The Cyprus government has introduced important updates to the reduced VAT scheme for primary residences, affecting both local and international property buyers.
The reduced 5% VAT rate remains one of the most valuable incentives available to individuals purchasing a new home in Cyprus as their primary residence. However, buyers should be aware of the latest eligibility criteria, size limits and upcoming deadlines.
Buyers planning a relocation should also read our Moving to Cyprus: Complete Guide for 2026.
What Is the Reduced VAT Rate?
When purchasing a newly built property in Cyprus, the standard VAT rate is 19%.
Eligible buyers can apply for a reduced VAT rate of 5% on their primary residence, potentially saving tens of thousands of euros on a property purchase.
Current Reduced VAT Rules
Under the current framework, the reduced 5% VAT rate applies to:
- The first 130 square metres of a qualifying primary residence
- Properties with a value of up to €350,000 for full benefit
- Properties with a total value not exceeding €475,000
- Properties with a total buildable area not exceeding 190 square metres
Any qualifying area or value above these thresholds may be subject to the standard 19% VAT rate.
Important 2026 Deadline
A transitional scheme continues to benefit some buyers whose planning permits were submitted before the 2023 legislative changes.
Certain qualifying projects may still be eligible under the previous, more generous VAT framework, provided applications are submitted within the applicable deadlines. Cyprus authorities have also extended relief measures for projects affected by planning and permit delays.
Buyers considering a new-build property should seek professional advice to determine whether they qualify under the transitional arrangements.
Why This Matters for Buyers
The difference between paying 5% VAT and 19% VAT can significantly affect the final cost of a property purchase.
For example, on a new property valued at several hundred thousand euros, the savings available through the reduced VAT scheme can be substantial.
This is particularly important for:
- First-time buyers
- Families relocating to Cyprus
- Permanent residency applicants
- International investors purchasing a primary residence
Many buyers use qualifying property purchases as part of their long-term relocation or residency strategy.
Who Can Apply?
The reduced VAT rate is generally available to individuals purchasing a property that will be used as their primary and permanent residence in Cyprus.
Choosing the right location is equally important. See our Best Places to Live in Cyprus guide.
Applicants must meet specific legal and tax requirements, and the property must satisfy the size and value criteria established by the legislation.
What Should Buyers Do Now?
If you are planning to purchase a newly built property in Cyprus, it is important to:
- Confirm whether the property qualifies for the reduced VAT rate.
- Review the property’s size and value against the current thresholds.
- Check whether transitional rules may apply.
- Obtain legal and tax advice before signing contracts.
Buyers should also consider ongoing living expenses. Our Cost of Living in Cyprus in 2026 guide provides a detailed breakdown of monthly costs.
Early planning can help buyers avoid unexpected costs and maximize available tax benefits.