The Cyprus Tax Department has recently provided further guidance regarding the transitional provisions for the reduced 5% VAT rate applicable to primary residences under the previous VAT framework.
According to the announcement issued on 4 May 2026, individuals may still qualify under the old scheme in cases where the planning permit application was submitted, or the permit itself was issued, by 31 October 2023, even if the building permit is granted after 1 January 2025.
Below is a simplified overview of the current reduced VAT options available for the purchase or construction of a new primary residence:
1. Transitional / Previous VAT Scheme
Under the previous rules, the reduced 5% VAT rate applies to the first 200 square metres of the residence, without any property value limitation.
This scheme may still be available provided that:
• The planning permit was issued or applied for by 31 October 2023.
The following application deadlines apply:
• Building permit issued by 31 December 2024
Applications for the reduced VAT rate must be submitted no later than 15 June 2026.
• Building permit issued from 1 January 2025 onwards
Applications for the reduced VAT rate must be submitted by 31 December 2026.
2. Current VAT Scheme
For projects falling under the new rules, the reduced 5% VAT rate is limited to:
• The first 130 square metres of the residence; and
• A maximum property value of €350,000.
This regime applies where the planning permit application was submitted after 1 November 2023.
As always, M. Target Group specialists remain at your disposal should you require any further information, clarification or professional assistance.
