Tax rate by region Cyprus

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The information provided on this page is intended for general informative purposes only. It should not be interpreted as tax advice, nor is it meant to be. For advice on your particular tax responsibilities, consult with an experienced tax expert. PayPro Global does not assume any responsibility for any action taken or not taken based on the information presented here.

Understanding SaaS Sales Tax in Cyprus: A Practical Guide for Businesses

Cyprus adopted a Value Added Tax (VAT) system in 1977 to align with European Union standards and enhance revenue collection. Businesses operating within the country, including those offering Software as a Service (SaaS), must adhere to specific VAT regulations. This guide provides a comprehensive overview of SaaS sales tax in Cyprus, outlining key aspects and offering practical advice for compliance.

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Cyprus

Cyprus implemented a VAT system in 1977 to enhance revenue collection and align with EU standards.

Official government link: Tax Department

19.00%

E-products and services VAT/Sales tax rate

5.00%

Reduced tax rate

Reduced tax rate product categories

E-Leaning and books, magazines and newspaper supplied by a school, university or college

Exempted product categories

Certain education services are exempt

Reverse charge mechanism for B2B sales

Yes

Tax ID validation required

Yes

When do you have to register

Non-resident companies have to register as soon as goods are being delivered or services are being provided

Online registration possible

Yes

Local representative needed

Not mandatory

Registration procedure

Registration for the MOSS can be completed online. Non-resident businesses seeking VAT registration can apply to the Tax Department using Form T.D.2001, which can be submitted through the PSC Cyprus or directly to the local Tax Department Office by post or in person.

The application must include the following documents:

A copy of the certificate of incorporation
A copy of the certificate of registered office address
A copy of the certificate of directors and secretary
A copy of the certificate of shareholders
A copy of the certificate of registration of the business name (if applicable)
A questionnaire for the registration of international business entities (for companies registered in Cyprus with main business activities abroad)
The VAT registration number is issued within one or two days, and the certificate of registration is provided within 5 to 10 days.

List of digital and electronic services liable for tax

E-books, images, movies, and videos, whether purchased from platforms like Shopify or accessed via services like Netflix, fall under the tax category of “Audio, visual, or audio-visual products.”
Downloadable and streaming music, whether buying an MP3 or using services like SoundCloud or Spotify, are categorized as audio products.
Cloud-based software and as-a-Service products, including Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS), and Infrastructure-as-a-Service (IaaS).
Websites, hosting services, and internet service providers.
Online advertisements and affiliate marketing.

Penalties

Foreign companies may face penalties for mis-declarations or late filings of Cyprus VAT returns:

A late registration penalty of €85 per month.
Late filings incur a charge of €51 per return.
Delayed payments result in a 10% surcharge on the VAT due, plus additional interest currently set at 4.5% per annum.
Incorrect VAT reporting attracts a 10% penalty on the output VAT due, along with annual interest on both the output VAT and the penalty.

Tax evasion can lead to penalties of up to 300% of the output VAT value.

The statute of limitations for Cyprus VAT is six years, extended to twelve years in cases of fraud.

Registration threshold

No threshold, non-resident companies must register for VAT

Filing interval

Quarterly

Filing deadline

10th of second month after period-end

E-invoicing requirements

Not mandatory

How-To Guides: Cyprus SaaS VAT

Step: 1 Threshold

Effective May 1, 2004, Cyprus requires non-EU vendors (including online platforms) of digital services to consumers (B2C) in Cyprus to register for and collect VAT, regardless of the sales amount. The obligation was expanded to EU-established digital services providers effective January 1, 2015.

Step: 2 Business Registration

Foreign businesses must register with the Cyprus Tax Department. Non-EU businesses often use the Non-Union One-Stop Shop (OSS) or appoint a local fiscal representative if a full VAT registration is required.

Step: 3 TIN/VAT Number

Issued as a VAT Identification Number (prefixed with “CY”) by the Tax Department (Ministry of Finance).

Step: 1 Standard VAT Rate

The standard VAT rate in Cyprus is 19% (applies to most SaaS/digital services).

Step: 2 VAT Formula

To calculate your tax amount, use this formula:

 

Tax Amount = Net Price x 19%

 

Step: 3 Reverse Charge (B2B)

Yes. For cross-border B2B sales into Cyprus, the “Place of Supply” is where the customer is established. The Cyprus-based business customer self-assesses VAT, and the foreign seller does not charge local VAT.

Step: 1 Selling B2C

The seller must charge 19% Cyprus VAT. For EU-based sellers, this is handled via the Union OSS; for non-EU sellers, via the Non-Union OSS.

Step: 2 Selling B2B

VAT is not charged by the seller. The seller must verify the buyer’s VAT ID via VIES and apply the Reverse Charge Mechanism.

Step: 3 Invoice Requirements

 Invoices must include:

• Supplier & Buyer Name/Address
• Supplier’s VAT ID (with CY prefix)
• Buyer’s VAT ID (for B2B/Reverse Charge)
• Unique Sequential Invoice Number
• Date of Issue and Date of Supply
• Description of SaaS/Service
• Net Amount, VAT Rate (19%), and VAT Amount (in EUR)
• Note: “Reverse Charge” (if B2B).

Step: 1 Filing Interval

Taxes should be filled quarterly. 

Step: 2 Filing Deadline

10th day of the second month following the end of the tax period (e.g., Q1 return due by May 10th).

Step: 3 Submission

Electronically via the Tax For All (TFA) portal (replaced the old TAXISnet). Payments are made via online banking or the portal.

Step: 4 Record Keeping

Cyprus VAT requires 6 years for accounts and 8 years for invoices.

 

PayPro Global Solution: Simplified Registration & Fiscal Representation

Navigating Cyprus’ VAT registration and fiscal representation can be daunting. PayPro Global acts as your Merchant of Record, handling these complexities, including VAT registration and fiscal representation where needed, so you can focus on your business.

Learn more about our MoR services.

FAQ

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