On Thursday, the Plenary Session of the Parliament unanimously amended the VAT law for harmonization with an EU directive on the special regime for small enterprises and administrative cooperation and the exchange of information in order to monitor the correct implementation of this special regime.
The special scheme as it stood allowed VAT exemption to be granted only to undertakings established in the Member State to which VAT is due. However, that legislation had negative effects on competition in the internal market for undertakings not established in that Member State.
To counteract the distortion, a European directive has been adopted amending the special regime so that small businesses established in Member States other than those to which VAT is due can also benefit from the exemption.
In the case of Cyprus, the VAT exemption will also be granted to businesses that are not established in the Republic, provided that their turnover does not exceed €15,600 in Cyprus and in total €100,000 in the European Union.
Similarly, small businesses in the Republic operating in other Member States will be able to opt for VAT exemption at cross-border level, provided that they meet the national exemption threshold of other Member States and the European threshold of €100,000.
The Ministry of Finance estimates that the regulation will reduce the administrative burden borne by small businesses established in the Republic and carrying out operations in another Member State.
Christiana Erotokritou, President of the Parliament's Finance Committee, explained the purposes of the bill concerning SMEs and cross-border VAT exemption if they have jobs and do business in other member states.
In this way, he said, transactions are done on equal terms and this is important for SMEs, since they are given the weapon of equal treatment.
