In Cyprus, the normal Value-Added Tax (VAT) on newly built residential property is 19 %. However, eligible homebuyers can benefit from a reduced VAT rate of 5 % on the purchase or construction of a new primary residence — a significant saving designed to encourage home ownership.
📌 Who Can Qualify?
To be eligible for the 5 % VAT rate:
- You must be a natural person (not a company).
- You are 18 years or older.
- You are buying or building a new home to be used as your main and permanent residence in Cyprus.
- You must intend to live in the property as your primary residence for at least 10 years.
- You have not previously benefited from this reduced VAT scheme in the last 10 years.
This means the reduced VAT is available to both first-time buyers and those who have not used the VAT benefit in the past decade.
📏 How the VAT is Applied
Under current rules:
- The 5 % VAT rate applies to the first 130 m² of the property’s internal area.
- Any area above 130 m² (up to 190 m²) is generally subject to the standard 19 % VAT rate.
- There are also value limits — e.g., properties above certain price thresholds may not qualify for the reduced rate on the excess value.
Example:
If you buy a 150 m² new home:
- First 130 m² → 5 % VAT
- Remaining 20 m² → 19 % VAT
🧾 Important Conditions
✔ The home must be your primary and permanent residence in Cyprus.
✔ You must remain living in the property for at least 10 years to keep the full VAT benefit.
✔ If you sell the property or stop using it as your main residence within 10 years, you may have to repay part of the tax benefit — basically the difference between the 5 % and 19 % rate for the unused period.
This 10-year rule ensures the reduced VAT benefits genuine owner-occupiers and prevents repeated claims within short periods.
