VAT on Cyprus Real Estate in 2026: What Every Buyer, Owner and Investor Needs to Know

The year 2026 is a landmark one for VAT in Cyprus property. Two major legislative updates — Law 109(I)/2026 and Regulatory Administrative Acts 102/2026 and 103/2026 — have introduced changes that affect buyers, developers, landlords, and anyone considering selling or renovating. This article provides a plain-language overview of the rules currently in force.

The Reduced 5% VAT Rate for a First/Primary Residence

The standard VAT rate in Cyprus is 19%. A reduced rate of 5% applies to the purchase or construction of a first and permanent residence, subject to strict conditions introduced by Law 42(I)/2023.

Under the current scheme:

• 5% applies to the first 130 m² of buildable area, up to a value of €350,000
• The total buildable area must not exceed 190 m²
• The total transaction value must not exceed €475,000
• If either cap is exceeded, 19% applies to the entire transaction
• The property must be used as the buyer's primary and permanent residence for 10 years
• Application is submitted electronically through the Tax For All (TFA) portal before taking possession

Persons with disabilities benefit from 5% on the first 190 m². Law 55(I)/2024 additionally allows late applications within 12 months of taking possession in justified cases (illness, absence from Cyprus, etc.).

Important: the 10-year clawback rule. If the property is sold or rented out before 10 years, the owner must notify the Tax Department within 30 days and repay the proportional benefit — calculated as 14% (the difference between 19% and 5%) multiplied by the remaining years out of 10. For example, selling after 4 years means repaying 60% of the total benefit received.

The Transitional Scheme (200 m²) — Deadline 31 December 2026

A more generous regime — 5% on the first 200 m² with no value cap — applies to properties where a planning permit was submitted or issued by 31 October 2023. Law 109(I)/2026 (Official Gazette No. 5089, 24 April 2026) extended the deadline for submitting declarations under this scheme to 31 December 2026, for cases where processing was delayed by the planning authorities. From 1 January 2027, only the new scheme (130 m²/€350,000) will apply.

VAT on Rentals

• Long-term residential letting: Fully exempt from VAT. No VAT is charged to tenants, and the landlord cannot recover input VAT on the property.
• Commercial leasing (Law 157(I)/2017): VAT at 19% applies by default when the tenant uses the property for taxable business activities (at least 90% taxable supplies). The landlord may opt out of VAT by submitting Form T.F.1220 to the Tax Department — but this option is irrevocable. From 1 April 2026, the form must be submitted within 30 days of signing the lease.
• Short-term/holiday rentals (Airbnb-type): Subject to the reduced rate of 9%. The property must be registered on the Register of Self-Catering Accommodation under Law 34(I)/2019, and the owner must be registered for VAT once annual turnover exceeds €15,600.

VAT on Land

Since 2 January 2018 (Law 157(I)/2017), the sale of undeveloped building land is subject to 19% VAT when sold in the course of business. This applies to plots in development zones intended for construction. Agricultural, environmental, or protected land is exempt.

If building land is purchased to build a qualifying primary residence, the buyer pays 19% upfront and may then apply to the Tax Department for a refund of the 14% difference, effectively bringing the rate to 5%. Supporting documentation (title deed, planning permit, proof of residence) must be submitted within 6 months of taking possession.

What Changes on 1 September 2026: New Definition of "New" Building

This is the most significant technical change of the year, introduced by Regulatory Administrative Acts 102/2026 and 103/2026 (published 27 February 2026, effective 1 September 2026), amending the Fifth and Eighth Schedules of the VAT Law N.95(I)/2000.

Currently (until 31 August 2026), a building is considered "new" — and therefore subject to VAT — if sold within 5 years of completion, provided it has not been used by an unrelated person for at least 24 months.

From 1 September 2026, the 5-year/24-month test is replaced by a simpler concept: first occupation. A building is "new" (and subject to VAT) if sold before first occupation. First occupation means systematic use of the building for at least 18 months — whether by the owner, a tenant, or otherwise.

The passage of time alone will no longer determine the VAT treatment. Proper documentation of the 18 months of use becomes essential — tenancy agreements, utility bills, occupancy records. Without this evidence, a building could remain "new" and taxable even if it is several years old.

The same change applies to renovation works: from 1 September 2026, the 5% reduced rate on renovation and repair of private residences requires both that the property is at least 3 years old AND that there is documented evidence of at least 18 months of use (R.A.A. 102/2026, Fifth Schedule).

Key Dates to Note

• Now — 15 June 2026: Deadline to submit 5% declaration under transitional scheme if building permit was issued by 31 December 2024
• Now — 31 December 2026: Deadline for transitional scheme where planning application was submitted by 31 October 2023 but building permit not yet issued
• 1 January 2027: Transitional 200 m² scheme permanently ends
• 1 September 2026: New "first occupation" rules take effect for all building sales and renovation works

Official Sources

• 5% VAT Application — Tax Department, gov.cy
• VAT Law N.95(I)/2000 — available on CyLaw
• Law 42(I)/2023 — Amended 5th Schedule (first home VAT) — Official Gazette, 16 June 2023
• Law 157(I)/2017 — Commercial leasing and building land VAT — Official Gazette, 13 November 2017
• Law 109(I)/2026 — Extension of transitional provisions — Official Gazette No. 5089, 24 April 2026
• R.A.A. 102/2026 & 103/2026 — New definitions of first occupation — Official Gazette, 27 February 2026

This article is for general information only. VAT treatment depends on the specific facts of each transaction. Always verify current rules and seek professional advice before making decisions.

Trifonas Mamas
Property Valuer (MRICS–ΕΤΕΚ)
Registered Estate Agent