Cyprus VAT on Property: The Five-Year Rule Ends 1 September 2026

From 1 September 2026, Cyprus stops deciding VAT on completed buildings by age. The five-year rule is replaced by a first-occupation test. A building is subject to VAT if it is supplied before its first occupation, and exempt once it has been in systematic use for at least 18 months. Age is no longer the deciding factor.

What was the five-year rule?

Until 31 August 2026, VAT on a completed building was decided largely by time. A supply was subject to VAT within five years of completion, and the alternative route out was 24 months of use.

In practice, owners and developers watched a clock. Hold the building long enough and the VAT question resolved itself.

What replaces it from 1 September 2026?

Decrees 102/2026 and 103/2026 amend the Fifth and Eighth Schedules of the VAT Law and move the test from time to use.

The wording that mattered, “before the first supply within a period of five years from the date of completion”, is replaced by “before the first occupation”.

• A supply before first occupation is subject to VAT.
• A supply after first occupation falls under the general immovable property exemption.

The five-year clock disappears entirely.

What counts as first occupation?

First occupation is the first use of a building following its delivery or construction. It includes owner-occupation, use by the owner for its own business purposes, leasing, or any other use continuing on a systematic basis.

First use means systematic use or exploitation of the building for a period of at least 18 months.

The word doing the work is systematic. Briefly putting a key in a door is not occupation. The rules are looking for genuine, continuing use.

What actually changed, in three points

1. The five-year backstop is gone. This is the change that costs money. Previously, five years of ownership resolved the VAT position regardless of what you did with the building. Now nothing does. A building that has never been put into systematic use remains subject to VAT indefinitely, however old it is.

2. The use threshold drops from 24 months to 18. For buildings that are genuinely used, the route to exemption is now shorter than it was.

3. Owner-occupation counts. First occupation expressly includes owner-occupation and use by the owner for its own purposes, not only letting the building to someone else. Owners who use their own buildings are in a better position than they were.

Who pays more under the new rules?

The clear losers are owners and developers holding completed but unused stock.

Take a building completed in 2019 that was never put into use. Under the old rule, five years had passed and the sale fell into the exemption. Under the new rule it has never achieved first occupation, so the supply is still subject to VAT. Seven years of ownership changed nothing.

That is a 19% swing on a transaction many owners have been assuming is exempt.

What about the reduced 5% rate on renovations?

The amendments also change what counts as an “old” private residence for the reduced VAT rate on renovation work.

A residence now qualifies as old when at least three years have passed since first occupation, and the 18 months of systematic use counts toward that three-year period. Both conditions matter: age alone is not enough, and use alone is not enough.

If you are planning renovation work and budgeting for the reduced rate, confirm the property qualifies under the new definition before you sign a contract.

What should you do now?

If you are holding completed, unused property. Establish where each building stands against the 18-month test and document it. Evidence of systematic use is now what determines the VAT treatment, so it needs to exist and be provable. Keeping clean, current records is what makes that evidence available when a buyer or the Tax Department asks for it.

If you are mid-transaction around the changeover. The date of supply decides which regime applies. Deals completing either side of 1 September can be treated differently.

If you are budgeting a renovation. Re-check the property against both the three-year and 18-month conditions before assuming the reduced rate.

If you are buying. Ask the seller to evidence the occupation history. Under the old rule you could work the position out from the completion date. You cannot any more.

The short version

Cyprus has moved from asking how old is this building to asking has it genuinely been used yet, and for how long. For most normal transactions the outcome will be the same. For unused stock, and for anything completing near the changeover, it is different, and the difference is 19%.

If you are unsure how the change affects a specific property or transaction, our corporate tax and compliance team can review the position with you.