Reduced VAT in Cyprus can make a real difference to the cost of a new home. As of September 2026, buyers of an eligible main residence can pay VAT at 5% instead of the standard 19%, within limits on size and value that have applied since 16 June 2023. This guide explains how those limits work, what the 2026 amendment changed, and what to check before you rely on the reduced rate.
Who the reduced VAT rate is for
New property sold by a developer is generally subject to VAT at 19%. The reduced 5% rate applies to buying, or building, a home to use as your main and permanent residence in Cyprus, rather than to every property purchase.
The scheme is often described as a first-home relief, but the key test under the law is main residence use. Applicants sign a declaration that, among other things, they have not already acquired another home in Cyprus used as their main residence at the reduced rate. How that applies to you, and what evidence is required, are questions for your lawyer. The Tax Department is the official authority on eligibility.
How the 5% reduced VAT limits work in Cyprus
Under the rules in force since 16 June 2023, introduced by Law 42(I)/2023, there are two sets of limits. The first defines how much of the home benefits from 5%. The second sets a ceiling above which the home does not qualify.
- The 5% rate applies to the first 130 m² of buildable area, as shown on the planning drawings.
- The 5% rate applies up to a value of €350,000.
- The total value of the transaction must not exceed €475,000.
- The total buildable area must not exceed 190 m².
- Otherwise, the standard 19% rate applies.
In practice, this means a home can be within the overall limits and still have part of its area or value taxed at the standard rate. Exactly how the calculation applies to a particular unit is technical, so ask for it in writing before you commit.
The limits also shape which homes are likely to be affected. Smaller apartments may sit comfortably within both thresholds, while larger apartments and family villas are more likely to exceed the 130 m² or €350,000 marks, or to fall outside the scheme altogether if they are above 190 m² or €475,000. Checking the buildable area and the final price, including any extras added to the contract, is therefore an early and worthwhile step. The law sets different area rules for people with disabilities and for larger families with more than three children.
| Rule | Limit (since June 2023) |
|---|---|
| Area taxed at 5% | First 130 m² of buildable area |
| Value taxed at 5% | Up to €350,000 |
| Maximum total transaction value | €475,000 |
| Maximum total buildable area | 190 m² |
| Rate outside the relief | 19% |
“Never assume a home qualifies for 5% VAT. Ask for the calculation in writing and have your lawyer confirm eligibility before you sign.”
John Theodorou Group
The 2026 amendment and transitional deadlines
When the current limits were introduced, a transitional rule allowed the earlier rules to continue for buildings whose planning permit had been obtained, or applied for, by 31 October 2023, provided the required declaration was submitted within three years of the 2023 law taking effect, which means by mid-June 2026.
Law 109(I)/2026, published on 24 April 2026, added that the Tax Commissioner may examine applications under this transitional rule until 31 December 2026 where their examination could not be completed in time because of delays by the planning authorities. Law firm commentary reads the mid-June 2026 deadline as still applying to other cases, and as of September 2026 that date has passed.
Whether a particular property falls under the transitional rules depends on its planning history, which only the developer’s documents and your lawyer can confirm. Philippou Law has published a summary of the 2026 amendment for further reading.
How VAT interacts with other purchase costs
VAT does not sit on its own. Where the purchase is subject to VAT, no Land Registry transfer fees are due, which is one reason new-build and resale costs look so different. Our guide to the full cost of buying property in Cyprus sets out both routes side by side.
There is also one cost fewer than before: stamp duty has been abolished for contracts signed from 1 January 2026. The VAT rules themselves were not changed by that reform.
Practical checks before you rely on 5% VAT
First, confirm whether the quoted price includes or excludes VAT, and at which rate it has been calculated. A price that assumes 5% VAT only holds if you and the property both meet the conditions.
Second, check the covered area and value against the limits above, and ask how any excess would be taxed. Third, ask your lawyer to review how the sale contract deals with VAT, including what happens if the reduced rate is not granted. Our article on property contracts in Cyprus explains why the wording matters.
If you are buying before completion, timing and planning dates can also be relevant. Our guide to buying off-plan property in Cyprus covers the wider process.
Frequently asked questions
Does the whole price get 5% VAT?
Not necessarily. The 5% rate applies to the first 130 m² of buildable area, up to a value of €350,000; the standard 19% rate applies otherwise.
What is the maximum value for the reduced rate?
Under the rules in place since 16 June 2023, the total transaction value must not exceed €475,000 and the total buildable area must not exceed 190 m².
Did the 2026 amendment change the limits?
No. Law 109(I)/2026 concerned the transitional rule, allowing certain applications delayed by the planning authorities to be examined until 31 December 2026.
If you are looking for a home to live in around Limassol, you can browse our current projects and speak to our team about a specific property. We will share the details we have, and we always recommend confirming VAT eligibility with your own lawyer.
This article is for general information only and reflects our understanding of the rules as of September 2026. It is not legal, tax or financial advice. Rules change, so please confirm the details with an independent lawyer or tax adviser before making decisions.
