When a company sells its products or provides services in a foreign country, it is obligated to register for value-added tax in the place where the business transactions happen. In addition, it must charge the local rate applicable to goods in the state. Businesses are required to file applications for a value-added tax number if it involves taxable activities such as importing goods into the country, retailing goods locally, storing products, or organizing events as such trade events. Almost all business entities here must charge the tax on goods purchased and certain services rendered.
Looking for information on value-added tax? this guide has all there is to know and how to register.
Types of Value Added Tax
There are three different types of VAT rates applied within the territory. Standard with a 19 percent rate is charged on a few taxable goods and services. Intermediary at a 9 percent rate is taxed on foodstuffs, public transport, etc. 5 percent Reduced rate which applies to pharmaceutical products, books, etc. A zero percent rate may apply to community and international transport.
VAT Registration
All corporations and foreign businesses with taxable activities must register and apply for VAT before commencing business. Applying late attracts unwanted fines and financial penalties. This process is simple and easy, all one must do is submit the essential documents and then wait for the tax number to be issued. The number is used for tax purposes related to the sales of goods.
Registration Threshold
When a company exceeds specific thresholds, it must file an Intrastat statement. Available thresholds in the nation are:
- Arrivals: EUR 180,000
- Shipments: EUR 55,000
Processing Time
Usually, it takes no less than a month to complete the application. A company received its VAT number at most four weeks after registration.
Documents Required
The following items must be included with your application:
- Completed registration form
- Extract from the trade register
- Proof of activity within the territory
- Power of attorney for the fiscal representative
- Copy of Articles of Association, etc.
Hiring A Fiscal Representative
Only foreign companies from non-EU member states must hire fiscal agents to represent them for tax services. Corporations owned by citizens from Europe do not have to hire representatives. Thus, all VAT debts are accounted for by the company.
Filing VAT Returns
A company must report its value-added tax position by filing a tax declaration (Form VAT 4) and periodical VAT returns every quarter. However, monthly reporting may be allowed or imposed by Cypriot VAT authorities. Returns must be filed electronically before the 10th day of the second month after the tax period to which it relates. When a return is not submitted on time, Cypriot VAT authorities charge a penalty of € 100. This unwanted fine can be avoided by timely and accurate filing.
VAT Penalties
After a company register for VAT, it becomes obligated for it to file and report VAT accurately and timely. Failure to meet these obligations may attract financial penalties, unwanted fines, or late filing fees when deadlines have long passed. The tax office can also choose to find a business for late tax registration. Inaccurate filings also attract penalties of 20 percent of the additional tax liability. There are other penalties levied on corporations who fail to comply with the rules of the tax authorities, other than the few mentioned above. To avoid these fines, companies must abide by the rule and register for VAT before commencing business or after the first taxable transaction.
