VIES

ZERO-RATING OF INTRA-COMMUNITY SUPPLIES

Prior to 1st May 2004 (accession of Cyprus in the EU) all exports of goods to destinations outside Cyprus, qualified for the zero rate of VAT. This continues to be the case for exports to countries outside the EU. However, under the EU VAT arrangements, as from that date a Cypriot trader registered for VAT may zero-rate the supply of goods to a customer in another Member State (MS) provided that:

- The customer is registered for VAT in the other MS,
- The customer’s VAT registration number is obtained and retained in the supplier’s records,
- This number, together with the supplier’s VAT registration number is quoted on the sales invoice,
- The goods are dispatched and transported to the other MS,
- The supplier retains appropriate commercial documentary evidence that the goods have been removed from Cyprus,
- The supplier submits the Recapitulative Statements to the VAT Service.

PURPOSE OF THE VIES SYSTEM
VIES (VAT Information Exchange System) contributes to the effectiveness of this new VAT regime and provides a mechanism for preventing and deterring of the abuse of the VAT zero-rating provisions on intra-community trade of goods and detecting unreported movements of zero-rated goods between MS. An integral part of the system is a requirement that each MS must store and process specific information which it collects from its traders about their supplies to other MS.

OBLIGATIONS OF TRADERS UNDER VIES
Under the EU and the national legislation regulating VIES, any VAT-registered person who supplies goods to a VAT-registered person in another MS has to submit the Recapitulative Statement declaring all the intra-community supplies made during a calendar quarter. The Statement must be submitted to the VAT Service until the tenth day of the second month following the calendar quarter to which the statement relates. If a person fails to comply, this person is liable to a penalty of fifty one euro (€51) for every month of non-compliance, the maximum being three months. Non-compliance that continues after the three months, constitutes a criminal offense and a convicted person may incur an additional fine of up to two thousand five hundred sixty two euro (€2562).

Moreover, the relevant legislation provides that the submitted Recapitulative Statement should not be incomplete or contain inaccuracies, such as wrong VAT numbers of the customers in other MS. If a submitted Recapitulative Statement is incomplete or contains inaccuracies, the taxpayer should submit a corrective statement within two months following the calendar quarter to which the Recapitulative Statement relates. In opposite case, a penalty of fifty one euro (€51) is imposed.

Therefore, taxpayers are urged to check the validity of the VAT number given to them by their customers in other MS either by contacting the VIMA Section of the VAT Service or via the relevant web page of the EU at the following address:

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