Customs Duties
Cyprus, being a Member State of the European Union (EU), belongs to the Customs Union of the EU. The Customs Union means that all EU Member States work together as if they were one, applying the same tariffs to goods imported into their territory from the rest of the world and applying no tariffs internally. Therefore upon the importation of goods into Cyprus from outside the EU, customs duties may be levied as well as customs controls on imported goods aiming to protect consumers, animals and the environment from goods which could be bad or dangerous.
Additionally, all the Community customs laws are directly applicable in Cyprus. The most significant acts are the Union Customs Code (UCC) and its implementing regulations, as well as the Common Customs Tariff, also known as the EU's Combined Nomenclature (CN). These laws are complemented by Cypriot national laws, particularly with regard to areas that are not covered by the UCC.
The nature and value of the goods, as well as the relevant TARIC classification codes, determine whether quotas and other measures apply, as well as the level of customs duties to be imposed. Specifically, the Common Customs Tariff stipulates a tax rate to be applied to the value or number of imported goods, depending on their type. It can either be represented as a fixed amount applied to a certain quantity (i.e. specific tax) or as a percentage applied to the customs value (i.e. ad valorem tax).
Customs duties are calculated based on three main drivers:
Classification
The Common Customs Tariff provides a duty rate to be applied to the value or quantity of the imported products for each type of good. The proper customs classification of the goods is one of the most crucial factors that should be taken into account on the importation of goods in Cyprus. A wrong classification may result in the application of higher customs duties than necessary and additional tax burden, or lower customs duties, which would increase the risk of a tax assessment by the Cypriot Customs Authorities.
Origin
If the goods imported have a preferential origin based on international trade agreements between the European Union and non-EU countries, they may benefit from a reduced or zero duty rate upon importation given that the applicable criteria are met. For example, the EU has concluded a free trade agreement with the UK following Brexit, therefore Cypriot companies can benefit from zero rate of customs duties when they trade with the UK. However, they have to collect and maintain appropriate evidence to be able to prove to the customs authorities the preferential origin.
Valuation
The customs value of goods imported in the EU is determined according to the rules provided in the UCC. The most common rule of determining the customs value is the 'transaction value', subject to certain additions or deductions. The transaction value is primarily based on the price of the goods, however additional expenses should be added to determine the customs value in case that they are incurred by the buyer. For example, the following expenses need to be considered, among others, when determining the customs value:
- Commissions (except buying commissions)
- Transport costs and insurance (to the EU)
- Royalties and licence fees
Other valuation methods include:
- The transaction value of identical goods
- The transaction value of similar goods
- The deductive method
- The computed method
- The fall-back metho
Special customs procedures
Special customs procedures exist that allow for the
import of goods into Cyprus from non-EU countries with full or
partial relief from customs duties or suspension of customs duties.
These procedures have been put in place to promote economic growth
in the EU and include, among others, the Temporary Admission,
Inward Processing Relief, Outward Processing Relief and Customs
Warehousing. Each special customs procedure has different specific
requirements that shall be met in order to benefit from the relief
or suspension.
Customs representation
When dealing with the Cypriot Customs Authorities to
perform the customs formalities and obligations required by the
customs legislation, a person may appoint a customs representative.
Customs representation may be direct, where the representative acts
in the name and on behalf of another person, or indirect, where the
representative acts in their own name but on behalf of another
person. Customs declarations in Cyprus can be lodged by the owner
of the goods or a representative or a person who has control over
the goods.
Trade measures
According to the law, the importation and exportation of
certain goods is prohibited or restricted, aiming to protect the
society and the environment. Such goods may include potentially
hazardous goods to the human health or the environment (e.g.
chemical products), goods with controlled end-use (e.g.
explosives), agricultural products and dual use products (i.e. both
civil and military use). These goods require import/export licences
from the relevant authorities and their importation/exportation may
be subject to certain conditions or even prohibited.
Authorised Economic Operator (AEO) status
Traders established in the EU customs territory who are
engaged in international trade and customs operations may apply for
EU AEO status. This status demonstrates that the holder is verified
by the EU Customs Authorities according to various criteria and can
be considered as a safe part of the supply chain and a reliable
business partner. Entities with AEO status are eligible for
streamlined access to simplified customs procedures. AEO status can
be granted in any EU Member State and will be valid throughout the
EU. For example, it can be obtained by the Cypriot Customs
Authorities and will be recognised in all 27 Member
States
Brexit
Brexit has given rise to major customs-related issues.
Despite the agreement on trade and cooperation between the EU and
the UK, the withdrawal of the UK from the EU has resulted in
uncertainties in the clearance of goods, especially in relation to
the origin of goods and preferential treatment.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
