Reduced VAT rate
A 5% VAT rate, instead of the standard 19%, on a home bought or built as your main residence in Cyprus, within limits on its size and value.
Updated 12 Oct 2026How it works
New homes in Cyprus normally carry VAT at the standard rate of 19%. An individual who buys or builds a home to use as their main and permanent residence in Cyprus can apply for the reduced 5% rate instead. You apply to the Tax Department through its Tax For All (TFA) system, and the 5% rate applies only once the application is accepted.
Under the current rules (Law 42(I)/2023), the limits are:
| Limit | |
|---|---|
| Area taxed at 5% | First 130 m² |
| Total buildable area | Up to 190 m² |
| Value taxed at 5% | First €350,000 |
| Total value | Up to €475,000 |
Within these limits, 5% applies to the first 130 m² and the first €350,000, and the rest is taxed at 19%. A home above either total limit does not qualify, and the whole price carries 19%.
Older, more generous rules (5% on the first 200 m², no value cap) still apply to projects whose planning permit application was submitted by 31 October 2023. That transition was due to end on 15 June 2026. Amending Law 109(I)/2026 extended it to 31 December 2026 where the building permit was issued after 1 January 2025 or has not yet been issued. If the building permit was issued by 31 December 2024, the 15 June 2026 deadline stands.
The 5% rate also applies, under conditions, to renovating a private home that is at least three years old.
Why it matters when you buy
On a new €300,000 flat of 100 m², VAT at 5% is €15,000; at 19% it is €57,000. From 1 September 2026, a home that has had some use, but less than 18 months of systematic use, can still qualify if the other conditions are met.