According to newly adopted emergency legislation, Cyprus has extended the 5% VAT rate on new residential properties until the end of 2026. The transitional period was originally set to expire in June 2026, but significant delays in planning and building permit approvals — caused by the local government reform — prompted the extension.
To ensure that developers and buyers do not incur additional costs due to state-related delays, the parliament approved the extension of the transitional period.
Which Projects Qualify for the Reduced Rate?
To benefit from the “old” VAT rules, a planning permit application must have been submitted by the developer before October 31, 2023. While such projects are relatively limited, they are still available on the market.
“Old” vs “New” VAT System — Key Differences
Under the “old” VAT system:
- The 5% VAT rate applies to the first 200 sq.m of buildable area.
- There are no restrictions on the total property value.
- The 19% rate applies proportionally to any area exceeding 200 sq. m.
Under the “new” VAT rules, stricter limits apply to both property size and value:
- The 5% VAT rate applies only to the first 130 sq.m for properties valued up to €350,000.
- If the property value falls between €350,000 and €475,000, a mixed rate applies: 5% on the first €350,000 and 19% on the remaining amount up to €475,000;
- Similarly for size: if the property ranges from 130 to 190 sq.m, 5% applies to the first 130 sq.m, and 19% to the remaining area up to 190 sq.m;
- If the property exceeds 190 sq.m or €475,000 in value, the full amount is subject to 19% VAT.
This is an important update for investors. It is currently a favourable time to enter the Cyprus property market — whether you are considering a purchase to apply for permanent residency, for personal use, or investment purposes.
