articles | 25 June 2020

Cyprus government supporting tourism with VAT cut

The government on Tuesday temporarily reduced VAT charges to five per cent from nine per cent for hotels, restaurants and taxi transport. The move is intended to support the tourism industry with a boost in revenues – the reduction is not likely to be passed on to the customer.

VAT Decree Κ.∆.Π 268/2020 was published on 23 June 2020 in the Official Gazette of the Republic of Cyprus indicating the reduced rate. The reduction of the rate for these services will be applied for the period from 1 July 2020 to 10 January 2021.

The change only applies to the following services, according to Deloitte Cyprus:

Accommodation in hotels, tourist accommodation and similar areas, including the provision of holiday accommodation.
Restaurant and catering services.

Transport of passengers and their accompanying luggage inside the Republic by urban, intercity, and rural taxis and by tourist and intercity buses.

Tourist industry representatives said that the change would be helpful. “This is a welcome measure of support, one which will bring in extra revenue,” commented Philokypros Roussounides, the director general of the Cyprus Hotel Association.

Deutsche Bank analysts agree, noting that this kind of reduction generally does support businesses; however, it does not usually prevent prices from rising when merchants are pressured.
However, Cyprus hoteliers and restaurateurs are not raising prices; they are rather working to provide incentives for tourists. At several Cyprus hotels interviewed, room prices were being reduced and upgrades to better rooms were on offer.

According to the general rules, the VAT rate that must be applied to each transaction is the one valid on the day of issuance of invoice or payment by the customer (whichever is earlier).
But businesses may apply the new rate to invoices that cover services rendered before the rate change (under certain conditions), or to invoices sent after the change of rate.

Source: Cyprus Mail

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