On 24 March 2025, the Cyprus Tax Department released
Circular 2/2025, introducing new provisions for
VAT exemption on commercial property rental. The
update provides an important opportunity for lessors in
Cyprus to regularise their tax position via a
retroactive submission of Form T.F. 1220. This
article outlines the key details and implications for property
owners and business tenants.
VAT on Commercial Property Leases: What Has
Changed?
As per paragraph 1(a)(iv) of the Eighth
Schedule of the Cyprus VAT Law, rental agreements for
commercial properties to taxable persons for business
purposes are, by default, subject to VAT
if signed after 13 November 2017.
However, lessors have the right to opt out of
VAT by submitting Form T.F. 1220 to the
Tax Commissioner. If this form is not submitted, VAT must be
imposed by default on the rental income.
