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Amendments of the VAT Law and Regulations

On 5 December 2013, the Cyprus Parliament approved amendments to the Value Added Tax Law, as well as the Value Added Tax (General Provisions) Regulations and the Value Added Tax (Transfer of Goods) Regulations, for purposes of compliance with EU Directive 2010/45 amending the basic EU Directive on VAT (2006/112) and setting out certain rules on invoicing.

In particular, under the new legislation:
• record-keeping needs to be sufficient to allow control of goods moving temporarily from one EU member state to another. Therefore, it shall include details of valuations on goods moving temporarily between EU member states.
• the rules concerning the chargeability of VAT on intra-Community supplies of goods and on intra-Community acquisitions of goods are clarified, to ensure the uniformity of the information submitted in recapitulative statements and the timeliness of the exchange of information by means of those statements.
• in order to help small and medium-sized enterprises that encounter difficulties in paying VAT to the competent authority before they have received payment from their customers, the law now provides for an option of allowing VAT to be accounted using a “cash accounting scheme”. This scheme allows the supplier to pay VAT to the competent authority when the payment for a supply is received, and the right of deduction arises at the time the deductible tax becomes chargeable. Taxable persons can make use of this scheme provided that their annual turnover does not exceed € 25 000.
• a harmonised time limit for the issue of an invoice with respect to certain cross-border supplies is imposed.
• paper invoices and electronic invoices are treated equally. Invoices must reflect actual supplies and their authenticity, integrity and legibility should therefore be ensured. The authenticity and integrity of electronic invoices may be ensured by using certain existing technologies, such as Electronic Data Interchange (EDI) and advanced electronic signatures. However, since other technologies exist, taxable persons are not required to use any particular electronic-invoicing technology.
• the provisions regulating the special VAT scheme for lawyers and the construction industry [Sections 47 and 48 of the Value Added Tax (General Provisions) Regulations] were deleted. However, according to the transitional provisions of the new regulations, the deleted provisions shall continue to apply with regard to any service performed before the enactment of the new legislation.

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