Cyprus 5% VAT on New Homes: What Ends on 31 December 2026
Buyers of a new home in Cyprus who will live in it as their main residence can still use the more generous pre-2023 5% VAT rules in limited cases, but only if their application reaches the Tax Department by 31 December 2026. The window applies to projects whose planning permit was applied for or issued by 31 October 2023 and whose building permit was issued after 1 January 2025 or is still pending. From 1 January 2027, every application falls under the stricter rules introduced in 2023. For a larger or higher-value home, that difference can mean paying 19% VAT on the whole price instead of 5% on most of it.
What Is the Reduced 5% VAT Rate in Cyprus?
New residential property in Cyprus is generally subject to VAT at the standard rate of 19%. An individual who buys or builds a new home to use as their main and permanent residence can apply for a reduced rate of 5% on part of the property.
The reduced rate is not automatic. The buyer submits an application through the Tax Department’s Tax For All (TFA) portal, and the developer can only invoice at 5% once the application is approved. The relief is for a home you live in. It does not apply to investment, holiday or rental property.
How Do the Old and New 5% VAT Rules Compare?
The 2023 amendment (Law 42(I)/2023, in force from 16 June 2023) added size and value limits. The transitional rules preserve the earlier, simpler test for qualifying projects until the end of 2026.
| Pre-2023 rules (transitional) | Current rules (since 16 June 2023) | |
|---|---|---|
| Area taxed at 5% | First 200 m² of buildable area | First 130 m² of buildable area |
| Value taxed at 5% | No value limit | Up to €350,000 |
| Maximum property size | No limit | 190 m² buildable area |
| Maximum transaction value | No limit | €475,000 |
| Above the limits | 19% on the area above 200 m² | 19% on the excess; 19% on the whole price if 190 m² or €475,000 is exceeded |
| Available until | Applications by 31 December 2026, qualifying projects only | Ongoing |
The key difference for larger homes is the last row of the current rules. A home over 190 m² or over €475,000 loses the reduced rate entirely, even on the first 130 m².
Who Can Still Use the Pre-2023 Rules Before 31 December 2026?
The transitional window is narrow. It depends on the project’s permit dates, not on when you sign a contract.
Under Law 109(I)/2026 and the Tax Department’s announcement of 4 May 2026, the Tax Department accepts applications submitted between 16 June 2026 and 31 December 2026 for the pre-2023 rules where:
- a planning permit was issued, or an application for one was submitted, by 31 October 2023; and
- the building permit was issued after 1 January 2025, or has not been issued by 31 December 2026.
Where the planning condition is met but the building permit was issued by 31 December 2024, the deadline was 15 June 2026 and has passed.
In practice, this covers a limited number of new-build projects that were filed before the 2023 reform but whose permits were delayed. A buyer who wants to rely on the transitional rules should confirm the permit dates with the developer and submit the application through the TFA portal well before 31 December 2026.
Which Buyers Gain Most From the Transitional Rules?
The transitional rules matter most for homes that exceed the current limits: more than 190 m² of buildable area or a total value above €475,000. Under the current rules, these homes pay 19% on the whole price.
Illustrative example (interpretation, not a tax calculation): a new 220 m² home priced at €600,000, bought as a main residence.
| Pre-2023 rules | Current rules | |
|---|---|---|
| Portion at 5% | 200 of 220 m² (about €545,455) | None, as the home exceeds 190 m² and €475,000 |
| Portion at 19% | 20 of 220 m² (about €54,545) | €600,000 |
| Approximate VAT | €37,636 | €114,000 |
The example assumes the price is apportioned by area. The actual VAT depends on the approved application, the certified buildable area and the contract terms.
For homes within 130 m² and €350,000, the old and new rules generally give the same result, so the year-end deadline matters less.
Who Qualifies Personally for the 5% Rate?
The property test is only half of the picture. The buyer must also qualify. In general, the applicant must:
- be an individual aged 18 or over, buying in their own name rather than through a company;
- use the property as their main and permanent residence in Cyprus;
- keep it as their main residence for at least 10 years, or repay the VAT difference (see below);
- buy a new property, before its first occupation, from a developer or construct it themselves.
The scheme is not limited by nationality. Cypriot, EU and non-EU citizens can apply, provided the home genuinely becomes their main residence. Any previous use of the reduced rate on another property must be disclosed and can affect eligibility.
Relocating to Cyprus: How Do Tax Residency and Non-Dom Status Fit In?
The 5% VAT rate and Cyprus tax residency are separate tests. Qualifying for one does not establish the other. For a family relocating to Cyprus, both usually need to be planned together.
Tax residency. An individual is Cyprus tax resident for a calendar year by spending more than 183 days in Cyprus. Alternatively, the 60-day rule may apply. Under it, the individual spends at least 60 days in Cyprus, does not spend more than 183 days in any other single country, carries on a business, is employed or holds an office in Cyprus at some point in the year, and maintains a permanent home in Cyprus, owned or rented. From 1 January 2026, the 60-day rule no longer requires the person to be non-resident everywhere else.
Non-dom status. A Cyprus tax resident whose domicile of origin is outside Cyprus is generally treated as non-domiciled for Special Contribution for Defence (SDC) purposes. Non-doms are generally exempt from SDC on dividends, interest and rental income. The status ends once the person has been Cyprus tax resident for 17 of the previous 20 years, and the 2026 reform added an optional paid extension. General Healthcare System (GHS) contributions may still apply.
Interpretation: a home bought as a main residence often supports the permanent-home condition of the 60-day rule and the primary-residence condition of the VAT application. Each test still has to be met on its own facts, and your home country’s residency rules decide whether you stop being tax resident there.
Non-EU Buyers: Residence Status and the Main-Residence Condition
Non-EU citizens can apply for the 5% rate on the same basis as Cypriot and EU citizens. The difference is practical: to live in the home as your main residence, you need a right to reside in Cyprus.
An approved VAT application does not grant residence, and buying property does not by itself give you the right to live in Cyprus. Immigration routes, including permits linked to property ownership, have their own conditions and timelines. Plan the residence application alongside the purchase, so that you can show the home is your main residence if the Tax Department asks.
What Should You Check Before Signing With a Developer?
With the deadline close, the most expensive mistake is signing on the assumption that the old rules apply. Before you commit, ask the developer and your lawyer for the following:
- Planning permit date. A copy of the planning permit, or proof of the application, showing it was issued or submitted by 31 October 2023.
- Building permit status. Whether the building permit was issued after 1 January 2025 or is still pending. If it was issued by 31 December 2024, the transitional deadline has already passed.
- Certified buildable area. The architect’s or civil engineer’s certificate of the home’s buildable area, which the VAT application uses.
- New-build status. Confirmation that the home has not been occupied before, as the reduced rate applies to new residences.
- VAT clause in the contract. Whether the price is stated before VAT, at which rate the developer will invoice before approval, and what happens if the application is rejected or approved only in part.
- Timeline to file. Enough time to prepare and submit the application through the TFA portal before 31 December 2026.
The reduced rate can be a legitimate point in price and payment negotiations, particularly for homes above 190 m² or €475,000. Agree the VAT basis in writing, and do not treat a developer’s assurance as a substitute for checking the permit documents.
What Happens if You Sell or Rent the Home Within 10 Years?
The reduced rate is conditional on the home remaining your main and permanent residence for 10 years. If it stops being your main residence before then, for example because you sell it or rent it out, you must notify the Tax Commissioner within 30 days.
You then pay the difference between the standard and reduced VAT for the remaining part of the 10-year period. The benefit for the years you lived there is not lost.
Illustrative example: if the VAT saving at purchase was €40,000 and the home stops being your main residence after 4 years, about six-tenths of the saving (€24,000) would become payable.
A false declaration means the full VAT difference becomes payable. Keep evidence that the home is your main residence, such as utility bills, your registered address and residence documents.
Frequently Asked Questions
1. Is the 5% VAT rate on Cyprus homes ending on 31 December 2026? No. The 5% rate continues for primary residences under the rules in force since June 2023. What ends on 31 December 2026 is the transitional window for the more generous pre-2023 rules, which applies only to qualifying projects.
2. Which properties can still use the pre-2023 rules? New homes in projects whose planning permit was issued or applied for by 31 October 2023, where the building permit was issued after 1 January 2025 or has not been issued. The buyer’s application must reach the Tax Department by 31 December 2026.
3. What are the current limits for the 5% rate? The 5% rate applies to the first 130 m² of buildable area and up to €350,000 of value. If the home exceeds 190 m² or the total transaction value exceeds €475,000, 19% applies to the whole price.
4. Can foreign buyers apply for the 5% VAT rate? Yes. The scheme is open to Cypriot, EU and non-EU citizens, provided the home becomes their main and permanent residence in Cyprus. Non-EU buyers also need a right to reside in Cyprus, which is a separate application.
5. Can I use the 5% rate on a buy-to-let or holiday home? No. The reduced rate applies only to a home you use as your main and permanent residence. Renting it out or selling it within 10 years triggers repayment of part of the VAT difference.
6. Does buying a home in Cyprus make me tax resident? Not by itself. Tax residency depends on the 183-day rule or the 60-day rule, where having a permanent home in Cyprus is one of several conditions.
7. Is signing the contract before 31 December 2026 enough? No. For the transitional rules, what matters is the project’s permit dates and submitting your application through the Tax For All portal by 31 December 2026.
How Evidentrust Can Help
Evidentrust supports individuals relocating to Cyprus with tax residency and non-dom planning, reduced VAT applications and ongoing personal tax compliance. Our affiliate lawyers handle property due diligence and residence permit applications.
Contact Evidentrust if you are considering relocating to Cyprus and buying a new home before the year-end deadline.
This content is for general information only and should not be treated as tax, legal or professional advice. Whether the reduced VAT rate, the transitional rules or any tax residency status applies depends on your personal circumstances, including residence, domicile, source of income and timing, and should be confirmed before you commit to a purchase.
