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%.

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 ceases to be used as the owner’s primary residence during that period, part of the VAT benefit may need to be repaid to the Tax Department.

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.

Recognising that many purchasers had already commenced projects under the previous framework, transitional provisions 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.

Extension of the Transitional Period

In April 2026, Cyprus enacted Law 109(I)/2026, extending the transitional arrangements for projects affected by delays in obtaining building permits.

The extension applies where:

• The planning permit application was submitted or issued by 31 October 2023; and
• The building permit was issued after 1 January 2025 or remains pending by 31 December 2026.

Where a building permit has not yet been issued, applicants must submit evidence of the building permit application when applying for the reduced VAT rate.

Projects that satisfy the relevant criteria may continue to be examined by the Tax Commissioner until 31 December 2026.

For qualifying purchasers, the difference between the old and new VAT regimes can be significant.

Under the previous framework, buyers of larger or higher-value homes could benefit from the reduced VAT rate on the first 200 m² without any property value cap. Under the current rules, eligibility is subject to stricter area and value thresholds.

As a result, qualifying under the transitional provisions may generate substantial tax savings.