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Indirect Tax Update - New amendments to the VAT Legislation

New amendments to the VAT Legislation

In addition to the recent amendment to the VAT Act with regards to the VAT treatment of vouchers, the House of Representatives voted for the following three additional amendments, which were published in the Official Government Gazette on 21 and 24 May 2019.

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Indirect Tax Update - New amendments to the VAT Legislation effective since 1/1/2019

First amendment (Law 70(Ι)/2019) – Amendment of Schedule 13

Schedule 13 of the VAT Act is amended by adding new subparagraphs 2 to 4 to paragraph 18.

Paragraph 1 of 18 essentially provides that the place of supply of digital services to non-registered persons is where the non-registered person is established. Therefore, the provider of such services is liable to either register in the MS the non-taxable person is established or under Mini One Stop Shop (MOSS) regardless of the value of such services.

The new sub-paragraph 2 of paragraph 18 exempts the provider of such services from the obligation to register in the country of establishment of the non-registered client or under MOSS if the value of supplies to all MS within one calendar year does not exceed €10,000.

The new sub-paragraph 3 of paragraph 18 provides that the provider of these services must register either in the MSs the non-taxable persons are established or under MOSS if at any time in the calendar year the amount of € 10.000 is exceeded.

Sub-paragraph 4 obliges the supplier, if he has exercised the election, to consider the place of supply of his services to be the Republic and account for VAT using the applicable VAT rate for at least two calendar years.

KPMG Comment

This particular amendment is not expected to be widely applicable. Possibly it will help some businesses that are either in the early stages of their business activities or occasionally provide this kind of services.

Second amendment (Κ.D.P. 174/2019) – Exceptions in invoicing rules

The second amendment concerns the replacement and recasting of paragraph 3 of Regulation A11 of the Basic Regulations of the VAT act with the new paragraph 3 referring to the exceptions to the invoicing rules.

According to the wording of point (a) of the new paragraph 3, if the person providing the services or supplying the goods does not have a fixed establishment in the MS where the service or goods are deemed to be delivered, the invoicing rules of the MS of the business establishment of the person making the supply apply. Even if there is such a fixed establishment in the MS the transaction is deemed taking place, the invoicing rules are those of the MS of the business establishment of the person making the supply, provided that the fixed establishment does not intervene with the transaction. The same applies if the transaction takes place outside the EU.

The wording of point (b) of new subparagraph 3 provides that when services are provided under MOSS, the pricing rules applied in the MS where the taxable person elected to register under MOSS (previously no reference was made to MOSS).

Example

A digital service provider established in Germany is registered under the special scheme (MOSS) in Germany. Germany's invoicing rules apply.

Third amendment (Κ.D.P. 175/2019) – Non-Established taxable person with regards to Telephone, Radio Broadcasting and electronic services 

The third amendment concerns paragraph 1 of regulation 2 and paragraph 2 of regulation 3 of the special regulations KDP 479/14 issued under Article 42B (Special scheme for telecommunications, radio and television or e-services).

Paragraph 1 of Regulation 2 refers, inter alia, to the definition of 'non-established taxable person' in relation to the special regime for Telecommunications, Radio and Television or Electronic Services.

The change focuses on the rewording of the above mentioned definition and instead of making reference to 'Member State' makes reference to the EU 'Community'.

Existing definition

"Non-established taxable person" means a person who provides digital services in the context of carrying on a business which does not have any business establishment or other fixed establishment in the territory of a Member State and is not required to be registered for VAT purposes in the Republic under any other provisions of the CY VAT Act or the law of another MS.

New definition

'Non-established taxable person' means a taxable person who does not have his place of business or a permanent/fixed establishment in the territory of the Community’

The amendment to paragraph 2 of Regulation 3 focuses on replacing point (i).

While under (i) above, the non-resident had to declare that he did not have a VAT number in the community, the new point (i) requires the non-resident to make a statement that he has no place of business or permanent establishment within the territory of the Community.

Please note that all of the above amendment cane into inforce retroactively as of 01/01/2019.

How can KPMG assist?

Should you like to further discuss the content and potential impact of the Circular to your business, please contact one of our trusted advisors from the Indirect Tax Department at KPMG Cyprus.

KPMG’s Indirect Tax team provides advice and assistance at the Cyprus and international level. We structure our effort to dovetail with your business issues and strategy. Our focus is on supplying value adding and pragmatic advice rather than just a list of recommendations.

Our tax professionals are able to review your company’s current tax position and provide relevant advice and planning on a range of indirect taxes, including VAT, customs duties and excise taxes (such as tax audits, reorganizations and acquisitions, etc.). Furthermore, we can help your company with its administrative obligations and contacts with administrative bodies.

 

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