Cyprus Property VAT Alert

After 15 June 2026, the reduced VAT rate of 5% on residential property will no longer apply under the old criteria. Most purchases will fall under the standard 19% VAT rate.

Does this mean buyers have only a few months left to secure a property under the old rules? Let’s break it down.

Until 31 October 2023, Cyprus had one of the most generous VAT schemes in the EU. The 5% rate applied to the first 200 m² of new residential property, with no limit on the purchase price. The only requirement was that the property be used as a primary residence for at least 10 years.

However, the tax authorities detected widespread misuse: high-net-worth buyers were registering multimillion-euro homes as primary residences, but using them as investments or rental assets. Over the past three years, more than 5,000 inspections were carried out, and over €50M was recovered. In such cases, the reduced rate was cancelled, and buyers were forced to pay the difference between 5% and 19%.

In November 2023, law N.42(I)/2023 came into force, tightening eligibility for the reduced VAT rate.

Now, the 5% VAT applies only if all of the following conditions are met:

• The property is brand-new
• The reduced rate applies only to the first 130 m²
• The total built area does not exceed 190 m²
• Purchase price up to €350,000
• Total transaction value up to €475,000
• The property is used as a primary residence for at least 10 years.

This effectively removes luxury and investment properties from the reduced VAT regime, keeping it only for genuine first-home buyers.

The only way to still buy with 5% VAT under the old rules is to purchase a property for which the developer submitted a construction permit application before 31 October 2023. After that, Cyprus will fully operate under the new system, meaning most properties will be taxed at 19%.

What Does This Mean for Buyers?

The transition period is a closing window of opportunity — and it’s already narrowing.

• Buyers who are planning to live in the property can still benefit from the 5% rate, but only if the project falls under old permits.
• Investors should act quickly: such properties are becoming scarce, and demand is rising ahead of regulatory changes.

If you’re considering purchasing real estate in Cyprus — whether for personal use, rental income, or relocation — Astons can help you secure the best options still eligible for the 5% VAT rate and guide you through the buying process and residency by property investment pathways.