VAT. Supply of goods outside of Cyprus is considered a transaction outside the scope of Cyprus VAT, but this does not imply that the Company is not required to register for VAT in another EU country.
In general, the place of supply is determined as follows:
- Where the goods are supplied;
- How the supply is made;
- Nature of goods supplied.
One very important matter that should be taken into careful consideration is the flow of goods.
The Basic Rule for the place of supply includes the following:
- Supply of goods without transportation i.e. where the goods are located at the time the supply take place;
- Supply of goods with transportation i.e. where the goods are located when the dispatch or transport to the customer begins.
Below is a summary of exemptions to the Basic Rule:
- Distance sales to non-taxable persons where the transportation is made by the seller; the registration requirement to each member state, will depend on the threshold of each country. Provided that the registration threshold is not exceeded in the country of the customer, VAT registration is not required, and as a result local VAT (in the country where it is registered for VAT) is charged by the seller;
- Sales of goods which are subject to excise duties; for example, sales of tobacco products, alcoholic beverages and alcohol and fuel, are always treated as distance sales if the transportation is made by the supplier, irrespective if the purchaser is a VAT registered person. If the transportation is undertaken by the purchaser, the transaction is taxed in the EU country where the transportation begins;
- Sales within member states that includes installation; in this case, the place of supply of goods, which are installed or assembled by the supplier, is where the goods are being installed or assembled. Some EU countries have introduced the simplification rule, where the recipient of the goods and installation services can apply the reverse charge so that the EU supplier does not need to register for VAT in the other EU country;
- Supply of goods on board ships, aircraft or trains; the place of supply in these means of transportation during the section of a passenger transport operation effected within the EU, is where the point of departure is;
- Supply of electricity or gas; if the supply is made to taxable dealer, the place of supply is where the taxable dealer is established. If the supply is made to a private customer, the seller may need to register for VAT in the other EU country and charge the VAT rates of the other country;
- Intra-community supply of goods; the place of supply shall be the place where the dispatch or transport of the goods is completed. In this case no VAT is charged by the seller, provided that the purchaser has a valid EU VAT number, the goods were transported between the member states and there is evidence that the goods were indeed transferred between the member states.
2. Cross Border Supplies-services
In general, the place of supply is determined as follows:
- Where the services are supplied
- Nature of services supplied
- Status of the customer
An important aspect that always needs to be taken into consideration, is the distinction between a taxable and a non-taxable person.
The Basic Rules for the place of supply are the following:
The place of supply of services between businesses is where the customer is established. The person who provides the service has to declare through VIES report on a monthly basis the services provided, and the person who receives the services has to account for VAT under the reverse charge mechanism.
The place of supply for services supplied to private individuals is where the supplier is established.
Below is a summary of exemptions to the Basic Rules:
- Services relating to immovable property; services connected with immovable property are taxed where the immovable property is located, hence the person liable for accounting for VAT is the provider of the services. Some EU countries apply the extension to the reverse charge;
- Passenger transport; the place of supply is where the transport takes place, by proportion to the distances covered
- Admission to cultural, artistic, sporting, scientific, educational, entertainment and similar services; in this case, the place of supply in relation to the admission of such events is where the event actually takes place. Admission refers to the right to enter in an event such as theatrical shows, circus, trade and other exhibitions, amusement parks, concerts and other similar cultural events, athletic exhibitions/events such as games, educational and scientific events such as seminars and lectures;
- Restaurant and catering; the place of supply is where the services are physically carried out;
- Restaurant and catering on board a ship/aircraft/train; the place of supply is the place of departure of the transport
- Intermediary services; the place of supply is the location where the main transaction is taxable;
- Telecommunication, broadcasting, radio, television and electronically supplied services; the place of supply is where the private customer is established. This could create an obligation to register under multiple EU member states or registering under the MOSS scheme;
- Services consultants and lawyers, financial services; the place of supply is where the customer is established, provided that the customer is established in a non-EU country;
- Short term hiring of means of transport; the place of supply of short-term hiring means of transport is where the means of transport is actually made available to the customer. In all cases short-term means not more than 30 days, except for vessels that in not more than 90 days.
For further guidance on Cyprus and international VAT planning please contact Mr Charles Savva, on firstname.lastname@example.org.