In a recent judgment, the Supreme Court of Cyprus upheld the application of the exemption of VAT for first property even in the absence of regulations implementing the legislative provisions.

Until Cyprus accession to the EU, the delivery of property was a wholly exempted transaction for VAT purposes. This regime was altered after the implementation of amending Act 95(I)/2004, which left intact the previous regime in regard to the sale of land but imposed a VAT obligation (15%) on the delivery of property with constructed premises that acquired a building permit after the 1st of May 2004, subject to a reduction in the percentage (5%) if that is the first property bought by the purchaser. 

Nowithstanding the enactment of the above legislation and its express provision that the particulars of its implementation shall be governed by Regulations to be issued by the Council of Ministers, no such regulations were issued until today and the VAT Authorities advanced the position that due to the lack of such regulations, the legislative exemption could not apply.

The Supreme Court rejected this position and held that the right to the exemption was crystallised as from the enactment of the legislation and the lack of regulations could not be raised as an impediment to its implementation.