VAT on Property Purchases in Cyprus

Purchasing property in Cyprus involves important tax considerations, particularly Value Added Tax (VAT).

While newly built residential properties are generally subject to VAT at the standard rate of 19%, individuals buying a home to use as their primary and permanent residence may qualify for a reduced VAT rate of 5%.

An amendment passed in April 2026, together with a clarifying announcement from the Tax Department, has extended a key deadline for buyers seeking to qualify under the older, more generous rules, but only in defined cases and only for a limited time.

This reduced rate can result in substantial savings, making it one of the most significant incentives available to residential property buyers in Cyprus.

When Does VAT Apply?

VAT applies only to the first sale of a newly constructed property. The purchase of a resale property is generally exempt from VAT.

For buyers of new-build homes, the applicable VAT rate depends on whether the property qualifies as the purchaser’s primary and permanent residence and whether the statutory eligibility criteria are met.

The Current Reduced VAT Regime

Following legislative reforms introduced in 2023, the reduced 5% VAT rate applies under specific conditions.

In general:

• The reduced rate applies to the first 130 m² of buildable area.
• The total buildable area must not exceed 190 m².
• The property’s value must not exceed €350,000.
• Graduated relief may apply to properties with a buildable area of up to 190 m² and a value of up to €475,000.

Where the buildable area exceeds 190 m² or the property value exceeds €475,000, the standard VAT rate of 19% applies to the entire purchase price or construction cost.

Special Provisions

Certain categories of purchasers benefit from enhanced relief:

• Persons with disabilities may apply the 5% rate to the first 190 m² of the residence.
• Large families (with four or more children) receive an additional 15 m² of qualifying area for each child beyond the third.

Primary Residence Requirement

The reduced VAT rate is available only where the property is used as the purchaser’s primary and permanent residence.The property must generally be occupied as such for a period of ten years.

If the property is sold, rented, or otherwise ceases to be used as the owner’s primary residence during that period, part of the VAT benefit must be repaid to the Tax Department, broadly, the 14-percentage-point difference between the 5% and 19% rates, calculated in proportion to the years remaining. The Tax Department has in recent years stepped up audits of properties that received the reduced rate but were not used as a main home, so accurate use and documentation matter.

Transitional Rules for Older Applications

Prior to June 2023, Cyprus operated a more generous VAT regime. Under those rules, the 5% VAT rate applied to the first 200 m² of a primary residence, with no overall value cap. Only the area above 200 m² was taxed at 19%.

Recognising that many purchasers had already commenced projects under the previous framework, transitional provisions (Article 63 of the VAT Law) were introduced. These allow certain developments to continue benefiting from the former regime, provided that the relevant planning application was submitted on or before 31 October 2023. Under this arrangement, the old and new frameworks have operated in parallel from 16 June 2023 to 15 June 2026.

From 1 January 2027, the pre-2023 regime is due to be abolished entirely, leaving only the stricter 130 m² framework in place.

Extension of the Transitional Period

In April 2026, Cyprus enacted Law 109(I)/2026, published in the Official Gazette on 24 April 2026, amending Article 63 to extend the transitional arrangements for projects affected by delays in obtaining building permits. The Tax Commissioner may now continue to examine qualifying Responsible Declarations until 31 December 2026.

By an announcement on 4 May 2026, the Tax Department clarified which cases fall within the extended deadline. Two scenarios apply, and the distinction turns on the building permit date:

• the planning permit application was submitted or issued by 31 October 2023; and
• the building permit was issued after 1 January 2025, or has not been issued by 31 December 2026.

Original deadline – by 15 June 2026.

Buyers remain bound by the original cut-off where:

• the planning permit application was submitted or issued by 31 October 2023; but
• the building permit was issued on or before 31 December 2024.

The 2026 amendment did not move this deadline.

Summary

The April 2026 amendment provides a valuable but time-limited opportunity for buyers who can still qualify under the previous VAT regime. Because the Tax Department’s clarification ties eligibility to specific permit dates rather than general intent, the assessment now turns on the precise timing of the planning and building permits.

Anyone considering a qualifying new-build purchase should review those dates carefully, confirm which deadline applies, 15 June 2026 or 31 December 2026, and ensure the Responsible Declaration is filed correctly and in time.