In Cyprus, new housing VAT regulations introduced in 2023 are reaching their final phase of implementation in 2026. The most significant update is the approaching June 15, 2026 deadline, which marks the absolute end of the transitional period for “old” rules, concerns the reduced 5 % VAT rate on the purchase or construction of a primary residence.
Current VAT Rates and Limits (2026)
The standard VAT rate for new properties is 19%. A reduced rate of 5% is available only for a primary residence if the following strict cumulative criteria are met:
- Size Limits: The 5% rate applies only to the first 130m2 of the property.
- Total Area Cap: The total buildable area of the property must not exceed 190m2. If the property is larger than 190m2, the standard 19% rate applies to the entire value.
- Value Cap: The 5% rate applies to a maximum property value of €350,000.
- Transaction Cap: The total transaction value must not exceed €475,000. For properties between €350,000 and €475,000, VAT is calculated proportionally (5% on the first €350k, 19% on the remainder).
- Exception for Disabilities: Persons with disabilities can apply the 5% rate to the first 190m2.
Critical Transitional Deadline: June 15, 2026
Properties that had a planning permit application submitted by October 31, 2023, can still benefit from the “old” regime (which allowed 5% VAT on the first 200m2 with no value caps). However, the VAT declaration for these properties must be officially submitted to the Tax Department by June 15, 2026. After this date, all transactions will strictly follow the new framework regardless of when the permit was issued.
Residency and Compliance Rules
To maintain the 5% VAT benefit, the property must remain the buyer’s primary and permanent residence for 10 years.
- Repayment: If you sell or rent the property (including short-term rentals like Airbnb) before the 10-year period ends, you must repay the 14% VAT difference proportionally for the remaining years.
- Inspections: The Tax Department has intensified audits, particularly in coastal and student areas, to catch owners using primary residences as investment properties.
- Family Transfers: New rules allow a property to be transferred to an adult child without VAT repayment if they use it as their primary residence.
Abolition of Stamp Duty (New for 2026)
As part of a broader tax reform effective January 1, 2026, Cyprus has fully abolished Stamp Duty for all property contracts signed on or after this date. This reduces upfront transaction costs for both new and resale properties.