08.04.23

Cyprus- New super-reduced VAT rate

The introduction of new VAT rates can pose problems for businesses, who will need to adapt systems and categorisations to accommodate such rates. However, they are often viewed as an effective fiscal strategy for governments to manage their tax agendas.  

The European Union has recently provided EU Member States with greater flexibility to dictate their own VAT rates. These concessions extend to the introduction of super-reduced VAT rates, which previously could not be set below 5%. This restriction has now been abolished, and it is likely that several Member States will take advantage of this to introduce new categories of goods / services subject to the super-reduced rates in line with specific wider fiscal and social initiatives.  

Cyprus is the one of the first countries to take advantage of this increased latitude, via the introduction of a super-reduced rate of 3% VAT for specific goods and services. This will co-exist alongside the 19% standard VAT rate and 5% reduced VAT rate and will be effective from 21 July 2023. 

The new 3% rate will impact the following goods and services: 

• Goods, including specific books, certain lifting devices, vehicles specific to people impacted by disability, orthopaedic items and appliances, and other specific items which can assist people living with a disability.  
• Services, including specific cleaning services performed by private entities, waste treatment and debut performances for specific cultural activities. 

In addition to the new 3% super-reduced VAT rate, the Cypriot government has re-categorised several of its goods and services under the zero VAT rate. This re-classification is also currently active and will last until 31 October 2023, in contrast to the new 3% super-reduced rate, which is expected to be a permanent feature. 

The law relating to both the new super-reduced rate and the re-classification of goods can be found here. 

Cyprus is a compliant territory for Kofax, and the Tungsten Web Form Portal supports the new rate. Kofax is communicating with impacted Cypriot suppliers and buyers to facilitate the new super-reduced VAT rate.