Cyprus Tax Department Announces Extension for Non-Taxation Election for VAT Purposes on Property Rentals
On March 24, 2025, the tax department introduced Circular 2/2025, providing the option to submit Form T.D. 1220 until December 31, 2025. This form facilitates the election for non-taxation for VAT purposes of leasing or renting immovable property, ensuring no penalties arise from delayed notification to the tax commissioner.
The circular targets lease agreements executed from November 13, 2017, onwards—the effective date of Law 157(I)/2017—under specific conditions:
- The lessor must not have informed the Tax Commissioner about their decision to exempt the lease from VAT using Form T.D.1220 and must have refrained from applying VAT to the transaction.
- The lease must be declared for direct tax purposes, complying with obligations related to income tax, contributions to the general healthcare system (GHS), and special defence contributions.
However, the circular excludes cases where VAT has been applied by the lessor to a taxable entity utilising the property for business purposes, thereby enabling the lessee to claim VAT deductions.
Circular 2/2025 remains valid until the end of 2025.
Beginning January 1, 2026, lessors will need to inform the tax commissioner within 30 days of the lease initiation to opt for non-taxation for leases involving taxable entities using the property for business operations.
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