Services received by a Cyprus company from abroad (from both EU and non EU companies)
- When a Cyprus company receives professional services from abroad (i.e. legal, consulting, accounting, marketing, IT services, royalties and licenses rights etc) then it must treat these services under the reverse charge rules, that is to self charge local VAT at the rate of 19% on the value of the services received. However, this does not apply where the services received from abroad are exempt services from VAT. The most common exempt services are the following:
- Intermediation, negotiation and arrangement services in respect of trading/transactions to shares, securities and currencies
- Insurance services
- Services in relation to specific immovable property situated outside Cyprus
- Management and similar services provided to investment/mutual funds
- The granting and the negotiation of credit by the person who grants the credit
- Receipt of such services from abroad in excess of the registration threshold of euro 15.600 per a consecutive twelve months period creates an obligation for VAT registration for the Cyprus company.
- The recoverability of this self charged input VAT will depend on the nature of the activities of the company. Companies which have exempt activities with income from EU/Cyprus sources (i.e. loan interest income, proceeds from disposal of securities, insurance and banking services, medical services, rental activities and educational services) do not have the right to claim back this input VAT and generally the input VAT charged on their expenses by their suppliers.
- The above treatment does not apply for purely investment holding companies (co’s which do not have any other activities or sources of income other than dividend income), as the pure holding of investment is not an economic activity for VAT purposes. Pure holding companies do not have the right for a VAT registration. We note that holding companies which at the same time have financing activities or are engaged in trading of shares are not considered as pure holding companies.