When purchasing a newly constructed property in Cyprus, buyers typically encounter a standard Value Added Tax (VAT) rate of 19%. However, there is a substantial financial incentive for those buying a new home as their primary residence: a reduced VAT rate of 5%. This benefit has historically allowed buyers to save tens of thousands of euros, making new properties significantly more affordable.
It’s essential to remember that VAT applies only to new constructions and not to resale properties, which are exempt from this tax. In this article, we explore the latest updates to VAT legislation and what they mean for homebuyers in Cyprus in 2026.
On 24 April 2026, the Republic of Cyprus enacted an amendment extending transitional provisions related to VAT on new homes, originally introduced by Law 42(I)/2023. This extension permits the Tax Commissioner to review applications for the reduced 5% VAT rate until 31 December 2026 in certain scenarios, particularly where delays caused by planning authorities affected timely processing.
The Tax Department further clarified that this extension applies if a planning permit was submitted or granted by October 31, 2023, but the building permit was issued after 1 January 2025 or remains unissued by the end of 2026. Buyers in this category must submit their VAT reduction application alongside their building permit application, allowing the Tax Commissioner to assess any delays.
For applications tied to planning permits issued by 31 October 2023 and building permits granted by 31 December 2024, the original deadline of 15 June 2026 remains in effect.
Before June 2023, the reduced VAT rate of 5% applied to the first 200 square meters of the buildable area of a primary residence without limit on the total property value or overall size. This allowed buyers purchasing even large, high-end properties to benefit from the discount on the initial 200 square meters, with any additional area subject to the full 19% VAT.
Implemented in June 2023, the new VAT rules introduced more stringent criteria for eligibility:
Recognizing many buyers had already made commitments under the old system, the 2023 reform introduced a 3-year transitional period. This means that properties with planning permission applications submitted by 31 October 2023 continue to be taxed under the previous, more generous framework until 15 June 2026.
This overlap has allowed buyers some flexibility but also complexity in understanding which VAT rules apply to their purchase.
The April 2026 amendment offers a valuable extension for eligible buyers to benefit from the older VAT framework. The financial impact is non-trivial, as adhering to the previous rules could result in significantly lower VAT charges compared to the stricter regime set in 2023.
For anyone looking at houses for sale in Cyprus or other property types, understanding the best possible VAT treatment could save you considerable money.
The 2026 amendment represents a meaningful opportunity for buyers still within the transitional period to enjoy a more favorable VAT rate when purchasing newly built primary residences in Cyprus. With clear guidance from the Tax Department, buyers have a better understanding of eligibility and deadlines.
We strongly recommend consulting with legal experts to analyze your individual circumstances and confirm if you qualify for the reduced VAT rate under these extended provisions.
If you’re exploring options like affordable apartments for sale or other properties in Cyprus, our team at INDEX.cy is here to help you navigate the complexities of VAT and maximize your investment.
Disclaimer: This article provides general information only and should not be considered as legal advice. Always seek specialised legal counsel regarding your specific situation.
Maria Kokoridi
Senior Associate at Philippou Law Firm
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