When planning to buy real estate in Cyprus, investors and future residents often face the issue of taxation. The main tax that can significantly alter the budget of the transaction is the value-added tax (VAT). The standard rate is 19%, but under certain conditions, the legislation of the Republic of Cyprus allows it to be reduced to a preferential 5%.

In 2024–2026, the rules for granting benefits became stricter. According to the adopted law Law No. 42(I)/2023, the reduced VAT in Cyprus is now targeted assistance for those purchasing affordable housing for personal use.

Updated VAT law in Cyprus: when is 5% paid?

The preferential rate of 5% applies exclusively to primary residences (new housing from the developer) and only if the property becomes your main and permanent place of residence in Cyprus (Main Residence) for a period of at least 10 years.

Criteria for receiving benefits under the new rules:

For your application for a VAT reduction when purchasing an apartment in Cyprus to be approved, the property must meet three limits simultaneously:

1. Area limit (preferential): The 5% rate is charged only on the first 130 sq. m. of living space.

2. Maximum total area: The internal area of the property must not exceed 190 sq. m. If the area of the house or apartments exceeds this value, the buyer loses the right to the benefit and pays the full 19% on the entire amount.

3. Value limit: The 5% benefit applies to the first €350,000 of the property's price. Additionally, the total transaction cost under the contract cannot exceed €475,000.

Note: For individuals with disabilities, the preferential rate of 5% applies to the entire area up to 190 sq. m. without proportional division.

In what cases is the standard VAT rate of 19% applied?

You are required to pay the full property tax in Cyprus (19%) in the following situations:

• Investment property: If the property is purchased for rent or as a "holiday home".

• Commercial properties: Offices, shops, and warehouses are always subject to the full rate.

• Secondary market (Resale): VAT is not charged on “resale,” instead the transfer fee is paid.

• Exceeding thresholds: If the living space exceeds 190 m² or the contract price is above €475,000.

• Purchase by a legal entity: Companies are not entitled to the preferential 5% rate.

Official sources and useful links

To verify the accuracy of the data and submit an application, we recommend using official government resources:

1. Tax For All (TFA) — the official portal of the Cyprus Tax Department for filing tax returns and applications for preferential VAT.

2. Cyprus Tax Department — general information about the tax legislation and circulars (for example, Circular 11/2023).

3. Ministry of Finance of Cyprus — news on legislative changes and reforms.

Summary table: VAT in Cyprus 2026

Transitional period (Important!)

Until June 15, 2026, there is a transitional period. If the application for a building permit was submitted before October 31, 2023, you may qualify for benefits under the "old" rules (5% on the first 200 sq. m. without a strict limit on the total cost).

Expert advice: Be sure to check the date the documents were submitted by the developer - this can save you tens of thousands of euros.

The choice between the VAT rate of 5% and 19% in Cyprus today depends not only on your intentions to use the property for yourself but also on strict compliance with the technical parameters of the property. The new rules for 2024-2026 have made the market more transparent but require careful analysis of the area and cost of the contract even at the reservation stage.

If you are planning to purchase for investment purposes, factor in the 19% tax into your financial model right away. However, if your goal is to move and live on the island, ensure that the property does not exceed 190 square meters to avoid losing your right to state subsidy. Proper tax planning is the key to ensuring that your purchase in Cyprus remains a profitable and secure investment.