Cyprus Tax News: VAT on hospitality and transport temporarily reduced to 5%

Date: July 1, 2020

As part of its efforts to boost the coronavirus-stricken economy, the Cyprus government has temporarily reduced the VAT rate that applies to certain services in the tourism, restaurants, and transport industries from 9% to 5%.

The Decree was published in the Cyprus Official Government Gazette on 23 June 2020 and it is applicable for the period from 1 July 2020 until 10 January 2021 in respect of:

  1. Accommodation services provided by hotels and similar establishments, including the provision of holiday accommodation.
  2. Restaurant and catering services.
  3. Transportation of passengers and their accompanying luggage within the Republic by urban, intercity, and rural taxis and by tourist and intercity buses.

The VAT rate applicable to the above services is effectively reduced from 9% to 5%.

Further important points to note

Temporary nature of the measure

The reduction is only a temporary measure, triggered by the Covid-19 crisis and an attempt by the Government to stimulate consumption and support businesses in the hospitality and tourism sectors.

This means that, as from 11 January 2021, the reduced VAT rate of 9% will be applicable again (unless the measure is extended in time).

Practical application

VAT will be due at the reduced rate of 5% on all relevant supplies made on, or after, the date on which the change takes effect, that is 1 July 2020, but not later than 10 January 2021 – the date the measure ends.