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.
With the issuance of Circular 2/2025, a new
opportunity has emerged:
✅ Lessors may now submit Form T.F. 1220
retroactively, provided they meet certain conditions and
do so by 31 December 2025.
Conditions for Retroactive Submission
To take advantage of this exemption, the following conditions must be met:
- The lessor did not charge VAT on the commercial lease.
- The lessor failed to submit Form T.F. 1220 in due time.
- The lessor is fully compliant with their direct tax obligations.
It is important to note that lessors who have already imposed VAT on their rental agreements cannot apply retroactively under this Circular.
The VAT exemption relief granted under Circular 2/2025 will remain valid until 31 December 2025.
Eurofast's Take
Navigating VAT obligations on commercial leases in Cyprus can be complex, especially with retroactive filing options. At Eurofast, we assist clients in evaluating their eligibility for VAT exemptions, ensuring accurate submission of Form T.F. 1220, and maintaining full compliance with Cyprus tax law.
Our tax professionals can provide tailored support in reviewing existing lease agreements and preparing the required documentation for retroactive relief. Whether you are a property owner, property manager, or business tenant, our team is here to guide you every step of the way.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
