The 5% VAT Alert
For anyone buying a home in Cyprus, the difference between 5% and 19% VAT can significantly affect the purchase budget.
The December 2026 Deadline Does Not Apply to Everyone
The Cyprus Tax Department has confirmed an extension connected to delays by planning authorities, allowing certain applications under the transitional provisions to be considered until 31 December 2026.
The qualifying project must have obtained a planning permit or submitted its planning permit application by 31 October 2023. The announcement covers specified cases where the building permit was issued after 1 January 2025, or remains unissued by the end of 2026.
For the category where the building permit was issued by 31 December 2024, the application deadline remained 15 June 2026. That deadline has already passed.
How the Current 5% VAT Rules Work
Under the general framework introduced in June 2023, the reduced rate applies to qualifying homes used as the buyer’s primary and permanent residence.
The standard limits allow 5% VAT on the first 130 m² of buildable area, subject to an eligible value of €350,000. The residence’s total buildable area must not exceed 190 m², and its total value must not exceed €475,000.
Within these overall limits, the calculation may involve both 5% and 19% VAT. Exceeding either overall limit generally removes eligibility under the standard rules. Special provisions apply to certain qualifying buyers, including people with disabilities and larger families.
Why the Older Framework Still Matters
Eligible purchases covered by the transitional provisions can retain the previous treatment, with 5% VAT applying to the first 200 m² of buildable area.
This can make a material difference when comparing homes. However, a property’s age or construction stage alone does not establish eligibility. The relevant permits, deadlines, and buyer requirements must also be checked.
Ask for a written VAT calculation for the specific property before finalising your budget.
The Reduced Rate Is for Your Main Home
The 5% residence scheme is intended for qualifying personal occupation. Buying a property to rent to tenants or holiday guests does not qualify simply because it is residential.
If a beneficiary stops using the home as their residence before ten years have passed, the Tax Department generally requires notification within 30 days and repayment of the VAT difference proportionate to the remaining period, subject to applicable exceptions.
Discuss any future plans to sell or rent the property with your tax adviser before relying on the reduced rate.
Plan Your Purchase With The Property House
A clear purchase budget starts with understanding the VAT treatment of the home you are considering.
At The Property House, we help you explore properties that suit your location preferences, lifestyle, and budget. Before committing, have an independent tax adviser confirm your eligibility and the correct calculation.
Contact The Property House to discuss your property search and find a home that supports your plans.