We handle VAT questions from buyers of new-build apartments in Cyprus every week, and for good reason: getting it wrong can mean paying tens of thousands of euros more than necessary. A technical change to the rules takes effect in 2026, and if you’re buying under an older permit there’s a closing transitional window worth knowing about too, so this is the right year to understand exactly where you stand before you sign anything.
What’s changing for buyers in Cyprus in 2026
Two separate things are happening this year, and it’s worth keeping them apart. First, from 1 September 2026, the legal definition of when a building counts as ‘new’ for VAT purposes is being formalised, a technical change, not a change to the reduced rate’s eligibility caps themselves. Second, if you’re buying under an older planning permit, a separate transitional pathway to more generous, pre-2023 terms is closing, with one deadline already passed and a narrower one remaining open only for delayed permits.
For the large majority of buyers today, the caps that matter are the ones that have applied since 2023, covered below, and those aren’t changing. If you’re still deciding between areas, our guide to buying an apartment in Limassol covers the wider picture.
Standard vs. reduced VAT: the basics
‘New’ has a specific legal meaning for VAT purposes, and this is exactly what the 2026 change formalises. A property is treated as new, and therefore within the scope of VAT, until it has reached first occupation, defined as at least 18 months of genuine, systematic use, whether by an owner living in it, a tenant, or a business operating from it. Once that period passes, the property is considered ‘used’ and a resale is generally VAT-exempt, with transfer fees applying instead. We cover the resale side in more detail further down.
Who qualifies for the 5% rate
If you’ve used the 5% rate before on a different property, you can generally apply again for a new primary residence, provided the first property has either completed its required minimum period of use or you formally deregister it and repay the VAT difference for the years remaining. We explain the mechanics of that repayment further down, since it’s one of the most common questions buyers ask us once they’ve already purchased.
One practical note from what we see at signings: buyers sometimes assume eligibility is automatic once they’ve decided a property will be their home. It isn’t. The declaration and the underlying paperwork need to be right at the point of the sale agreement, not fixed retroactively, so this is worth raising with your lawyer before contracts are signed, not after.
The caps: area and value limits
The 5% rate only applies up to a set size and value, and anything above that reverts to the standard rate on the excess, not the whole purchase.
Under the framework in place since 2023, the reduced rate applies to the first 130 square metres of buildable residential area, and to the first €350,000 of the property’s value, provided the total buildable area does not exceed 190 square metres and the total transaction value does not exceed €475,000. A property larger or more valuable than these outer limits is taxed at the standard 19% rate on the entire purchase, not just the portion above the threshold.
Here’s how the two rates compare at a glance:
| Feature | 5% reduced rate | 19% standard rate |
|---|---|---|
| Applies to | Primary residence only, natural persons | Any new-build purchase not meeting reduced-rate conditions |
| Qualifying area | First 130 m² (up to 190 m² total buildable area) | No area limit |
| Qualifying value | First €350,000 (up to €475,000 total transaction value) | No value limit |
| Ongoing condition | Must remain primary residence for 10 years | None |
| Who can use it | Individuals only | Individuals and companies |
Sources: Law 42(I)/2023, Official Gazette, 16 June 2023.
Worked example
To make this concrete, here’s how the split-rate calculation works in practice for a property that exceeds the 130 m² qualifying area but stays within the outer limits.
| Scenario | Area | Price | VAT calculation | VAT due |
|---|---|---|---|---|
| Within the cap | 120 m² | €300,000 | 5% on the full amount | €15,000 |
| Above the cap (split-rate) | 160 m² | €400,000 | 5% on 130/160 × €350,000 (€284,375), 19% on the remaining €115,625 | €36,187.50 |
The savings are significant, which is exactly why getting the qualification details right matters. If you want to see how VAT fits alongside transfer fees and other purchase costs for a specific property, our transfer fees and tax calculator gives you a fuller picture in a couple of minutes.
What’s actually changing under the 2026 reform
Two decrees, R.A.A. 102/2026 and R.A.A. 103/2026, amend Cyprus’s VAT Law and take effect on 1 September 2026. As PwC’s Worldwide Tax Summaries confirms, what they do is settle, in law, the definition of ‘first occupation’, now fixed at 18 months of genuine, systematic use, and apply that same definition consistently across the schedules governing both when VAT applies at all and when the 5% rate is available. They do not change the 130 m², €350,000, 190 m² or €475,000 figures above.
Separately, and this is the part worth checking if your purchase has been going on for a while, there’s a closing window for buyers on older permits. Michael Kyprianou LLC set out the mechanism clearly: if your planning permit application was submitted, or your planning permit was issued, on or before 31 October 2023, you may still be able to use the more generous pre-2023 terms, 5% on the first 200 square metres, with no value cap at all. The main deadline to apply under this route, 15 June 2026, has already passed. A narrower extension to 31 December 2026 remains open, but only where your building permit was issued after 1 January 2025, or hasn’t been issued yet.
This sits alongside two other 2026 changes worth knowing about if you’re budgeting for a purchase: stamp duty on property contracts was abolished from 1 January 2026, and Capital Gains Tax rules were also updated this year. We’ve covered both in separate guides, on Capital Gains Tax in Cyprus and on Cyprus Property Taxes Explained, if you want the fuller picture on what a purchase or eventual sale will cost you.
Bought under an older planning permit? If your permit application predates 31 October 2023, ask your lawyer whether you fall inside the narrowing transitional window, since the standard deadline has already passed and only the delayed-permit extension remains open.
The 10-year rule: selling or renting before the period ends
Using the 5% rate comes with a condition attached: the property needs to remain your primary and permanent residence for 10 years from the date of purchase or completion.
If you sell or start renting the property out before that period ends, you’re required to notify the Tax Commissioner within 30 days of the change of use, and repay the difference between the 5% you paid and the 19% standard rate, calculated proportionally for the years remaining in the 10-year period. The longer you’ve lived in the property before the change, the smaller the repayment.
This is one of the details buyers most commonly ask us about after the fact, usually when a job relocation or family change means their plans shift. It’s not a reason to avoid the reduced rate, most buyers never come close to needing to sell within 10 years, but it is worth factoring in if your circumstances feel genuinely uncertain at the point of purchase.
The 5% rate applies once per qualifying primary residence, per person. Used it before on a different property? You can generally apply again once that property has completed its 10-year period, or after formally deregistering it and repaying the VAT difference.
VAT on land and resale property
Two related questions we get often: does VAT apply to land, and does it apply to a resale?
Land sold by a VAT-registered vendor, developers and businesses in the property trade, has been subject to 19% VAT since a 2018 amendment to Cyprus VAT law. Land sold by a private individual outside the course of business is generally outside the scope of VAT.
Resale property is a different story. Once a property has moved past the ‘new’ threshold covered earlier, a resale between individuals is generally VAT-exempt, and transfer fees apply instead. If you’re comparing a new-build purchase against a resale option, this exemption is one of the genuine cost advantages resale property has, even though it comes without the reduced-rate savings a qualifying new-build offers.
Talk to a Local Expert
Working out whether a specific property qualifies for the 5% rate, and what it will actually cost you once VAT, transfer fees and legal costs are factored in, is exactly the kind of question our team handles daily. If you’re actively looking at new-build apartments in Limassol, get in touch and we’ll walk you through your options, or start with investing in Cyprus property for the wider picture on ownership costs and returns.
This guide is for general information only and does not constitute tax or legal advice. Buyers should obtain advice based on their individual circumstances before entering into a transaction.
Frequently Asked Questions
Source: PwC Worldwide Tax Summaries, Cyprus – Corporate – Other Taxes (2026 edition), on Decree R.A.A. 102/2026 and the 1 September 2026 first-occupation definition; Michael Kyprianou LLC, ‘Cyprus VAT on First Homes’ (April 2026), on the transitional deadline extension to 31 December 2026. Area and value caps per Law 42(I)/2023.
We are Life Realty, a licensed real estate agency (Licence No. 603/E) founded by Demos Georgiou, a Chartered Surveyor and RICS member, with offices in Limassol and Paphos. We help buyers navigate the costs and process of purchasing property across Limassol and beyond.
liferealty.cy·Last reviewed: October 2026