VAT REVERSE CHARGE FOR CONSTRUCTION INDUSTRY
Overview
The House of Representatives of the Republic of the Republic of Cyprus on 31 July2020 put in practice some important amendments to the Cyprus VAT law which is affecting the construction industry and the related services (note 1). These changes were announced in the Government Gazette on 20 August 2020.
Article 11B shifts the obligation to account for VAT on construction, demolition, repair, or maintenance of any civil engineering project (and in some cases goods provided with the services) from the supplier to the recipient of the services (B2B). Under the amendment, “taxable person” has been replaced with “any person”.As a result of the amendment, the recipient (being a taxable person) has the obligation to self-account for VAT on the services (or services together with goods) even if the supplier is not a taxable person registered for VAT purposes (B2B and C2B).
Main benefit and reason for the amendment
There was a time difference between the date of issue of the invoice and the settlement. Taking into consideration, that the amounts relating to this type of industry are enormous, the time difference was the main reason of cash flow liquidity problems with many negative consequences (i.e. delay of existing and new projects, needs extra financing until settlement of the invoice). With the new amendment and by applying the reverse charge, the amount payable to Vat authorities is not affected and at the same time it improves the liquidity position of the construction and related companies.
Notes
1. The amendments relates to the provision of services and to sale of goods in relation to the construction, demolition, repair of property as well as the maintenance of a property.