The Government in Cyprus announced this afternoon a temporary reduction of the standard VAT rate and the higher of the two reduced rates amongst the economic measures aimed at reducing the financial impact of the the COVID-19.
The current standard VAT rate of 19% will be reduced to 17% for a period of 2 months.
The current reduced rate of 9% will be brought down to 7% for 3.5 months (this rate applies mainly to accommodation provided in hotels and similar establishments, restaurant and catering services, domestic passenger transport).
Extension will also be given for due VAT payments.
The law is said to be ready and passed in just a few days.
Source Silviya Ivanova
Cyprus national fiscal package of measures to counter coronavirus refers to the following VAT related measures in an attempt to support business liquidity and strengthening of internal consumption.
It specifically refers to the following:
1. Temporary suspension for two months of the obligation to pay VAT, without the imposition of any penalties. It should be clarified though that the deadlines for the submission of the VAT returns are not suspended.
This measure refers to:
a) businesses, whose turnover was not more than € 1m according to the tax returns filed in 2019 and
b) businesses whose turnover cut down by more than 25%. It is noted that such arrangements will be made so that the VAT payable amounts will be paid progressively until 11 November 2020. This measure will increase business liquidity during the period in which businesses are expected to face a liquidity problem.
2. Provisional reduction of VAT:
a) from 19% to 17% over a two-month period and
b) from 9% to 7% for a period of three and a half months immediately after the relevant legislation is put into effect so as to enhance citizens’ purchasing power and stimulate consumption.
