Further to our previous VAT updates regarding the decisions taken by the Cyprus government to use Value Added Tax (VAT) as a fiscal policy tool in order to minimise the adverse effects of coronavirus (Covid-19), on the local economy, we would like to highlight the following:
Indirect Tax (VAT) Measures – Reduction of VAT rate to 5% to support tourism industry
On 23 June 2020 the Council of Ministers issued decree ΚΔΠ 268/2020, which announces that the VAT rate of 9% is reduced to 5%, from 1 July 2020 to 10 January 2021.
VAT measures – Reduction of VAT reduced rate to 5%
The Cyprus Government announced further economic support measures in order to address the effects of Coronavirus outbreak on the Cyprus tourism industry.
As per the new law the Cyprus Government, in its effort to use Value Added Tax (VAT) as a fiscal policy tool for minimising the adverse effects of coronavirus (Covid-19) pandemic on the local economy and especially on the tourism sector, has temporarily reduced the VAT rate that applies to the tourism, restaurant and transport industries from 9% to 5%.
The reduction applies to the following:
• Hotel accommodation, tourist lodging and other similar holiday accommodation;
• Restaurant and catering services; and
• Transportation of passengers and their accompanying luggage within Cyprus via taxi or bus.
Businesses which are falling in any of the abovementioned categories need to take action to ensure the change in VAT rate is correctly reflected in their accounting records, in order to avoid problems in future VAT audits. The relevant businesses have to ensuring that penalties and interest will not be imposed due to any mistakes.
Feel free to contact us if you wish to have a discussion and/or need advise, as to on how this development might affect you or your business.