Amendments to the Cyprus VAT Law related to the supply of new properties and the renovation of old properties

On 27 February 2026, Cyprus published two Decrees (no. 102/2026 and 103/2026) amending the Cyprus VAT Law, particularly the Fifth and Eighth Schedules, concerning the supply of new immovable properties and the renovation of old immovable properties, with effect 1September 2026.

These changes introduce new criteria to determine when a building is considered "new" for VAT purposes.

Effective date: The amendments will take effect on 1 September 2026.

Amendments to the 8th Schedule of the VAT Law (Decree no.103/2026)

- Amendments in Paragraphs 1(b)(i) and 1(b)(ii):

The existing wording of the Legislation

“before the first supply within a period of five (5) years from the date of completion and any subsequent supplies within the period of five (5) years provided that no actual use by unrelated person has been occurred for at least of a period of twenty-four (24) months”

is replaced by the new wording “before the first occupation”.

- Paragraph 3 is replaced by the below revised definitions:

a) "First occupation" refers to the first use of a building after its delivery or construction, including owner-occupation, personal use, leasing, or any other form of use that continues on a systematic basis.

b) "First use" refers to the use or exploitation of a building after its delivery or construction, which occurs systematically for a period of at least eighteen (18) months.

Under the new amendments, any supply of a building and its accompanying land that occurs before it has been systematically used for eighteen (18) months will now be subject to VAT.

Amendments to the 5th Schedule of the VAT Law (Decree no.102/2026)

Similar amendments in the Fifth Schedule of the Cyprus VAT Law redefine the terms “first occupation” and “first use” impacting the application of the 5% reduced VAT rate for the following:

a) Private residence renovations: It clarifies that the eighteen (18) months of systematic use count towards the three-years requirement for a residence to be considered old. 

b) Supply of buildings: Based on the existing provisions, any use, even for a short period of time, could disqualify a building from the reduced VAT rate. Under the amended law, if the building is sold before reaching 18 months of systematic use, the reduced VAT rate can apply. 

In other words, under the amended law, a “new” building subject to VAT can also qualify for the reduced VAT rate provided other conditions (size, value and buyer’s status) are met.

 Implementation Considerations

- Property Developers and Sellers should ensure accurate tracking of when a building first enters into systematic use. Documentation such as lease agreements, occupant logs, utility bills may serve as valuable evidence to avoid unexpected VAT liabilities.

- Buyers and Investors should verify whether properties are deemed "new" under the new law to plan for any VAT or other financial implications.

Examples

Below we provide some practical examples to illustrate how these changes will impact relevant transactions relating to immovable property:

Example 1: Unused building over 5 years old.

- Before 1 September 2026, it would be considered as exempt from VAT since more than 5 years from its completion have elapsed.

- As from 1 September 2026, it would be considered as vatable, as there was no systematic use of more than 18 months.

Example 2: Building completed 3 years ago and used by a related person (or the owner) for the whole period.

- Before 1 September 2026, it would be considered as vatable since it was not used by a non-related party for a period of over 24 months.

- As from 1 September 2026, it would be considered as exempt since it has more than 18 months of systematic use.

Example 3: Apartment used for 6 months and subsequently sold to the tenant.

- Before 1 September 2026, it would be considered as vatable, but not eligible for the reduced VAT rate.   

- As from 1 September 2026, it would be considered as vatable, but it would be eligible for the reduced VAT rate.