VAT on Property Purchases in Cyprus

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

Purchasing property in Cyprus carries important tax considerations, chief among them Value Added Tax (VAT). Newly built residential properties are generally subject to VAT at the standard rate of 19%, but individuals buying a home to use as their primary and permanent residence may qualify for a reduced rate of 5% – one of the most significant incentives available to residential buyers in Cyprus.

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. The extension applies only in defined cases and only for a limited time.

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

The Current Reduced VAT Regime

Following the legislative reform of June 2023, the reduced 5% rate applies to the first 130 m² of buildable area and up to €350,000 of the property’s value, provided that the total buildable area does not exceed 190 m² and the total value does not exceed €475,000. Any area or value between those thresholds is taxed at 19%.

Where the buildable area exceeds 190 m² or the value exceeds €475,000, the entire purchase price or construction cost is taxed at the standard 19% rate and the relief is lost altogether, not merely reduced.

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%.

Because many purchasers had already commenced projects under that framework, transitional provisions (Article 63 of the VAT Law) allow certain developments to continue benefiting from the former regime, provided the relevant planning permit was issued, or the planning application duly submitted, on or before 31 October 2023. Under this arrangement, the old and new frameworks operated in parallel from 16 June 2023 to 15 June 2026, and the pre-2023 regime is due to be abolished entirely from 1 January 2027.

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

The 2026 Extension

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.

The Tax Department’s announcement  of 4 May 2026 clarified which cases fall within the extended deadline. The distinction turns on the building permit date; in all cases, the 31 October 2023 planning-permit criterion must first be satisfied.

Extended deadline – 31 December 2026

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 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 offers a valuable but strictly 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 turns entirely on the precise timing of the planning and building permits.

Anyone considering a qualifying new-build purchase should review those dates carefully, confirm whether the 31 December 2026 window is available to them, and ensure the Responsible Declaration is filed correctly and in time.