New rules on supply of buildings and renovation services

The former amends the rules  under which the supply of a new building is subject to VAT. The latter, revises  the definition of first occupation for the purposes of implementing the reduced  5% VAT rate on renovation and repair services. The amendments are effective as  of 1 September 2026.
 
 

VAT on supply of buildings

According to the Eight Schedule of VAT Law currently in force, the supply of a building is subject to VAT when supplied before its first delivery and under any subsequent deliveries within a period of five (5) years from its completion, provided that no actual usage was made by a non-related person for a period of at least twenty-four (24) months.

In relation to the above, the following definitions apply: 

1. Completion means the completion of the building so as to be able to be put in use for the purpose which is intended.
2. Actual use means the use of the building on a systematic basis.
3. Related person has the meaning given in paragraph 1(4) of the Fourth Schedule to the VAT Law.
    

Under the new provisions from 1 September 2026, the following transactions are subject to VAT:

• Transfer of buildings or parts of buildings, including the plot of land transferred with the building, and
• Transfer of possession of a building or part thereof via a contract of sale, an agreement that provides for future transfer of the building together with the land, or a lease with a purchase option.
   

In relation to the above, the following definitions apply: 

1. First occupation means the first use of the building after it has been constructed, self-use, leasing, or any other use which is carried out on a systematic basis.
2. First use means the use of the building after its construction carried out systematically for a period of at least eighteen (18) months.
    

Renovation and repair services

Renovation and repair work carried out by a taxable person on private residences  is subject to the reduced VAT rate of 5% on the condition that the private residence qualifies as old. A residence is considered old when at least three years have passed since its first occupation. 

As of 1 September 2026, a private residence will be considered old if at least three years have passed since it was first occupied. Under the amended provisions, renovation and repair services may be subject to the reduced VAT rate of 5% only where it can be demonstrated that the residence is at least three years old and has been used for at least eighteen (18) months. The introduction of the 18‑month use requirement is now central to the application of the reduced rate 5%. 

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