VAT for Cyprus Forex Companies

Recommended contact person

Nicolas Patsalis Nicolas Patsalis Head of Corporate Accounting
Michael Alexandrou Michael Alexandrou Partner | Tax

VAT for Cyprus FOREX Brokers and Investment Firms 

General VAT overview

VAT Treatment regarding the supply of Services

  • If the Customer is resident of the EU and is VAT registered, then 0% VAT is applied with reverse charge by the customer.
  • If the Customer is resident of the EU, but is not VAT registered, then Cyprus VAT is to be charged.
  • If the Customer is not resident of the EU, independently of his VAT status, no VAT is charged.
  • If the Customer is a Cyprus resident, independently of his VAT status, Cyprus VAT is to be charged.

Business to Business Transactions (B2B)

As of the 1st January 2010, the Place of Supply of B2B services is considered to be where the recipient of the service or has a fixed establishment to which the service is supplied. As of the 01.01.2010,  VAT is due in the country of the recipient of the service.

Business to Client Transactions (B2C)

From the 1st January 2010, the Place of Supply of B2C service is where the supplier has established his business or has a fixed establishment from which the service is supplied. Therefore, since the abovementioned date, VAT is now due in the country of the supplier of the service.

VAT Treatment of FOREX and BINARY Services

 Counterparty Location

 VAT Treatment

 VAT Registration

VAT Input

 non-EU

 Zero rated supplies

 Must register if supplies exceed €15.600 per annum or receives taxable services from abroad exceeding €15.600.

 Can be reclaimed

 EU including Cyprus

 Exempt supplies

 Unable to register unless it receives taxable supplies from outside Cyprus exceeding €15.600 per annum.

 Cannot be reclaimed

The company, after its registration to the VAT authorities:

  • must report to the VAT authorities on a quarterly basis.
  • can recover input VAT on local expenses incurred up to 6 months prior to VAT registration and for goods acquired 3 years prior to registration, in the first reporting period.

Market Maker VS Broker/Tied Agent

Note:

Cyprus VAT Legislation prescribes a standard method of apportionment between taxable and exempt economic activities on the basis of the revenues derived from each activity to the total revenues for the relevant period. However, where a taxpayer believes that the standard method does not produce a fair result, (following a VAT ruling) a special method of apportionment can be used (i.e. by transaction count, by deposit amounts etc.)

If Market Maker is EU/CY resident then 0% recovery of input VAT is allowed. If Market Maker is non-EU resident company then 100% recovery is allowed.

VAT Refund Procedure

Once a VAT quarterly report is filed which result for VAT to be refunded, the taxpayer must fill the VAT Refund application form (VAT Form 4B). This is usually sent together with the next quarter’s VAT report; however the taxpayer can opt to send it before next quarter’s reporting.

The VAT refund procedure is to be completed within 8 months maximum.In case the 8 month deadline is exceeded then interest will accrue on the said amount.

For further information on VAT issues for Forex and other companies, you can get in touch with us.