Cyprus 5% VAT on primary residences: 2026 amendment explained

The purchase of a newly built property in Cyprus is subject to Value Added Tax at the standard rate of 19%. The law allows individuals buying a brand-new home as their primary and permanent residence to apply a reduced VAT rate of 5%, a saving that can run into tens of thousands of euros. On 24 April 2026, the Cyprus Parliament extended the transitional regime that lets some buyers still claim the 5% rate under the more generous pre-2023 rules.

VAT does not apply to resale properties. It is charged only on the first purchase of a newly built property.

The 2026 amendment

The amending Law 109(I)/2026 was published in the Official Gazette of the Republic of Cyprus on 24 April 2026. It extends the transitional provisions of Law 42(I)/2023 until 31 December 2026 in defined cases. Specifically, the Tax Commissioner may now examine applications submitted under the relevant article up to 31 December 2026, where the examination was not completed in time due to delays attributable to the planning authorities.

The Tax Department then issued a clarification setting out the cases to which the extended deadline applies.

Which cases the extension covers

The 31 December 2026 deadline applies where:

• The planning permit application was submitted, or the planning permit was issued, by 31 October 2023, and
• The building permit was issued after 1 January 2025, or the building permit will not have been issued by 31 December 2026.

Where the building permit has not yet been issued at the time of the VAT application, the application for the reduced 5% rate must be accompanied by the application for the building permit, so that the Tax Commissioner can examine the reasons for the delay in its issuance.

The 15 June 2026 deadline for older planning permits

Buyers who want to apply for the 5% rate under the old rules in respect of a property where:

• The planning permit application was submitted, or the planning permit was issued, by 31 October 2023, and
• The building permit was issued on or before 31 December 2024,

must submit their application to the Tax Commissioner by 15 June 2026. The 2026 amendment did not move this deadline. The original transitional cut-off continues to apply to these cases.

The old rules before June 2023

Before June 2023, the 5% reduced rate applied to the first 200 square metres of the buildable area of a primary residence. There was no cap on the value of the property and no cap on its total size.

A buyer of a large or high-value home could still claim the reduced rate. The 5% applied to the first 200 square metres, and the standard 19% applied to any area above that threshold. For many buyers, this was the most attractive feature of the Cyprus property market.

The 2023 reform: Law 42(I)/2023

The amending Law 42(I)/2023 was published in the Official Gazette on 16 June 2023. It introduced stricter eligibility for the 5% rate.

Under the current rules, the 5% rate applies to:

• The first 130 square metres of a newly built property, provided that the total buildable area does not exceed 190 square metres, and
• A property value of €350,000, provided that the total transaction value does not exceed €475,000.

Different thresholds apply to individuals with disabilities.

The original transitional period

The 2023 legislation recognised that many buyers had already entered into commitments under the old rules, and it included a three-year transitional period. The old rules continue to apply to any project where the planning permission application was submitted to the competent authority on or before 31 October 2023, meaning the 5% rate applies to the first 200 square metres with no value or size restrictions.

Under this arrangement, the old and new frameworks have operated in parallel from 16 June 2023 to 15 June 2026.

Why the 2026 amendment matters

The financial difference between the two VAT regimes can be substantial. A buyer purchasing a €700,000 new-build with a buildable area of 250 square metres would pay 5% on the first 200 square metres under the old rules and 19% on the rest. Under the post-2023 rules, the same property would not qualify at all. The value cap of €475,000 and the size cap of 190 square metres rule it out, and the full 19% rate applies.

For buyers whose projects were delayed for reasons outside their control, the 2026 amendment is a chance to still claim a regime that would otherwise have closed for them on 15 June 2026.

Conclusion

The April 2026 amendment is a meaningful extension for buyers caught between the two VAT regimes. The Tax Department's clarification has narrowed the eligibility window, so the assessment is now about specific permit dates rather than general intent. For anyone considering a new-build purchase in Cyprus where the project was filed before 31 October 2023, the next step is to check the planning and building permit dates and confirm which deadline applies.

This article is for general information only and does not constitute legal advice. For advice on your specific circumstances, please contact our property team.