When buying a newly constructed property in Cyprus, Value Added Tax (VAT) at the standard rate of 19% typically applies. However, buyers purchasing their first home as a primary and permanent residence have the benefit of a reduced VAT rate of just 5%. This reduction can amount to tens of thousands of euros in savings, making it one of the most attractive incentives available to property buyers in Cyprus.
It’s crucial to highlight that VAT applies only to new-build properties and not to resale homes.
On 24 April 2026, the Republic of Cyprus published an amending law (Law 109(I)/2026) extending certain transitional provisions of Law 42(I)/2023 until 31 December 2026. This extension allows the Tax Commissioner to review applications for the reduced VAT rate in cases where planning authorities caused delays.
Specifically, this extension concerns situations where a planning permit application was submitted or issued by 31 October 2023, but the building permit was issued after 1 January 2025 or has yet to be issued by 31 December 2026. Buyers applying for the reduced rate in these cases must submit their VAT reduction application alongside their building permit application to clarify the delay.
For buyers whose building permits were issued on or before 31 December 2024 (with planning permits applied for or granted by 31 October 2023), the original application deadline for the 5% VAT rate remains 15 June 2026.
Before June 2023, the 5% VAT reduction applied to the first 200 square metres of a primary residence’s buildable area, without restrictions on property value or total size. This meant that purchasers of large or high-value homes could apply the reduced rate up to 200 sqm, paying the standard 19% VAT only on areas exceeding that limit.
The 2023 legislative update (Law 42(I)/2023) brought tighter eligibility rules. The reduced VAT rate of 5% now applies to:
Exceptions are granted for individuals with disabilities.
Recognizing that many buyers had contracts under the previous system, the law provided a three-year transitional period. This means the old VAT rules still apply to projects with planning applications submitted on or before 31 October 2023, allowing buyers to benefit from the more generous 5% VAT cap of 200 sqm and no value limits until 15 June 2026. During this phase, both VAT frameworks coexist.
The 2026 amendment isn’t just a technicality—it can mean substantial savings for buyers who qualify under the previous, more advantageous rules. Those eligible can potentially reduce their VAT liability significantly compared to the stricter 2023 rules.
This extension offers a critical window for buyers still navigating planning permit delays, giving them access to a long-standing financial incentive that has made purchasing new properties in Cyprus more affordable.
The VAT amendments effective in 2026 reaffirm Cyprus’s commitment to supporting primary residence buyers while adapting to changing market realities. If you are considering a purchase of a house or other property types like apartments, understanding these VAT changes is essential to maximize your financial benefits.
We always recommend consulting a legal expert to evaluate your eligibility and ensure all applications comply with current regulations.
If you’re exploring Cyprus’s real estate market, don’t hesitate to reach out to us for guidance or browse our listings for cheap houses and villas to find your ideal home.
Disclaimer: This article provides general information only and does not constitute legal advice. Please seek professional advice tailored to your specific situation.
Maria Kokoridi
Senior Associate, Philippou Law Firm
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