Cyprus VAT on Property from 1 September 2026: What Now Counts as a "New" Building
Whether VAT applies to the sale of a building in Cyprus has long depended on how old the building is. From 1 September 2026, age is no longer the test. Two Decrees made under the VAT Law have replaced the five-year rule with a test based on how long the building has actually been used. The change affects developers holding unsold stock, investors buying completed property, and owners planning to sell or renovate. This article explains the old rule, the new rule, and the points that deserve attention in contracts and due diligence.
What has changed
The amendments are contained in two Decrees, R.A.A. 102/2026 and R.A.A. 103/2026, both published on 27 February 2026 and in force from 1 September 2026. R.A.A. 103/2026 amends the Eighth Schedule of the VAT Law (Law 95(I)/2000), which governs the supply of buildings. R.A.A. 102/2026 amends the Fifth Schedule, which covers the reduced 5% rate, including on renovation of private dwellings.
The old rule (until 31 August 2026). The supply of a building was taxable if it took place before first delivery, or within five years of completion, unless the building had been used for at least 24 months by a person unconnected with the owner. Beyond five years, a sale generally fell within the exemption for immovable property.
The new rule (from 1 September 2026). The five-year period is abolished. A supply of a building, together with its land or an undivided share of it, is taxable if it takes place before "first occupation". First occupation means the first use after delivery or construction, including owner-occupation, personal use, leasing or other systematic use. "First use" means use or exploitation on a systematic basis for at least 18 months. The same test applies to certain transfers of possession under sale agreements, agreements for future transfer, and leases with an option to purchase.
Two consequences follow. First, a building that has been left unused no longer becomes exempt simply because five years have passed. A property completed in 2019 and never occupied can now be a taxable supply. Second, use by anyone counts towards the 18 months, not only use by a person unconnected with the owner.
How the test works in practice
Published examples illustrate the effect.
A building that has never been used is "new", and its sale is subject to VAT, however long ago it was completed.
A house used by its owner or a related person for the whole of three years is "second-hand", and its sale is exempt.
An apartment used for six months and then sold to the tenant is still "new" and subject to VAT, because 18 months of systematic use have not been reached.
A house used for 17 months is "new". A house used for 18 months and a week is "second-hand".
The calculation turns on evidence. Developers and sellers should be able to show when the building was delivered, when use began, and that it was systematic. Lease agreements, occupancy records and utility bills are the natural sources. A building let on a short seasonal basis, such as holiday accommodation, raises the question of what "systematic" use means. As of the most recent commentary we have seen, the Tax Department had not issued guidance on that point, so cases at the margin should be approached with care.
The 5% reduced rate
The reduced rate of 5% remains available in the cases covered by the Fifth Schedule. Two points should be noted.
First, on renovation and repair of a private dwelling, the 5% rate applies to an "old" residence, meaning one for which at least three years have passed since first occupation. The amendments confirm that the 18-month first-use period runs within that three-year period, not after it. The same definition of first occupation now applies in both Schedules. Under the previous wording a building could be treated as "new" for the purposes of VAT on its sale, yet "used" for the purposes of the reduced rate.
Second, on the supply of a new dwelling, the previous wording meant that any use, even brief, could bar the reduced rate. Under the new rules a sale made before 18 months of systematic use can still qualify, if the other conditions on size, value and the buyer's status are met. Those conditions are unchanged and should be checked against the property and the buyer in each case.
Who is affected
Developers and sellers. Completed units that remained unsold and unoccupied for more than five years were previously treated as second-hand. From 1 September 2026 they may be taxable again. Stock should be reviewed against the new test, and pricing and contracts adjusted where VAT is now due.
Investors and buyers. The VAT cost of a purchase is a direct price factor, and it may no longer be possible to rely on the age of the building. A buyer should ask for evidence of occupation, and check that the contract states whether VAT is charged and who bears it.
Private individuals. A one-off sale by an individual does not automatically attract VAT. The question is whether the seller is a taxable person acting in the course of an economic activity, for example because the property was acquired or built for resale. An owner who has built and sold several properties, or who is otherwise developer-like in conduct, should take advice before a sale.
Owners planning renovations. Eligibility for the 5% rate now depends on the same occupation history. Keep the evidence together before engaging a contractor.
Transactions around the cut-over
The Decrees apply from 1 September 2026, and the sources we reviewed identified no detailed transitional provisions beyond that date. The VAT outcome of a sale may therefore differ depending on whether it completes before or after 1 September, particularly for buildings that were treated as second-hand only because five years had passed. The amendments also expressly address transfers of possession and contractual arrangements such as agreements for future transfer and leases with an option to purchase. Contracts signed before the change but completing after it should be reviewed to see which rule applies and who bears any additional VAT.
Practical steps
Establish when the building was completed and delivered, and obtain evidence of the nature and duration of any use.
Confirm whether the seller is a taxable person and whether the supply falls within the amended Eighth Schedule.
State in the sale agreement whether VAT is charged, at what rate, and who bears it, including a mechanism if the Tax Department takes a different view.
Treat transactions near the 1 September 2026 date with extra care.
Where a purchase is part of a wider acquisition, include the VAT position in due diligence, as we discuss in our article on commercial real estate due diligence in Cyprus.
Conclusion
The new test is simpler in principle: it looks at what has happened to the building, not how many years have passed. The effect in practice depends on evidence of use and on the treatment of marginal cases that the legislation does not yet answer. Sellers, buyers and developers should review their position now rather than at the point of sale.
This article is provided for general informational purposes only and does not constitute legal advice. Specific legal advice should be sought before taking any action in reliance on the contents of this article.
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