The eighteen months that decide whether a building is still new

From 1 September 2026, whether a building counts as new for VAT stops being a question about the calendar and becomes a question about what was done with it.

Two Orders do the work. Κ.Δ.Π. 102/2026 is made under section 18 and amends the Fifth Schedule, which carries the reduced rate of five per cent. Κ.Δ.Π. 103/2026 is made under section 39 and amends the Eighth Schedule, which lists exempt transactions. Both were made by the Council of Ministers, published in Official Gazette Annex III(I) No. 6000 on 27 February 2026, and each ends with the same commencement sentence.

The two definitions

Both Orders put the same pair of terms into their Schedule.

First installation, πρώτη εγκατάσταση, means the first use of the building after its delivery or erection, including owner occupation, own use, lease or any other use which continues on a systematic basis.

First use, πρώτη χρησιμοποίηση, means the use or exploitation of the building after its delivery or erection, carried out systematically for a period of at least eighteen months.

One point of wording. In Table B, paragraphs 11 and 11A, the same two definitions are cast in terms of the private residence rather than the building, because those paragraphs are about work done to homes. In Table C of the Fifth Schedule and in the Eighth Schedule the subject is the building. The test is the same in each.

The drafting is worth reading closely, because the three places being amended are not amended in the same way.

In Table B, paragraphs 11 and 11A of the Fifth Schedule, Κ.Δ.Π. 102/2026 replaces the interpretation of first installation, and separately adds first use as a new term. In Table C of the same Schedule, the same Order replaces the interpretations of both phrases, so both were already there. In the Eighth Schedule, Κ.Δ.Π. 103/2026 replaces the whole of paragraph 3 with a new paragraph 3 carrying both definitions.

What can be said from the Orders themselves, then, is what the text now says. Anyone reading a transaction against the previous wording should read that wording rather than infer it from these amendments.

Why that decides whether tax is charged

Paragraph 1 of the Eighth Schedule opens by saying that the transactions listed are exempt transactions. Sub-paragraph 1(b) exempts the supply of immovable property, and then carves out two transactions from that exemption, which therefore remain taxable.

Κ.Δ.Π. 103/2026 replaces both carve-outs. As replaced they are:

• the transfer of buildings or parts of them, together with the plot transferred with them or an undivided ideal share in them, where it takes place before first installation in them;
• the transfer of possession of the same, under a contract of sale, under an agreement expressly providing that the buildings together with the plot will be transferred at some time in the future, or under a lease with a right of purchase, where it takes place before first installation in them.

The pivot in both is first installation. And first installation now depends on first use, which now requires eighteen months of systematic use. So a building that was occupied briefly, or occupied in a way that was not systematic, has not reached first installation. A transfer of it falls inside the carve-out and outside the exemption.

Section 17 of the Law imposes VAT at nineteen per cent from 13 January 2014.

The reduced rate runs on the same test

This is the part that is easy to miss, because the two Orders are usually described as being about whether VAT is charged at all.

Table C of the Fifth Schedule is headed Supply or Erection of a Residence. It applies the five per cent rate to three things, and attaches the same condition to each:

1. the supply of a building or part of it, with the plot bought with it or an undivided ideal share, used as a main and permanent residence in the Republic, where the supply takes place before first installation;
2. the transfer of its possession under a contract of sale, an agreement for transfer at a future time, or a lease with a right of purchase, again before first installation;
3. the erection of such a building on building land, again before first installation.

Κ.Δ.Π. 102/2026 replaces the interpretation of both first installation and first use in Table C. The same eighteen months therefore decide not only whether a transfer is taxable, but whether a person buying or building a main home is inside the reduced rate.

Renovation, and the sentence that answers the obvious question

Table B of the Fifth Schedule carries services. Paragraph 11 gives five per cent for renovation and repair of private residences carried out by a taxable person, consisting of plumbing, electrical, carpentry, painting and building work, excluding materials that come to more than fifty per cent of the value of the service. Paragraph 11A is the variant for work improving energy performance or reinforcing structural adequacy.

Both require the residence to be old, which the Schedule defines as at least three years having passed since first installation in it.

That creates a question the moment first use acquires an eighteen month period, and Κ.Δ.Π. 102/2026 answers it in the replaced wording, in one sentence:

The period of eighteen (18) months referred to in the meaning of first use runs concurrently with the three years.

The eighteen months are not added to the three years. They run inside them.

Where the line is drawn for older buildings

Paragraph 4(a) of the Eighth Schedule provides that paragraphs 1(b)(i) and (ii), 2 and 3 do not apply to buildings for which a duly completed application for planning permission was filed before 1 May 2004. Where no planning permission is required under a General or Special Development Order, the same paragraph deals with that case separately.

Table C of the Fifth Schedule approaches the same date from the other side. Its proviso requires that, for the buildings in its paragraphs 1, 2 and 3, a duly completed application for planning permission was filed after 1 May 2004.

What this means in practice

The test has moved from a date to a fact. Under the replaced wording, a building is not taken out of the taxable category by having been used. It is taken out by having been used systematically for at least eighteen months, and systematic use is a question about what actually happened to the building.

That has three consequences worth separating.

On a sale or transfer. A transaction that would have been treated as exempt because the building had been used may now fall inside the carve-out in paragraph 1(b) and remain taxable. The two carve-outs reach transfers of possession as well as transfers of title, and expressly reach agreements providing for transfer at a future time and leases with a right of purchase.

On a main residence. The reduced rate in Table C applies only before first installation. A longer route to first installation lengthens the window in which the reduced rate can be claimed, and the conditions of Table C still have to be met independently.

On renovation. A residence is old, for the five per cent rate on renovation and repair, three years after first installation, with the eighteen months running concurrently rather than on top.

Both Orders were made on 27 February 2026 and take effect on 1 September 2026. The text quoted above is the text of the Orders themselves, and the Schedules they amend should be read as amended from that date.

Questions we are asked

Sources

• Value Added Tax (Amendment of the Fifth Schedule) Order of 2026, Κ.Δ.Π. 102/2026, Official Gazette Annex III(I) No. 6000, 27 February 2026, p. 554
• Value Added Tax (Amendment of the Eighth Schedule) Order of 2026, Κ.Δ.Π. 103/2026, Official Gazette Annex III(I) No. 6000, 27 February 2026, p. 557
• Value Added Tax Law, 95(I)/2000, consolidated text

This article is provided for general information purposes only and does not constitute legal advice.

Klitos Platis

Advocate, Partner

Kleanthous & Platis LLC, Nicosia · Published 31 August 2026