VAT on Cyprus property: when 19% becomes 5%

VAT (Cypriot acronym ΦΠΑ) is one of the largest line items on any off-plan purchase. The headline rate of 19% applies to the contract price of a newly built dwelling, and to building plot purchases linked to a development. For a buyer using the home as their primary residence in Cyprus, however, a reduced 5% rate is available on the first 130 square metres of covered area, subject to a value cap.

The 2023 reform and where it leaves us in 2026

The reduced-rate regime was tightened in mid-2023. The covered-area threshold dropped from 200 to 130 square metres, and a hard value cap of €350,000 was introduced; any value above the cap pays the full 19% rate. As of 2026 those parameters are unchanged.

Worked example

A €420,000 two-bedroom apartment with 110 sqm covered area, bought as the buyer's primary residence: the first €350,000 pays 5% VAT (€17,500), and the remaining €70,000 pays 19% (€13,300). Total VAT = €30,800 instead of €79,800 at the headline rate.

Eligibility

• The property must be used by the buyer as their primary residence for at least 10 years.
• The applicant must be 18+ and a natural person, not a company.
• One reduced-rate application per buyer per ten-year period.

The reduced-rate scheme is administered by the Cyprus Tax Department. Filing the wrong category at the wrong stage of construction can disqualify the application — get a Cypriot tax advisor on the contract well before signing.