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Cyprus VAT rate classification

Cyprus charges VAT at four rates: 19% standard, 9% reduced, 5% reduced, and 0% zero-rated. A fifth category — exempt — means no VAT is charged but the supplier cannot reclaim input VAT. The rate you charge depends on what you supply, not on who you supply it to, with exceptions for intra-EU and export transactions.

The 19% standard rate

The default. If your supply does not fall into a specific reduced, zero-rated, or exempt category, it is 19%. Professional services, software, electronics, clothing, furniture, consultancy, subscription fees, advertising, and most B2B services are all 19%. If you are unsure, start here and check whether an exception applies.

The 9% reduced rate — hospitality and transport

Restaurants, cafes, bars, hotels, and accommodation services charge 9%. Taxi services, bus fares, and cinema tickets are 9%. The 9% rate causes the most classification disputes, because the line between hospitality and catering is not always clear. A restaurant that delivers food charges 9% on the food. A shop that sells ready-made sandwiches for takeaway charges 5% (as foodstuffs). The same sandwich, eaten in a cafe, is 9%. The distinction is where it is consumed, not what it is.

Hotel accommodation is 9%, but conference room hire within a hotel is 19% — it is a professional service, not accommodation. Package holidays that bundle accommodation and transport are 9% on the accommodation portion and 19% on separately identifiable service components.

The 5% reduced rate — essentials

Books (printed and electronic), newspapers, magazines, medicines, medical devices, baby food, infant formula, some basic foodstuffs, seeds, plants, and fertiliser are 5%. The foodstuffs category is narrow: it covers items for human consumption sold for preparation at home, not restaurant meals or hot takeaway food.

E-books and print books are both 5%. Audiobooks are 5%. But a downloadable audio course or training material is 19% — it is not a book. The distinction turns on whether the product is a book in the traditional sense or a service delivered in audio format.

The 0% zero rate

Exports of goods to non-EU countries, intra-EU B2B supplies of goods (where the customer provides a valid VAT number), certain financial services supplied to non-EU recipients, and international transport are zero-rated. Zero-rated means no VAT is charged, but the supplier can reclaim input VAT on costs. This is the key difference from exempt supplies.

Exempt supplies

Insurance, banking and financial services, education, healthcare, and residential property letting are exempt. The supplier charges no VAT but cannot reclaim input VAT on purchases related to these supplies. A landlord renting a residential property cannot reclaim VAT on renovation costs. A bank cannot reclaim VAT on IT systems. This creates a permanent VAT cost in the supply chain.

Commercial property transactions can elect to be taxed (option to tax), converting an exempt supply into a 19% supply so the supplier can reclaim input VAT. This is common in commercial property development.

Common classification disputes

The disputes that reach the Tax Commissioner are almost always about which rate applies, not whether VAT applies at all. The recurring ones:

1. Takeaway food. Cold food for immediate consumption is 5%. Hot food is 9% (it is restaurant food). Food sold for later preparation at home is 5%. The temperature at the point of sale determines the rate — food kept hot is 9%, even if the customer takes it away.
2. Software and digital services. Standard 19%, unless the supply is an e-book (5%) or an exempt financial service. SaaS subscriptions are 19%. Custom software development is 19%.
3. Property. New residential property (first sale within 3 years of completion) is 5%. Subsequent sales are exempt. Commercial property first sale is 19%. Renovation of a residential property more than 3 years after completion is 5%.
4. Transport. International transport is 0%. Domestic taxi and bus services are 9%. Courier services are 19%.
5. Education. Tuition by a recognised institution is exempt. Private tutoring that is not part of a recognised programme is 19%. Professional training courses are 19% unless provided by a recognised educational body.

If you supply multiple items at different rates in a single transaction, you must apportion the consideration and charge VAT at each rate. You cannot apply a single blended rate. If you cannot apportion, the highest applicable rate applies to the entire consideration.