Cyprus Property VAT: New First-Occupation Test

From 1 September 2026 Cyprus decides VAT on a building sale by first occupation, not by a five-year clock. Decrees 102/2026 and 103/2026 explained.

Cyprus changed how it decides whether VAT applies to the sale of a building. From 1 September 2026 the test is no longer how old the building is, it is whether the sale happens before first occupation. Two decrees, R.A.A. 102/2026 and 103/2026, were gazetted on 27 February 2026 and took effect on 1 September.

TL;DR: A supply of a building is subject to 19% VAT only where it takes place before first occupation has been achieved. Once first occupation is established, the sale falls under the general immovable property exemption. First occupation rests on systematic use of at least 18 months. The 5% reduced rate for a primary residence keeps its own thresholds, but R.A.A. 102/2026 revises the definition of first occupation used when applying it.

What replaced what

As PwC Cyprus puts it, the mere passage of time is no longer a determinative factor. The test covers more than a straight sale: it reaches the transfer of a building or part of one with the plot transferred with it, and the transfer of possession under a contract of sale, an agreement expressly providing for future transfer, or a lease with an option to purchase.

What "first occupation" and "first use" mean

• First occupation is the first use of the building after its construction or delivery, including owner occupation, own use, leasing, or any other use carried out on a systematic basis.
• First use is systematic use or exploitation of the building for a period of at least 18 months.

The two are read together, so the 18 months is the hurdle. A developer who lets a unit for a few months and then sells has not cleared it, and that sale is still a VATable supply. R.A.A. 102/2026 aligns the Schedule 5 meaning of first occupation with the same definition, so both sets of rules now run on one test.

What this does and does not do to the 5% first-home rate

The thresholds are untouched: still the first 130 m², a €350,000 property value cap, a 190 m² buildable-area limit and a €475,000 transaction limit. What R.A.A. 102/2026 changes is the definition of first occupation used when applying that rate, which is how a dwelling is established as still new. PwC Cyprus puts it plainly: the decree "revises the definition of first occupation for the purposes of applying the reduced 5% VAT rate". The arithmetic of the relief is unchanged; the eligibility test around it is not.

Renovation of an older home also changed

This half is R.A.A. 102/2026 alone. The 5% rate on renovation and repair work applies only to an "old" private dwelling, and it now qualifies as old where at least three years have elapsed since first occupation and it has been used for at least 18 months, a condition that is now explicit rather than assumed. Both periods run from the same starting point, so the 18 months sits inside the three years.

If you are mid-transaction

The published firm summaries identify no transitional or grandfathering provision for contracts signed before 1 September 2026, so the date of the supply decides the treatment. If your completion or transfer sits close to the changeover, or the property has had partial or short-term use, the VAT outcome can differ from what your contract assumed.

This is general information, not tax advice. VAT on immovable property in Cyprus turns on the specific facts of each transaction. Confirm your position with a qualified Cyprus VAT adviser or the Tax Department before acting.

Sources

• KPMG Cyprus: Amendments to Schedules 5 and 8 of the VAT Law
• Deloitte Cyprus: Amendments to the Cyprus VAT Law, new properties and renovation of old properties
• PwC Cyprus: New rules on the VAT applied to the supply of buildings
• Constantinos Markou & Co: VAT amendments on the supply of buildings and renovation of private dwellings