Taxes in Cyprus Explained for New Buyers: 5% VAT on Property in Cyprus

Buying a home in Cyprus is a significant financial step, and VAT often surprises buyers. The standard VAT rate on new property is 19%, but eligible buyers may pay a reduced rate of 5%. The scheme can save buyers thousands of euros, but only if they understand the conditions, follow the application steps correctly and plan ahead.

Who qualifies for the 5% VAT rate in Cyprus?

A buyer of a new primary residence in Cyprus may qualify for 5% instead of 19%. The reduction is not applied automatically, and not everyone is eligible. The key criteria are:

• The property must be the buyer's main and permanent residence in Cyprus for at least 10 years.
• The buyer must be a natural person, not a company or trust.
• The home must be new and sold for the first time. Resales do not qualify.
• The reduced rate must be applied for before the buyer takes delivery of the property or moves in.

Can foreign buyers claim the reduced rate?

Yes. Non-Cypriot residents can benefit if they meet the criteria above. Nationality is irrelevant, whether you are a British expat, a German retiree or someone relocating from Dubai for work. The scheme is particularly attractive to expats moving to Cyprus permanently and to families seeking a lifestyle or schooling move.

What changed in the rules between 2023 and 2025?

Following EU recommendations, Cyprus amended its VAT legislation in 2023, and the updated rules took full effect in 2025. The changes affect who can claim the reduced rate, how much of a property qualifies and the conditions that apply.

What are the square metre limits?

• The first 130 square metres of a qualifying home are taxed at 5%.
• Floor area between 131 and 190 square metres is taxed at the standard 19%.
• If total internal area exceeds 190 square metres, the entire property is taxed at 19%.

For example, a 180 m² villa would have its first 130 m² taxed at 5% and the remaining 50 m² at 19%. A 200 m² home would not qualify for the reduced rate at all.

What are the value limits?

• The 5% rate applies to homes valued up to €350,000.
• For properties priced between €350,001 and €475,000, the reduced rate applies only to the first €350,000 of value.
• Homes costing more than €475,000 are subject to 19% VAT on the full price.

The aim is to support affordable home ownership rather than luxury developments.

Is there a disability provision?

Yes. If the buyer or a household member has a disability, the square metre cap is more generous: the reduced 5% rate can be claimed on the first 190 m² of the residence.

How do you apply for the 5% VAT rate?

Applications are submitted online to the Cyprus Tax Department and must include:

• A signed and stamped contract of sale
• A clear copy of the passport or ID
• A declaration from the architect or civil engineer on the project
• A declaration from the building contractor
• Proof of payment made to the developer or contractor
• The contractor's annual licence for the year of construction
• A copy of the planning and building permits
• The certificate of buildable area issued by the local authority
• A marriage certificate if applying jointly
• Declarations from any other applicants named on the contract

How long does processing take?

Review usually takes a few weeks. Approval must be granted before the buyer moves in, or eligibility may be lost. Delays are most often caused by missing documents or mismatched details, such as a passport number typo or unclear payment receipts, so check everything carefully before submission.

How much can you save with 5% VAT?

The reduced rate can save tens of thousands of euros. Consider a new 130 m² home priced at €300,000:

• At 5%, the VAT is €15,000.
• At 19%, the VAT would be €57,000.
• The difference is €42,000.

Do you need legal support?

Many buyers, especially those new to Cyprus or the legal process, use a legal team to manage the application. Typical support includes:

• Checking property eligibility and contracts
• Submitting the VAT application
• Coordinating with developers and tax offices
• Assisting with residency permits if needed

Selling rather than buying? See our guide to capital gains tax when selling property in Cyprus.