Buying a home for use as your primary residence in Cyprus can meaningfully reduce the VAT charged on the purchase — from the standard 19% down to 5% — but the rules governing this reduced rate changed in 2026, and the older, more generous transitional rules have now largely expired. This guide covers the current eligibility rules, size and value limits, and what happens if you sell or rent out the property early.
How the Reduced VAT Rate Works
New residential property in Cyprus is subject to standard VAT of 19%. Individual buyers who intend to use the property as their main place of residence can apply for a reduced rate of just 5% instead, provided they meet the eligibility conditions — a substantial saving on a new-build purchase.
Who Qualifies
To qualify for the reduced 5% rate, the buyer must be an individual (not a company), must intend to use the property as their main residence in Cyprus for at least the following 10 years, must not already own another property in Cyprus previously purchased using the reduced rate, and the property must not be rented out or used to generate income.
Current Size and Value Limits
Under the current rules, the 5% rate applies to the first 130 square metres of buildable area and the first €350,000 of property value. To qualify at all, the property’s total buildable area must not exceed 190 square metres and its total transaction value must not exceed €475,000 — any area or value above these thresholds is charged at the standard 19% rate rather than 5%.
The Old Transitional Rules Have Expired
Under the previous, more generous 2016-era rules, the reduced 5% rate applied to the first 200 square metres of a home regardless of its total size or value — a broader benefit that drew scrutiny from the European Commission for extending relief too widely. Following legislative reform, transitional provisions allowing buyers to still use these older, broader rules expired for most cases in June 2026. A narrow extension under Law 109(I)/2026 keeps the transitional rules available only until 31 December 2026, and only for applications where the Tax Commissioner’s review was delayed specifically due to planning-authority processing delays — not for new purchases generally. In practice, this means nearly all buyers today fall under the current, more restrictive 130m²/€350,000 rule rather than the older 200m² rule.
Selling or Renting Within 10 Years
The 10-year primary-residence commitment is enforced: if the owner disposes of the property as their main residence before 10 years have passed — whether by selling it or renting it out — they must notify the tax department within 30 days and repay the difference between the reduced 5% rate and the standard 19% rate. Buyers should factor this into any decision to sell or relocate earlier than planned, since the VAT clawback can represent a substantial unplanned cost.
What This Means for Buyers
The reduced VAT scheme remains one of the most valuable savings available to individual buyers purchasing a primary residence in Cyprus, but the 2026 tightening of the size and value limits means buyers targeting larger or higher-value new-build homes should check eligibility carefully before assuming the full 5% rate will apply to their purchase. Buyers considering a resale (secondary market) property instead should note that VAT generally doesn’t apply to resales at all, covered in our buying resale property in Cyprus guide — a different, but often comparably attractive, cost structure worth weighing against a VAT-reduced new-build purchase.
How Uinvest Group Can Help
Uinvest Group helps buyers confirm eligibility for the reduced VAT scheme before committing to a purchase, and can model the total cost difference between a VAT-reduced new-build and a comparable resale property under current rules.
Frequently Asked Questions
What is the reduced VAT rate for primary residences in Cyprus?
5%, instead of the standard 19%, for individual buyers using the property as their main residence for at least 10 years, subject to size and value limits.
What are the current size and value limits?
The 5% rate applies to the first 130 square metres and first €350,000 of value, with the property’s total area capped at 190 square metres and total value at €475,000 to qualify at all.
Are the older, more generous VAT rules still available?
Only in narrow cases. The broader old rule (200m² regardless of value) expired for most buyers in June 2026, with a limited extension to 31 December 2026 only for applications delayed by planning-authority processing.
What happens if I sell or rent the property before 10 years?
You must notify the tax department within 30 days and repay the difference between the 5% reduced rate and the standard 19% rate.
Does the reduced VAT rate apply to resale property?
No, VAT generally doesn’t apply to resale property in Cyprus at all — resale buyers instead pay a Land Registry transfer fee under a separate set of rules.
