The extension of the reduced 5% VAT rate until the end of December 2026 is important news for eligible property buyers in Cyprus.
For buyers planning to purchase a new home, apartment or villa in Cyprus, this extension may create a valuable opportunity to secure the right property with a lower VAT rate, subject to eligibility and approval by the relevant authorities.
In Cyprus, the standard VAT rate on new properties is usually 19%. However, eligible buyers may be able to apply for the reduced 5% VAT rate when purchasing a property that will be used as their main and permanent residence in Cyprus.
Who may qualify for the reduced 5% VAT rate?
The reduced 5% VAT rate is generally available to individuals who purchase or build a new residential property in Cyprus for use as their main and permanent home.
This may include:
• Cyprus residents buying a main home
• EU citizens relocating to Cyprus
• Non-EU buyers relocating to Cyprus
• Families moving permanently to Cyprus
• Retirement buyers planning to live in Cyprus
• Buyers purchasing a new property for personal residence, not only for investment or holiday rental
The buyer must usually be a physical person, not a company, and the property must be used as the buyer’s main residence in Cyprus.
How does it work?
The buyer does not automatically receive the 5% VAT rate just because the property is new.
An application must be submitted to the relevant VAT authorities, together with the required supporting documents. The reduced rate is granted only if the buyer and the property meet the legal requirements.
The buyer normally needs to confirm that:
• The property will be used as their main and permanent residence
• They do not already use another property in Cyprus under the reduced VAT scheme
• The property meets the applicable size and value limits
• The correct application is submitted before the relevant deadline
• All required documents are provided
• Approval is received from the authorities
The reduced 5% VAT rate is usually applied only to the eligible part of the property, according to the applicable rules. Any part of the property that does not qualify may be subject to the standard VAT rate.
Why this matters for buyers
The difference between 19% VAT and 5% VAT can have a significant impact on the final purchase cost.
For buyers looking at new-build properties in desirable locations such as Paphos, Limassol and other high-demand coastal or residential areas, the reduced VAT rate can make the purchase more attractive and financially efficient.
However, buyers should not choose a property only because of the VAT.
A good purchase decision should always be based on the full picture: location, build quality, developer reliability, delivery timeframe, total purchase cost, legal checks, resale potential and long-term value.
A property with reduced VAT can be attractive, but only if it is also the right property in the right location.
What buyers should check before paying a deposit
Before paying a reservation fee, signing contracts or making any financial commitment, buyers should always confirm:
• Whether they personally qualify for the 5% VAT rate
• Whether the specific property can qualify
• Whether the property size and value fall within the permitted limits
• Whether the property will be accepted as their main residence
• Whether the correct application process can be completed
• What the final purchase cost will be with VAT included
• What happens if they stop using the property as their main residence in the future
This is especially important for international buyers who are relocating to Cyprus, applying for permanent residence, retiring in Cyprus or purchasing a long-term family home.
The extension until the end of 2026 gives serious buyers more time to plan carefully, compare available properties and make a more confident decision.
For many buyers, the best opportunities will be in well-selected new developments that combine modern design, convenient location, strong rental demand, good resale appeal and a realistic final purchase cost.
Areas such as Paphos, Tombs of the Kings, Kato Paphos, Kissonerga, Coral Bay, Sea Caves, Limassol and other established locations continue to attract strong interest from local and international buyers.
The key is not simply to find a property with 5% VAT. The key is to find a property that makes sense legally, financially and practically for your lifestyle or investment plan.
For selected qualifying properties in Cyprus and private buyer guidance, contact:
Yiannis Liasides
YL Luxury Homes Ltd
Tel / WhatsApp: +357 96 532150
Registration No. 1232
Licence No. 27/E
The reduced 5% VAT rate is subject to eligibility, legal conditions and approval by the relevant authorities. Buyers should always obtain independent legal and tax advice before proceeding with any property purchase in Cyprus.
