In Cyprus, purchasing a newly constructed home typically incurs Value Added Tax (VAT) at the standard rate of 19%. However, buyers who acquire a brand-new property as their primary and permanent residence can benefit from a significantly lower VAT rate of 5%, making this a key financial incentive in the real estate market.
It’s important to highlight that VAT applies only to new properties and not resale homes. Over the years, this reduced VAT rate has saved homebuyers tens of thousands of euros, adding considerable value to residential property purchases.
On 24 April 2026, Cyprus introduced Law 109(I)/2026, which extends certain transitional provisions related to VAT payment deadlines, initially established by Law 42(I)/2023. This extension accommodates delays attributed mainly to planning authorities, allowing applications for the reduced 5% VAT rate to be examined by the Tax Commissioner until 31 December 2026 under specific conditions.
The key aspect of this amendment is that it applies to cases where either the planning permit application was submitted or the permit was issued by 31 October 2023, but the building permit was obtained after 1 January 2025 or is still pending by the end of 2026. To benefit, applicants without an issued building permit must submit their reduced VAT rate application alongside the building permit application for assessment.
Meanwhile, buyers with properties whose building permits were issued on or before 31 December 2024 must adhere to the original application deadline of 15 June 2026 to qualify for the reduced VAT rate under the old rules.
Prior to June 2023, the 5% VAT discount applied to the first 200 square meters of a primary residence, without limits on the property’s total size or value. This enabled many buyers, including those purchasing large and high-end properties, to benefit from significantly reduced VAT on a substantial portion of their purchase.
However, the 2023 reform introduced by Law 42(I)/2023 tightened eligibility criteria. The new rules stipulate that the 5% VAT applies only to:
Exceptions are made for individuals with disabilities.
Recognizing many buyers had already made commitments under the previous regime, the 2023 legislation introduced a three-year transitional period ending on 15 June 2026. During this time, properties with planning permission applications submitted by 31 October 2023 can still use the old VAT framework (5% on first 200 square meters, no price cap), while new applications comply with stricter rules.
This extension grants eligible homebuyers a crucial window to benefit from the more advantageous VAT conditions that existed before the 2023 reform, potentially saving substantial amounts on VAT payments.
Given the significant financial implications, buyers should carefully assess if their property purchase falls under the transitional provisions and act accordingly before deadlines expire.
The 2026 VAT amendment provides a welcome opportunity for many homebuyers in Cyprus to capitalize on historically favorable tax benefits. With the Tax Department’s clarifications, the eligibility criteria are clearer, making it critical for prospective buyers to seek expert legal advice to ensure they maximize available savings.
For those exploring options on purchasing newly built homes, we recommend consulting with legal professionals to evaluate eligibility for this reduced VAT rate. Our platform also offers a variety of property listings, including Cheap Apartments for Sale Cyprus and Houses for Sale in Cyprus, to help you find your ideal home within your budget.
Disclaimer: This article serves informational purposes and does not replace professional legal counsel. Prospective buyers should seek specialist advice tailored to their circumstances.
Maria Kokoridi
Senior Associate at Philippou Law Firm
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