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The Value Added Tax (Amendment) (No5) Law of 2012 andThe Excise Duties (Amendment) Law of 2012
10.12.2012
Area(s) of Practice: Налоговое право

“The Value Added Tax (Amendment) (No5) Law of 2012”

The Parliament also urgently approved a bill submitted before it, amending Section 17 of the VAT Law, so as to provide for a VAT increase from 17% to 18% with effect from 14 January 2013, and a further increase to 19% as from 13 January 2014. Also, the reduced VAT rate of 8% provided in Section 18A shall be increased to 9% with effect from 13 January 2014. Section 18A refers to Annex XII of the VAT Law that includes a list of supplies of services to which a reduced VAT rate of 8% was applied until now. The list includes restaurant and catering services, accommodation provided in hotels and similar establishments (including the provision of holiday accommodation and the letting of places on camping or caravan sites), and transport of passengers and their accompanied luggage in the Republic.

“The Excise Duties (Amendment) Law of 2012”

Excise Duties Law, 91(I)/2004 has also been amended in order to increase duty rates on certain tobacco products and alcoholic beverages. In particular, duty rates on fine-cut tobacco for the rolling of cigarettes and other smoking tobacco is increased from €60 to €150 per kilogram. Also, the structure of excise duty rates on cigarettes has been changed as follows:
• Specific element: €1,10 (from €0,80) per packet of 20 cigarettes;
• Ad valorem element: from 40% to 34%.
• Minimum excise duty rate: from €2,20 to €2,43 per packet of 20 cigarettes.

The aim of the new structure is to limit the negative impact of intentional unjustified reduction in cigarette prices on public income.

Furthermore, the new amendment imposes an increase on the excise duty rates for ethyl alcohol and beer. In particular, the Republic of Cyprus, following its accession to the EU, has applied a rate of €598,01per hectolitre of ethyl alcohol over the last 8 years. This rate is now increased to €956,82 per hectolitre of ethyl alcohol. With regard to excise duty on beer, the Republic of Cyprus, following its accession to the EU, has applied a rate of €4,78 per hectolitre per degree of alcohol of final product. This means that a tax of €0,12 was imposed on a 0,50 litre bottle of beer containing 5% alcohol volume. This rate is one of the lowest in the EU. However, following the amendment the excise duty rate on beer is increased to €6 per hectolitre per degree of alcohol which means that a tax of €0,15 shall be imposed on a 0,50 litre bottle of beer containing 5% alcohol volume.

In addition to the above, the Minister of Finance, taking into consideration the Index of Consumer Prices, is granted the authority to readjust the excise duty rates by issuing a Decree published in the Official Gazette of the Republic.

Finally, Section 87 of the Law was amended, in order to provide for a maximum refund of any tax paid regarding manufactured tobacco that has been declared unfit for human consumption due to natural disaster. In particular, the refund per year shall not exceed the 25% of the tax corresponding to the average monthly quantity per category of manufactured tobacco placed on the market.

It is noted that the amendments to the VAT and the Excise Duty legislation have been approved by the Parliament under an urgent procedure, in an effort to implement austerity measures considered necessary following the negotiations between the Cyprus government and the Troika.

 

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