VAT in Cyprus: Understanding the 19%, 9%, 5%, 3% and Zero Rates

Cyprus has been an EU member since 2004, and its VAT system follows European directives. The standard rate sits at 19% — one of the lowest in Europe. Compare that to Hungary's 27% or Denmark's 25%, and you'll see why the island attracts international businesses.

The system isn't overly complicated once you understand which rate applies to what. Here's a practical breakdown.

The Standard 19% Rate

Most goods and services fall under the standard 19% VAT rate. This includes:

retail goods (clothing, electronics, furniture, appliances)
professional services (legal, accounting, consulting, marketing)
IT services and software development
advertising and digital marketing
commercial property rentals (under certain conditions)
telecommunications

When in doubt, assume 19%. It's safer to apply the standard rate and get a professional opinion than to undercharge and face penalties later.

The 9% Reduced Rate

The 9% rate supports tourism and hospitality — sectors that contribute roughly 15% of Cyprus GDP:

Accommodation and food:

hotels, guesthouses, tourist apartments
restaurants, cafes, catering services
retirement homes (accommodation and care services)

Transport:

taxis
bus services (urban and intercity)
maritime passenger transport

Utilities:

electricity supplies for domestic use (subject to conditions)

The 5% Reduced Rate

The 5% rate covers socially important goods and services:

Food and beverages:

foodstuffs (not restaurant meals)
non-alcoholic drinks, juices, water
confectionery

Healthcare:

pharmaceuticals and vaccines
medical equipment

Culture and events:

concert tickets, cinema, sporting events
museum and exhibition entry
theatre performances (except premieres — see 3% rate)

Printed materials:

books, newspapers, magazines (print and digital)

Services:

hairdressing and beauty services
funeral services
school catering

Property:

first 130 sqm of primary residence (conditions apply)

The property rate deserves special attention. To qualify for 5% instead of 19%, you must use the property as your main residence for at least 10 years, submit an application before delivery, and the total value cannot exceed €475,000.

The 3% Super-Reduced Rate

Introduced in July 2023, the 3% rate applies to a limited list:

books, newspapers, magazines (excluding advertising materials) — reduced from 5%
equipment for disabled persons
waste collection and disposal services (private companies only)
sewage treatment
premiere performances of theatrical, musical, and dance productions

Note the distinction for cultural events: only the first performance qualifies for 3%. All subsequent shows are taxed at 5%.

Zero Rate (0%)

Zero rating differs from exemption. With zero-rated supplies, you still file returns and can recover input VAT. With exempt supplies, you cannot.

Permanent zero rate:

exports outside the EU
intra-community supplies to other EU member states
international passenger transport
supplies to qualifying ships and aircraft (fuel, provisions, repairs)
goods for blind and disabled persons (wheelchairs, Braille typewriters)

Temporary zero rate (extended to 31 December 2026):

baby food and infant formula
diapers (baby and adult)
feminine hygiene products
fresh and chilled vegetables
fresh fruits

The temporary measure was introduced in 2022 to ease the cost-of-living burden during high inflation. The government has extended it five times already.

VAT-Exempt Supplies

Some supplies are exempt from VAT entirely, but this means no input VAT recovery:

financial services (banks, investment firms)
insurance
medical services (doctors, dentists, hospitals)
educational services (schools, universities, certified training providers)
postal services
residential property rentals
cultural services by non-profit organizations (museums, libraries, galleries)

Registration Thresholds

Mandatory registration:

turnover exceeds €15,600 in any 12-month period
you expect to exceed this threshold within 30 days
intra-EU acquisitions exceed €10,251.61 per year
you make intra-community supplies (no threshold)

For foreign businesses:

EU companies: €10,000 distance selling threshold applies
non-EU companies: must register for any taxable supply, plus appoint a fiscal representative

Applications go through the regional tax office. Forms must be in Greek. Processing takes a few weeks.

Filing and Penalties

VAT returns are filed quarterly through the TAXISnet system. Deadline: 10th day of the second month following the quarter end.

Penalties:

late filing: €100 per return
late payment: 1.75% annual interest on unpaid amount
additional 10% surcharge may apply

Records must be kept for at least 6 years.

Reverse Charge Mechanism

When you purchase services from a supplier in another EU country or outside the EU, the reverse charge applies. You self-assess Cyprus VAT at the appropriate rate and simultaneously claim input VAT (if the service relates to taxable activities).

In practice, this means zero cash impact — but errors in documentation lead to assessments, penalties, and interest.

Summary Table

RateCategories19%Everything not in other categories9%Hotels, restaurants, passenger transport5%Food, pharmaceuticals, books, cultural events3%Publications, disability equipment, premiere performances, waste collection0%Exports, international transport, temporarily — basic necessitiesExemptFinance, insurance, healthcare, education

Practical Considerations

The Cyprus VAT system rewards proper planning. Misclassifying your supplies costs money either way: charge too little and you'll face back-taxes plus penalties; charge too much and you're less competitive.

A few things to keep in mind:

If you're selling to consumers across the EU, the One-Stop Shop (OSS) scheme can simplify compliance. You register in one country and report all EU sales through a single return.

For B2B services, place-of-supply rules determine where VAT is due. Generally, services to business customers are taxed where the customer is established — not where you are.

Property transactions have their own complexity. The 5% rate for primary residences comes with strict conditions, and the rules changed significantly in late 2023.

Information current as of January 2025. Tax legislation changes — verify current rules before making decisions.