Cyprus Redefines 'New' Property for VAT from 1 September 2026

Cyprus published two decrees on 27 February 2026 (K.D.P. 102/2026 and 103/2026) amending the Fifth and Eighth Schedules of the VAT Law (95(I)/2000), with effect from 1 September 2026, KPMG reports. They change the test that decides when a building counts as "new", and therefore when its sale is subject to VAT.

The current rule

Until 31 August 2026, the sale of a building is generally subject to VAT if it takes place within five years of completion, unless the building has been used by an unrelated person for at least 24 months.

The new rule

From 1 September the five-year criterion disappears. A sale will carry VAT if it takes place before the building's first occupation, under two new definitions:

• First occupation: the first use of the building after delivery or construction, including owner-occupation, personal use, leasing or any other use on a systematic basis.
• First use: systematic use or exploitation of the building for at least 18 months.

In practice, a building and its land sold before 18 months of systematic use will be subject to VAT; after that, the sale is exempt.

The 5% rate and renovations

The decrees also affect the reduced 5% rate. The 18 months of systematic use will count towards the three-year age a home needs to qualify as "old" for the reduced rate on renovations. And while under the current rules even brief use could disqualify a building from the 5% rate, under the new rules a building sold before 18 months of systematic use can still qualify, provided the other conditions on size, value and the buyer's status are met.

What to do before September

Developers and sellers should track when each building enters systematic use and keep evidence such as lease agreements and utility bills. Buyers should check whether a property will count as new under the new rules, especially for deals that will complete around 1 September.

This article is for information only and is not tax or legal advice.