VAT on New Property in Cyprus: First Occupation Rule
Until 31 August 2026, whether the sale of a building carried VAT depended mainly on its age: five years from completion, with an exception for buildings used by an unrelated person for 24 months. From 1 September 2026 the age test is gone. What matters now is whether the building has actually been used.
UPDATED 25 SEPTEMBER 2026
The change was made by decree ΚΔΠ 103/2026 of the Council of Ministers, published in the Official Gazette on 27 February 2026 and in force from 1 September 2026. It amends the Eighth Schedule of the VAT Law, on the supply of buildings. A second decree, ΚΔΠ 102/2026, made matching changes to the reduced 5% rate on renovations. We cover that separately.
The old rule
Until 31 August 2026, the sale of a building was subject to VAT if it took place within five years of completion. A later sale within those five years was caught too, unless the building had been actually used by an unrelated person for at least 24 months. After five years, the sale generally fell within the exemption for immovable property.
The new rule
From 1 September 2026, VAT applies to the transfer of a building, or part of one, together with its land or an undivided share in it, where the transfer takes place before first occupation.
The decree defines two terms:
- First occupation is the first use of the building after its delivery or construction, including owner-occupation, own use, leasing, or any other use that continues on a systematic basis.
- First use is the use or exploitation of the building after its delivery or construction, carried on systematically for at least 18 months.
In practice: if the building has already been used systematically for 18 months, its sale is exempt from VAT. If it has not, a sale by a business is subject to VAT. The decree sets no time limit, so this applies however long ago the building was completed.
Who it catches
Buildings completed some time ago that have stood empty. Under the old rule, a property finished in 2019 and never used would have passed the five-year mark and been sold outside VAT. Under the new rule, if it has never been occupied or used systematically for 18 months, its sale by a business is subject to VAT.
This matters most to developers and companies holding completed stock that has not sold, and to buyers of such property, who may find VAT on a building they assumed was outside it.
Who it frees
Newer buildings that have been used. A building less than five years old that has been rented out or lived in systematically for 18 months has reached first occupation. Its sale is exempt, where under the old rule it might still have carried VAT.
Private sellers
A private individual selling their own home is normally outside VAT, whatever its history. VAT only enters where the seller is acting as a taxable person in the course of an economic activity. That can include an individual who bought or built property in order to resell it, or who behaves in a way comparable to a developer or trader. A first sale is not automatically outside VAT; the circumstances as a whole decide it.
What to do
If you hold completed but unused property, assume a sale can carry VAT and price it accordingly.
If you rely on a building having been used, keep the evidence: leases, utility bills, occupancy records. When VAT turns on 18 months of systematic use, you may need to show when and how that use happened.
If you are buying, ask about the building's history of use, and make sure the sale agreement says clearly whether VAT applies and who bears it.
For buyers of a home to live in, the reduced rate is covered in 5% VAT on a new home: the 2026 rules.
Written by Antonis Lappas, BSc, FCCA. This is general information, not advice on your circumstances. Rules change, check the date on this article, and speak to us before acting on it.
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