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Cyprus adopts new VAT rules for SMEs to align with EU directive

The House Plenum has unanimously amended the VAT law to align with an EU directive concerning the special scheme for small enterprises.

The special scheme, as it previously stood, allowed VAT exemption only for businesses established in the member state where the VAT was due. However, this arrangement created negative competitive effects in the internal market for businesses not established in that specific member state.

To address this distortion, a European directive has been issued, modifying the special scheme so that small businesses established in Member States other than the one where VAT is due can also benefit from the exemption.

In the case of Cyprus, the VAT exemption will also be granted to businesses not established in the Republic, provided that their turnover does not exceed €15,600 in Cyprus and €100,000 in total across the European Union.

Similarly, small businesses established in the Republic of Cyprus and operating in other member states will be able to opt for VAT exemption on a cross-border basis, provided they meet the national exemption threshold of the other Member States and the EU-wide threshold of €100,000.

The Ministry of Finance estimates that this arrangement will reduce the administrative burden for small businesses established in Cyprus that conduct business in other member states.

(Source: CNA)

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