In light of the end of the transition period for the UK’s Withdrawal Agreement from the EU, the Tax Department of the Republic of Cyprus has made the following announcements in relation to movement of goods between Cyprus and the UK and VAT refunds:
VAT Refunds
The EU Directive on VAT Refunds to Taxable Persons in Other Member States will not apply to the UK after 31 December 2020; this means that there will be no access to the VAT refunds e-application and no ability to claim refunds for VAT incurred in the UK for expenses incurred by your company pursuant to the said Directive.
What happens next?
VAT paid in the UK up until 31 December 2020 on the supply of goods and the provision of services by UK taxable persons (as well as on VAT incurred on imports of goods into the UK) may be refunded on the basis of the above Directive, provided that those goods or services are used in the context of the business activities in Cyprus. Requests for VAT refunds must be submitted electronically as soon as possible and in any case by 31 March 2021 at the latest.
VAT paid in the UK from 1 January 2021 onwards, which is imposed on the supply of goods and the provision of services by UK taxable persons (as well as on VAT incurred on imports of goods into the UK) may be refunded on the basis of the 13th VAT Directive on Refunds to Non-EU Taxable Persons, provided that those goods or services are used in the context of the business activities in Cyprus. Requests for VAT refunds must be submitted electronically through the prescribed procedure.
UK-CY Movement of Goods
For VAT purposes, goods that have been dispatched or transported from/to the UK/Cyprus before 31 December 2020, and arrived to the UK/Cyprus thereafter, are considered as intra-EU transactions and not as imports and exports of goods, on the basis of Article 51(1) of the EU-UK Withdrawal Agreement.
From 1 January 2021 onwards, ongoing movements of goods that have started before 1 January 2021 will have to be presented before the competent Customs Authorities at the border of the Republic of Cyprus or the UK accordingly. Customs Authorities may request the importer to prove, by way of a transport document or otherwise, that the dispatch or transport of those goods started before 31 December 2020.
In any case, the reporting obligations relating to the above transactions (e.g., the submission of VIES statements) continue to apply.
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