Circular 187 issued by the Tax Department on 1 September 2014 clarifies the VAT treatment of various categories of expenses, which are charged to clients, in addition to the main charge for supplies of goods or services. In particular, it explains when such charges fall part of the main supply of goods and services i.e. treated as a single transaction for VAT purposes and when these expenses are paid on behalf of the client (disbursements).
The Cyprus VAT Legislation gives no guidance, on how to determine the existence of a single transaction, nor how this single transaction is treated for VAT purposes. To determine the criteria for what constitute a single transaction, the Tax Department relied on the criteria outlined in the European Court of Justice case Card Protection Plan, C-349/96.