The small print in Cyprus 5% VAT extension until Dec. 31

The reduced VAT rule now in force

Cyprus applies a 5% VAT rate on the supply or construction of new primary dwellings for qualifying buyers, instead of the standard 19%. The current rules, set by Law Ν.42(I)/2023, took effect on June 16, 2023 and cap the reduced rate at the first 130 m² of buildable area, with a total area limit of 190 m² and a value ceiling of €350,000 for full relief or up to €475,000 for partial relief.

The older scheme, which allowed 5% VAT on the first 200 m² without a value cap, still applies in some cases through transitional rules. Cyprus has now extended that window for certain projects until Dec. 31, 2026.

Who can qualify

The lower rate is available to individuals buying or building a primary and permanent residence, including Cypriots and foreigners who meet the tax rules. Expats and digital nomads can qualify if they plan to live in the property as their main home and can document that use.

Tourists and buyers of holiday homes don't get the break. Those purchases stay at 19% VAT and companies or investors buying for resale or rental also pay the full rate. Old properties that have already been occupied for at least 18 months are VAT-exempt.

What buyers need to file

Applicants have to submit the request through the Tax For All portal before the purchase is finalized. The filing includes personal details, property information, a declaration that the home will be used as a primary residence and confirmation from the developer.

The Tax Department can audit the property after the sale. If the buyer doesn't use it as the declared main home, the reduced VAT has to be repaid at 19%.

Read our full Cyprus guide for the complete picture. For more visa updates, check our latest coverage.