Reduced scheme for 5% VAT on property in Cyprus

A reduced VAT system for primary residences to boost home ownership is already in place. The reduced percentage for primary residences is 5%, compared to the general rate of 19%. This reduced percentage of 5% remains the same, but some criteria were changed by law in June 2023.

The takeaway

Law 42 (I)/2023 introduced new criteria for the VAT on primary residences in June 2023. The reduced rate remains the same (5%), but the property’s square meters are now lower. A transitional or grace period applies.

Introduction

The Value-Added Tax, or VAT, is a general, broadly based consumption tax in the European Union. The Cyprus VAT rate for 2025 is 19%.

Property transactions, land, and real estate in Cyprus are included in the supply and services category and are subject to VAT.

Previous VAT 5% regime

The previous rules apply to any project for which a planning permission application was submitted before 31 October 2023.

Conditions under the previous regime

A reduced rate of 5% is applied to the first 200 square metres (sq m) of a property, provided:

1. It is a new house/apartment.
2. It will be used as the individual’s primary residence for 10 years.
3. The applicants have completed their 18th year of age.

The 200 sq. meters include the internal covered areas (not including stairs).

What if a property is larger but satisfies the other criteria?

The standard 19% will apply to the remaining square metres.

New changes to the Cyprus reduced VAT system for a primary residence

In June 2023, Cyprus changed the reduced VAT on primary residence criteria.

Under the new rules, the reduced rate of 5% applies to the first 130 sq m of a primary residence, provided that:

1. The primary residence is up to EUR 350,000 in value, and
2. The total transaction value does not exceed EUR 475,000, and
3. The total constructed internal areas do not exceed 190 sq m.

Individuals with disabilities are allowed a reduced rate of 5% on the first 190 sq m of a primary residence.

The law

The new legislation is Law 42(I)/2023, published in the Government Gazette on 16 June 2023.

Transitional or grace period

The new rules will not apply where:

1. Planning permission has already been issued.
2. The application for planning permission is filed before 31 October 2023.

Application procedure

The application for a reduced VAT rate is submitted to the relevant VAT department:

1. After the Contract of sale is signed and stamped.
2. A payment has been made to the Developer/ Constructor.
3. Before the delivery of the property, the applicant should NOT use the property before applying for the reduced VAT rate.

Required documents

1. Passport / ID copy
2. Marriage certificate (if applicable)
3. Application Form (attached)
4. Planning / Building Permits and the applications for them
5. Architect plan (diagram) to confirm the internal (buildable) areas
6. Residence permit (if applicable)
7. Stamped Contract and receipt of payment
8. Contractor licence

Our services

Our team of Cyprus property lawyers provides the following services:

• Due diligence before the property purchase
• Drafting property reservation agreements, and advice on the procedure to be followed
• Real estate sale agreements draft or review
• Power of attorney preparation for the purchase or sale of real estate
• Permission for the acquisition of property by foreigners
• Land Registry services
• Real estate gift transfers between family members
• Reduced VAT applications
• Legal representation in property disputes

Frequently Asked Questions