Obtaining a reduced VAT rate towards immovable property

Reduced VAT Rate for New Homes in Cyprus (5% VAT Scheme)

Buy Property in Cyprus with Reduced VAT

Purchasing a new home in Cyprus may allow eligible buyers to benefit from a reduced VAT rate of 5%, instead of the standard VAT rate of 19%. This makes buying property in Cyprus significantly more affordable for individuals planning to live in their new home as a primary residence.

The reduced VAT scheme applies to qualifying new-build residential properties in Cyprus and is subject to approval by the Cyprus Tax Department.

⚠️ Important Update on Cyprus VAT Legislation (2026)

Cyprus VAT rules for new residential properties are expected to be updated in 2026, introducing revised definitions and application criteria for the reduced VAT scheme.

The 5% reduced VAT rate remains available for eligible buyers purchasing a primary residence, subject to updated conditions and approval by the Cyprus Tax Department.

Buyers are encouraged to review current opportunities when planning a property purchase, as eligibility rules may be subject to future legislative updates.

What is the 5% VAT Scheme in Cyprus?

The Cyprus reduced VAT scheme is designed to support individuals purchasing a primary residence in Cyprus.

Eligible buyers may pay 5% VAT on part of the property value, instead of the standard 19%, when purchasing a new residential property.

Who Can Benefit from Reduced VAT in Cyprus?

You may qualify for the 5% VAT rate if:

You are an individual (not a company)
You are purchasing a new residential property in Cyprus
The property will be used as your main and permanent residence
The property is for residential use only
You meet the criteria of the Cyprus Tax Department

Cyprus Reduced VAT Thresholds (2026 Guide)

The reduced VAT rate of 5% applies to the first 130 sq.m. of buildable area, provided that:

The total buildable area does not exceed 190 sq.m.
The eligible property value does not exceed €350,000
The total purchase price does not exceed €475,000

Any amount exceeding these thresholds is generally subject to the standard VAT rate of 19%.

How to Apply for Reduced VAT in Cyprus

The reduced VAT rate is not applied automatically. Buyers must apply through the Cyprus Tax Department.

The process typically includes:

Signing the purchase or construction agreement
Submitting an application for reduced VAT
Providing supporting documents (ID, plans, declaration of residence)
Review and approval by the Cyprus Tax Department

Once approved, the reduced VAT rate is applied to the eligible portion of the property.

Important Condition: 10-Year Residence Requirement

To retain the benefit of the reduced VAT rate, the property must remain your primary and permanent residence in Cyprus for 10 years.

If the property is sold, rented, or no longer used as your main residence during this period, the Tax Department may require repayment of part of the VAT benefit.

Why Buy a Property in Cyprus with Reduced VAT?

The 5% VAT scheme can significantly reduce the overall cost of purchasing a new home in Cyprus, making it especially attractive for:

Permanent relocation buyers
International purchasers moving to Cyprus
Families buying a primary residence
Long-term investors planning to live in Cyprus

How We Can Help

As experienced estate agents in Cyprus, we assist buyers throughout the entire property purchase process by:

Identifying properties that may qualify for reduced VAT
Explaining the purchase process clearly
Coordinating with your legal and financial advisers
Supporting a smooth and transparent transaction from start to finish

Disclaimer

The reduced VAT rate is subject to approval by the Cyprus Tax Department and applicable legislation at the time of application.

This information is provided for general guidance purposes only and does not constitute legal or tax advice.

Last Updated: May 2026