As things currently stand Brexit will be become a reality on 29 March 2019. This means that transactions with the UK up to that date will have an intra-community status, whereas from 30 March 2019 they will be considered as transactions with a third country.
The Cyprus VAT Authorities issued three announcements in relation to Brexit, which are briefly examined below.
Recovery of VAT suffered in the UK by Cyprus taxable persons
EU Directive 2008/09/EC enables businesses established and registered for VAT purposes within the EU to request a refund of the VAT suffered on business expenses incurred in other EU Member States.
Businesses in Cyprus can recover VAT imposed on expenses incurred in the UK in 2018 relating to goods and services, such as accommodation, transportation, parking, food, drink and participation in fairs, exhibitions or seminars. In order to qualify, such goods and services need to be used for the purposes of a taxable business activity in Cyprus.
Taxable persons in Cyprus which suffered UK VAT in 2018 may proceed to submit their electronic application for recovery of that VAT under the above mentioned Directive until 10 March 2019 and not until 30 September of the following year as provided by the Directive. After that date refunds with regards to VAT paid in the UK for business expenses incurred by EU businesses will not be possible in accordance with the provisions of the Directive.
Cyprus taxable persons on which UK VAT is imposed in 2019 will be able to apply for recovering it under the 13th EU VAT Directive as long as the provisions of that Directive are met. Cyprus requires reciprocity with the refunding country as a condition for applying the 13th Directive. Such reciprocity has not been agreed to date so it is not clear at this stage whether this procedure will be available.
INTRASTAT returns for trade with the UK
INTRASTAT returns should only include transactions to and from the UK up to 29 March 2019.
From 30 March 2019 supplies of goods to and from the UK will no longer be considered as intra-community but as exports and imports to and from a third country.
Recapitulative statements (VIES returns) for trade with the UK
Only supplies of goods and services effected up to 29 March 2019 should be included in VIES returns for March 2019.
As of 30 March 2019 supplies of goods and services to and from the UK will no longer be intra-community and as such should not be reported in the VIES system.