5% VAT in Cyprus in 2026: New Rules and How to Avoid Overpaying 14%
As of 2026, Cyprus continues to apply updated rules for the reduced 5% VAT rate on the purchase of a first residence. While this preferential regime previously applied broadly to most first-time homes, the conditions have now become significantly stricter and are primarily focused on smaller and more affordable properties. What has changed? Previously, the […]
As of 2026, Cyprus continues to apply updated rules for the reduced 5% VAT rate on the purchase of a first residence. While this preferential regime previously applied broadly to most first-time homes, the conditions have now become significantly stricter and are primarily focused on smaller and more affordable properties.
What has changed?
Previously, the 5% VAT rate could be applied to almost any first residence covering up to 200 m², without strict price limitations. Today, both size and price thresholds have been introduced.
Property size limit
The reduced VAT rate now applies only to properties up to 190 m².
If the property exceeds 191 m², the standard VAT rate of 19% is applied to the entire purchase price.
Area eligible for the reduced rate
Previously, the reduced rate applied to the first 200 m² of a property. Now, it applies only to the first 130 m².
Price limit
New rules also introduce a value cap:
- Maximum property value: €475,000
- The 5% VAT rate applies only to the first €350,000 of the property value
Who can still benefit from the old rules?
For properties where the Planning Permit application was submitted before 31 October 2023, the previous VAT regime still applies.
This is particularly relevant for buyers who had already started the purchase process before the legislative changes.
New 2026 deadlines
Due to administrative delays, Cyprus has extended the deadlines for submitting applications for the reduced VAT rate.
- If the building permit was issued after 1 January 2025 – applications for the 5% VAT rate can be submitted until 31 December 2026.
- If the permit was issued by the end of 2024 – the final deadline for submission via the Tax For All (TFA) system is 15 June 2026.
New “first occupation” rules from 1 September 2026
From September 2026, additional rules will define when a property is considered “new”.
A property is treated as new (and subject to 19% VAT) until it has been occupied or used for business purposes for at least 18 months.
In addition, the 5% VAT rate on renovation works will only be available three years after the first official occupation of the property.
What should you do now?
- Check the date of your Planning Permit application.
- If you fall under the old regime, ensure your application is submitted within the relevant deadlines.
- Note that all applications must now be submitted online via the Tax For All (TFA) system.
If you are planning to purchase property in Cyprus and want to understand whether you qualify for the 5% VAT rate, it is important to assess your case in advance based on the property’s parameters and application timelines.
For consultations regarding the application of the 5% VAT rate and to check your eligibility, please contact us at taxadvisory@mainpartnertrust.com.
Note: The content of this article is relevant at the time of its first publication. It is intended to provide general information on the topic and does not constitute legal advice. We recommend seeking professional advice regarding your specific matter before taking action based on the information presented. For more information or consultation, please contact our tax experts by email at contact@mainpartnertrust.com
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