Cyprus Mail

Businesses could wait two years for VAT refunds

Inland Revenue Department

Representatives of the business community, backed by deputies, on Tuesday demanded the government speed up the process for VAT refunds, giving them back some much needed cash.

Lawmakers at the House commerce committee heard that on average it took six months for a VAT refund to be issued, while in some cases the wait was up to two years.

The delays in VAT refunds are especially felt by building contractors and farmers.

Deputy Tax Commissioner Soteris Markides said that last year the Tax Department processed some 70,000 refund applications, returning €375 million in total to beneficiaries.

Defending his department, he said that during 2021 they processed more than 90 per cent of applications received.

Regarding businesses engaged in construction, Markides said refund applications were filed every three months, and that this could perhaps be a factor adding to the delay.

He also said that in many cases, the refund forms were incomplete – the applicant forgets to fill in his or her bank account number.

Another Tax Department official said that of the overall 21,000 pending refund applications, 60 per cent of the applicants had not fulfilled their obligations; the remaining 40 per cent were new applications.

Weighing in, the Institute of Certified Public Accountants blamed the Tax Department for its “poor practices and mentalities.”

According to Christos Christodoulou, representing the institute, the Tax Department worked too slowly because of its policy of classifying business by a risk ranking.

For businesses ranked as high-risk, the checks made by the Tax Department take several months – sometimes years.

Currently, a high number of companies were classed as high-risk, he said. This category included construction companies. And the Tax Department typically does not move a business to a lower risk profile, even when the business was consistently meeting its tax obligations.

Deputies also heard from the Building Contractors Association, complaining about the prohibitively high cost of raw materials. An association rep asked that they be exempt from paying VAT on construction materials imported from the EU.

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