When purchasing a newly constructed property in Cyprus, buyers are typically subject to a Value Added Tax (VAT) rate of 19%. However, for individuals buying a new home intended as their primary and permanent residence, there is a special reduced VAT rate of 5%—a financial advantage that has saved many homebuyers tens of thousands of euros over the years.
It’s important to highlight that this VAT reduction applies strictly to the first purchase of newly built properties. Resale properties are exempt from VAT.
In April 2026, Cyprus introduced an important amendment through Law 109(I)/2026, which extends transitional provisions initially set by Law 42(I)/2023 until the end of 2026 for certain cases.
The new amendment gives the Tax Commissioner an extended deadline—to December 31, 2026—to review applications for the reduced 5% VAT rate where delays are caused by planning authorities. Specifically, this extension applies when the planning permit application was submitted or granted by October 31, 2023, but the building permit was issued after January 1, 2025, or remains outstanding by the end of 2026. For applications submitted before the building permit is issued, documentation proving the building permit application must be included.
Buyers intending to benefit from the previous VAT rules for properties with planning permits submitted or granted by October 31, 2023, and building permits issued on or before December 31, 2024, must apply by June 15, 2026, in line with the original deadline.
Before June 2023, the 5% VAT cut applied to the first 200 square meters of the buildable area of a new primary residence, with no limit on property size or value. This meant that even purchasers of large, high-value homes enjoyed substantial VAT savings: 5% VAT up to 200 square meters and 19% on any additional area.
With the enactment of Law 42(I)/2023, stricter rules were introduced on June 16, 2023. Now, the reduced 5% VAT applies only under the following parameters:
There are exemptions for buyers with disabilities, reflecting Cyprus’ commitment to inclusivity.
Recognising many buyers had already committed under the prior regime, the law allowed a three-year transitional window. Projects with planning permit applications submitted on or before October 31, 2023, can still benefit from the older, more generous VAT rates—5% on the first 200 square meters without value or size restrictions. During this period, both old and new regulations operate side-by-side, concluding on June 15, 2026.
This 2026 adjustment offers a critical extension for buyers caught in permit delays, preserving their eligibility for the more advantageous old VAT framework. The difference between the two VAT schemes can translate into significant financial savings, making it imperative for prospective buyers to act swiftly and understand which rules apply to their purchase.
If you’re looking to acquire a newly built property in Cyprus, staying informed about these VAT developments is essential to maximize your investment. Following the Tax Department’s clarifications, the scope of who qualifies and how the extended deadlines work is now clearer than ever.
To better understand your eligibility and navigate the application process, consulting a legal expert is strongly recommended. For those exploring affordable options, check out our listings for Cheap Houses and Villas for Sale Cyprus or the latest Cheap Apartments for Sale Cyprus.
This article aims to provide general information and should not replace specialist legal advice tailored to your specific circumstances.
Maria Kokoridi
Senior Associate at Philippou Law Firm
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