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Commencement of National Health Insurance Contributions

Commencement of National Health Insurance Contributions

The Cyprus National Health Insurance System (NHIS) officially goes into effect in 2019. It aims to transform the existing public healthcare system, and provide every Cypriot citizen with lifelong, equal and unhindered access to quality healthcare services.

How will the NHIS be funded?

For the implementation of the NHIS, a special fund administered by the Health Insurance Organization (HIO) was established for the compulsory contributions of people in the following categories:

  • Employees
  • Employers
  • State
  • Self-employed persons
  • Pensioners
  • Other income earners
  • Government Officials
  • Persons responsible for the payment of remuneration to Government Officials

Stages of Implementation

According to the General Healthcare System (Amending) Law of 2017, the NHIS is to be implemented in two stages:

  • Employer and employee contributions for the first phase of the NHIS commenced in 1st March 2019, and this will provide for outpatient healthcare beginning on 1st June 2019.
  • The second and final stage for full implementation of the NHIS will commence 1st March 2020, and this will cover all remaining healthcare services (inpatient and outpatient).

Contributions to NHIS per Category

Category

Applicable on

Phase 1 (1 March 2019)

Phase 2 (1 March 2020)

Employers (Including State)

Employee earnings

1.85%

2.9%

Employees (Public and Private Sector)

Own earnings

1.7%

2.65%

State Fund

Earnings of employees, self-employed persons, officials, and pensions

1.65%

4.7%

Self-employed persons

Own income

2.55%

4.00%

Pensioners

Pension

1.7%

2.65%

Other income earners

Income includes rental, interest, dividends, etc.

1.7%

2.65%

Government Officials

Officials’ Remuneration

1.7%

2.65%

Persons responsible for the payment of remuneration to Government Officials

Officials’ Remuneration

1.85%

2.9%

 

Note:

It is noted that for every individual, the total amount of annual income on which contributions are paid is 180,000EUR.

In the case that individuals are not tax residents of Cyprus, they will contribute only from the income, earnings, and pensions derived from the Republic of Cyprus, excluding dividends and interest.

Methods of Payment:

  • Employees:

Employees’ contributions to NHIS will be deducted by the employer from the total earnings of the employees (as defined in the Social Insurance Law) and, together with the employers’ contributions, will be paid to the Social Insurance Fund, as in the case of the respective contributions to the Social Insurance Fund.

  • Self-employed persons:

Self-employed persons’ contributions to NHIS on the sums for insurable earnings provided for contributions to the Social Insurance Fund are paid to the Social Insurance Fund, whereas contributions on income of self-employed persons beyond these sums are paid to the Tax Commissioner.

  • Pensioners:

Pensioners’ contributions are deducted by the person paying the pensions and paid to the Tax Commissioner, except in cases where the pensions are paid to the pensioners by the Social Insurance Fund, in which case they are deducted from the pension and paid to NHIS. Contributions on pensions received from abroad are paid to the Tax Commissioner by the pensioners themselves.

  • Government Officials:

NHIS contributions on officials’ remuneration are deducted by the Republic or the person paying the remuneration and are paid to the Tax Commissioner.

  • Other Income Earners

NHIS contributions on other sources of income, such as dividends or interest received by an individual from sources within Cyprus, are deducted by the payer (as in the case of the special defense contribution on the relevant income) and paid to the Tax Commissioner.

  • Rental Income

NHIS contributions on rental income received by an individual from sources within Cyprus are deducted by the payer, provided that the payer is a company, partnership, the Republic of Cyprus or a local authority (as in the case of special defense contribution) and paid to the Tax Commissioner.

  • Income from abroad

NHIS contributions on income from abroad or on any other income not mentioned above, are paid by the individual who receives them to the Tax Commissioner.

For more information about the contributions to the NHIS and how this will affect you, get in touch with the team of professionals at Auditnet, who can help you navigate the start of the NHIS Contributions.

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brexit and the implication of vat - Cyprus

Brexit and VAT

Brexit and the Implications for VAT and Trade

Little time remains until the United Kingdom is set to exit the European Union, as the official Brexit day has been set for 29 March 2019. Without a clear withdrawal agreement yet in sight, the United Kingdom will be treated as a non-EU country. However, there are still many factors under discussion, and a number of outcomes could still be possible in the run up to that date.

What is certain, however, is that from the date of the actual exit, transactions with the UK will change. These will go from having intra-community status, to being treated as imports and exports between 3rd country territories. This means that the UK may have to pay import VAT, and vice versa.

The implications of this in Cyprus have been outlined via three separate announcements issued by the Cyprus VAT Authorities. These are as follows:

1. Refund of VAT incurred in the UK by Cyprus taxable persons

a. Taxable persons in Cyprus who have incurred UK VAT up until 31st December 2018 may proceed with the submission of an electronic application for VAT refund by 10th March 2019. After this date, the Council Directive 2008/9/EC on VAT refunds will no longer be applicable, and any incurred VAT may be lost.

b. Taxable persons in Cyprus who incur UK VAT in 2019 will be able to apply for their refund via the procedures of the 13th Directive, which outlines the rules relating to refunds to non-EU businesses, provided that these provisions are met. It is not yet clear, however, how this will be put into practice, as Cyprus currently requires reciprocity with the refunding non-EU member state in order for the 13th Directive to apply. No such reciprocity has been agreed upon to date, therefore the practical implications of this remain to be seen going forward.

2. Intrastat Declarations

a. Intrastat was introduced to collect data on the movement of goods between EU Member States upon the abolishment of formal import and export procedures within the single market. However, following Brexit, the Cyprus Tax Department has stated that Intrastat statements should only include transactions to and from the UK up until 29th March 2019.

b. From 30th March 2019 onwards, imports and exports to and from the UK will no longer be considered intra-community, and will therefore not be declared on an Intrastat statement.

3. Recapitulative statements (VIES returns)

a. VIES (VAT Information Exchange System) provides a mechanism whereby checks can be made in EU Member States on the validity of claims to zero-rating, and applies to intra-EU trade. As such, once Brexit goes into effect, only the supply of goods and services to the UK up to 29th March 2019 should be report on the VIES return.

b. Exports and imports to and from the UK which will take place after 29th March 2019 will no longer be considered intra-community trade, and will therefore not be stated on the Recapitulative Table.

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