Reduced 5% VAT Scheme for Residential Property in Cyprus

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Updated: January 15, 2026

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In Cyprus, a reduced VAT rate of 5% applies to the purchase or construction of a new primary residence, instead of the standard 19%. Under the current rules, this reduced rate applies to the first 130 sq. m of the property. To qualify, the total internal area must not exceed 190 sq. m, the property value must not exceed €350,000, and the total transaction value must not exceed €475,000. Any area beyond these limits is subject to the standard VAT rate of 19%.

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💳VAT on Property in Cyprus

 

Value-Added Tax (VAT) is a general consumption tax applied across the European Union. In Cyprus, the standard VAT rate for 2025 is 19%.

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Transactions involving land and real estate are classified as supplies of goods and services and are therefore subject to VAT.

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In June 2023, Law 42(I)/2023 introduced new criteria for applying the reduced 5% VAT rate on primary residences. While the reduced rate remains unchanged, the maximum eligible built area has been lowered. A transitional (grace) period applies.

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🏢 Previous 5% VAT Regime

The previous rules apply to any project for which the planning permission application was submitted before 31 October 2023.
 

Conditions Under the Previous Regime

A 5% VAT rate applies to the first 200 sq. m of a property, provided that:

• The property is a new house or apartment.

• It will serve as the buyer’s primary residence for at least 10 years.

• The applicant is 18 years of age or older.

• The 200 sq. m refers to internal covered areas, excluding staircases.

If a property exceeds 200 sq. m but meets all other requirements:
The 5% rate applies to the first 200 sq. m, and the remaining area is taxed at 19%.

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🏦 New VAT Rules for Primary Residences (2023 Update)

Introduced in June 2023, the new rules reduce the eligible area for the 5% VAT rate.
 

Under the revised scheme, the 5% VAT rate applies to the first 130 sq. m of a primary residence if:

• The property value does not exceed €350,000,

• The total transaction value does not exceed €475,000, and

• The total constructed internal area does not exceed 190 sq. m.

Individuals with disabilities are eligible for the reduced 5% VAT rate on the first 190 sq. m.

Legislation

The new rules are governed by Law 42(I)/2023, published in the Official Gazette on 16 June 2023.

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📄 Transitional (Grace) Period

​The new rules do not apply if:

• Planning permission has already been issued; or

• The planning permission application was submitted before 31 October 2023.​

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​🗃️ Application Procedure​

To apply for the reduced VAT rate, the applicant must submit all required documents to the relevant VAT Department after:

• The Contract of Sale has been signed and stamped, and

• A payment has been made to the developer or contractor.

The applicant must not occupy or use the property before submitting the reduced VAT application.

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🏷️ Required Documents

• Passport or ID copy

• Marriage certificate (if applicable)

• Completed Application Form

• Planning/Building Permits and related applications

• Architectural plans confirming internal buildable area

• Residence permit (if applicable)

• Stamped Contract of Sale and payment receipt

• Contractor’s licence​​​​​​​​​