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Cyprus parliament extends 5% reduced VAT transition period to the end of 2026
22-го апреля 2026
The House of Representatives has approved an extension to the transitional provisions for the 5% reduced VAT rate for the first purchase of a property.
The new legislation extends the deadline for the eligibility under the previous ("old") VAT rules until December 31, 2026. Initially, the transitional period was set to expire in June 2026. However, due to the recent local government reform and the transfer of licensing powers to Provincial Self-Government Organizations, there have been significant delays in issuing planning and building permits and hence the parliament has decided to extend the deadline to not penalize developers and buyers for these state delays.
Which projects/properties are eligible?
To benefit from the “old” VAT rules, an application for a Town Planning Permit must have been submitted before October 31, 2023.
The "Old" vs. "New" VAT Framework – Key Differences
Under the “Old” framework, 5% VAT applies on the first 200 m2 of buildable area and there is no strict cap on the total purchase price. A 19% rate applies proportionally to any buildable area over 200 m2.
Under the "New" VAT Rules, there are stricter requirements on the eligible size and price of a property.
The reduced 5% VAT applies only on the first 130 m2 if the purchase price is under €350,000.
if the purchase price is between €350,000 and €475,000, then a proportional rate applies with 5% charged on the €350,000 and 19% charged on the remaining amount between €350,000 and €475,000. Similarly, if the property's purchase price is between 130 m2 and 190 m2, a 5% VAT will apply on the first 130 m2 and a 19% VAT will apply to the remaining buildable area up to the 190 m2.
If the property buildable area exceeds 190 m2 or its purchase price exceeds €475,000, then a 19% VAT is charged on the full purchase price.
It needs to be clarified that the revised ("new") VAT framework, including the applicable thresholds and conditions, remains in force for all new applications outside this transitional scope.
The extension of the 5% VAT transition period until the end of 2026 provides a window for potential buyers and investors to acquire their property with reduced VAT. With this extension, buyers can still pay only 5% VAT on the first 200 m2 of buildable area, with no restriction on the purchase price. This avoids the stricter rules of the new law, which would normally charge the full 19% VAT on the entire purchase price if the house is larger than 190 m2 or exceeding €475,000.
If you are interested in buying a property, you can reach out to us at Aristo Developers to guide you through various options we have available that benefit from the reduced VAT rate.
