Do I pay reverse charge VAT or not? (Cyprus)

[avalanche]

I'm really confused right now. Have an entity in Cyprus, going to fund it with my own money
and pay monthly to freelancers located outside EU for software development services to build company's Intellectual Property.

Company is not going to make any income for next 2 years probably.

If I understood right, I must declare reverse charge VAT in Cyprus from my payments to these freelancers. But do I lose these 19% in the end of it all? Do I have to pay it to Cypriot gov and do I get it refunded considering that Im not making any sales at all (meaning I have no output VAT)?

Really hoping that Im not losing 19% from my own invested money lol

Last edited: Nov 3, 2020

 

[fshore]

avalanche said:
I'm really confused right now. Have an entity in Cyprus, going to fund it with my own money
and pay monthly to freelancers located outside EU for software development services to build company's Intellectual Property.

Company is not going to make any income for next 2 years probably.

If I understood right, I must declare reverse charge VAT in Cyprus from my payments to these freelancers. But do I lose these 19% in the end of it all? Do I have to pay it to Cypriot gov and do I get it refunded considering that Im not making any sales at all (meaning I have no output VAT)?

Really hoping that Im not losing 19% from my own invested money lol
Click to expand...

If they are non eu freelancers then there is no vat.
You should ask them if they are EU freelancers and if they will charge you vat. If they are eu residents /companies then you can give them your vat number and they should still not charge you vat.

 

[avalanche]

fshore said:
If they are non eu freelancers then there is no vat.
You should ask them if they are EU freelancers and if they will charge you vat. If they are eu residents /companies then you can give them your vat number and they should still not charge you vat.
Click to expand...

They are non-EU freelancers.

 

[NicolasMaduro]

Reverse VAT is only between EU VAT numbers, so dont worry about that.

Also since they are non EU you need to do 0% VAT and pay out to their name, address and birthday

I know in some countries you have to report payments like this, but I dont know how it is in Cyprus.

Last edited: Nov 5, 2020

 

[georgio]

Anybody knows what will happen to reverse charge VAT between UK/EU companies after Brexit?

 

[fshore]

No vat when selling to customers outside eu and outside uk

 

[avalanche]

fshore said:
No vat when selling to customers outside eu and outside uk
Click to expand...

That is not the topic of this thread but...

Do you know this from a consultant or its personal observation?

I hired a consultant before, he made a VAT opinion that states that place of supply in cross border B2C services is determined by country of residence of the EU supplier unless it is a digital service (fully automated, without human intervention). Meaning that such transaction is supposed to be VATable at rate of the supplier's country

 

[EliasIT]

avalanche said:
If I understood right, I must declare reverse charge VAT in Cyprus from my payments to these freelancers. But do I lose these 19% in the end of it all? Do I have to pay it to Cypriot gov and do I get it refunded considering that Im not making any sales at all (meaning I have no output VAT)?
Click to expand...

You either declare the VAT reverse with the Cyprus tax office, ask your agent to help with it or you lose the 19% for sure. But ask your agent or accountant to help you, it's really easy. As mentioned in this thread you only have to charge VAT when you do business with people inside the EU.

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[fshore]

avalanche said:
That is not the topic of this thread but...
Click to expand...

I was replying to the brexit question above,

avalanche said:
Do you know this from a consultant or its personal observation?

I hired a consultant before, he made a VAT opinion that states that place of supply in cross border B2C services is determined by country of residence of the EU supplier unless it is a digital service (fully automated, without human intervention). Meaning that such transaction is supposed to be VATable at rate of the supplier's country
Click to expand...

When you are vat registered you don't pay vat when buying from suppliers outside the eu. If you're not vat registered then you might have to pay vat in that case. But as vat registered you don't pay vat. Your customers pay vat (to you) and you hand it over to the tax office.

When you pay vat to a domestic supplier then you will get that back when you file your vat return.

Also the quote from your consultant doesn't apply, as your suppliers are not EU suppliers, according to you. IF they did charge you vat (if they were cyprus residents) then you as vat registered would get it back from the tax office after the vat return.