The year 2026 has brought the biggest change to the Cyprus tax system in about twenty years, and property owners, buyers and investors are directly affected. Some of the changes already apply. The most important one for property — the way VAT is charged on new buildings — starts on 1 September 2026. Here is a plain-language guide to what has changed and what it means in practice.

1. A new way of deciding VAT on buildings (from 1 September 2026)

This is the headline change.

Under the old rule (in force until 31 August 2026), a building was treated as "new" — and VAT was charged on its sale — if it was sold before it was first handed over, or within five years of its completion. After five years, the sale became VAT-free automatically. There was also an exit route: if an unrelated person had actually used the building for 24 months, it stopped being "new."

Under the new rule (from 1 September 2026), time no longer decides it. A building stays "new" — with 19% VAT on its sale — until it reaches its "first occupation." First occupation means the building has been genuinely and continuously used for at least 18 months. Any real use counts: the owner living in it, self-use, or renting it out.

Why it matters: the automatic five-year VAT-free rule is gone. A finished home that has sat empty for years is still "new," so VAT applies when it is sold — even if it was completed long ago. From now on, what matters is proof of real use, not the passage of time. Keep leases, utility bills and occupancy records — they become the evidence that a property is no longer "new."

A real example: a developer finishes a block of flats in 2020. Two flats never sell and stay empty. Under the old rule, selling them in late 2026 would be VAT-free, because more than five years have passed. Under the new rule, because those two flats were never used for 18 months, they are still "new" — so the buyer pays VAT on the price. On a €300,000 flat, that is the difference between paying no VAT and paying 5% (€15,000) if the buyer qualifies for the main-home rate, or 19% (€57,000) if they do not.

2. The 5% VAT rate on your main home — limits unchanged

The reduced 5% VAT rate for a primary, permanent residence continues under the same limits:

• 5% on the first 130 sq.m., for a property worth up to €350,000
• The total area must not exceed 190 sq.m. and the total value must not exceed €475,000
• Go over either limit and the whole purchase is taxed at 19%
• Persons with a disability: 5% on the first 190 sq.m.

The 2026 changes did not touch these limits. They only lined up the definition of "first occupation" with the new building rules above.

3. Renovating an old home: 5% VAT, but with a new condition

Renovation and repair of an older private home can still be charged at the reduced 5% VAT rate, but from 1 September 2026 you must be able to show two things:

• the home is at least three years old (measured from its first occupation), and
• it has actually been used for at least 18 months (this 18-month period counts within the three years)

If the cost of materials is more than half the total value of the work, the materials part is taxed at 19%.

4. Stamp duty on property contracts — abolished

From 1 January 2026, stamp duty no longer applies to documents signed during 2026 and after. Previously a sale contract could carry stamp duty of up to 0.2% of its value (capped at €20,000). Contracts signed on or before 31 December 2025 still follow the old rules.

5. Capital Gains Tax — same rate, bigger tax-free allowances

If you sell Cyprus property at a profit, Capital Gains Tax is still 20% on the gain. What changed from 1 January 2026 is the lifetime tax-free allowances, which went up:

• Main residence: from €85,430 to €150,000
• General allowance (any disposal): from €17,086 to €30,000
• Agricultural land sold by a farmer: from €25,629 to €50,000

These are lifetime allowances deducted from the gain, not from the sale price. For a main home, if the gain is €150,000 or less, no Capital Gains Tax is due.

There is also a point for company deals: selling shares in a company is now caught by Capital Gains Tax when at least 20% of the company's value comes from Cyprus property — previously the threshold was 50%.

6. Tax on rental income — simpler from 2026

The Special Defence Contribution (SDC) that used to apply to rental income was abolished from 1 January 2026. Rent is now taxed only under normal income tax (with a 20% standard deduction and other allowances), plus the 2.65% General Healthcare System (GHS/GeSY) contribution for individual landlords. Companies do not pay GHS on rent.

7. Rent must now be paid electronically (from 1 July 2026)

All rent for property in Cyprus must be paid by bank transfer, card, or another electronic method. Cash rent is no longer allowed. This applies to every landlord and tenant, whatever the amount.

8. What did not change

• Transfer fees at the Land Registry stay the same: 3% up to €85,000, 5% from €85,001 to €170,000, and 8% above €170,000. If VAT was paid on the purchase, there are no transfer fees; if not (for example a resale), the fees are reduced by 50%.
• There is still no annual national property tax — it was abolished in 2017 and has not returned. Local municipal and sewerage charges continue as before.

What this means for you

• Buyers: check whether a property that "looks second-hand" is still legally "new." From September 2026, an empty, never-used unit can still carry VAT.
• Sellers and developers: keep clear records of real use (leases, bills, occupancy) — this is now your evidence that a property is VAT-free.
• Owners planning to sell: the higher Capital Gains Tax allowances may reduce or remove your tax.
• Landlords: move all rent to bank or card payments and update how you record rental income.

These changes are significant, and the exact VAT treatment of a specific property can depend on its history and its paperwork. Before signing a contract or agreeing a price, it is worth confirming the position for that specific property.

Sources

• VAT Law N.95(I)/2000 — Eighth Schedule (supply of buildings), amended by ΚΔΠ 103/2026, Official Gazette No. 6000, 27.2.2026 — CyLaw: http://www.cylaw.org/KDP/data/2026_1_103.pdf
• VAT Law N.95(I)/2000 — Fifth Schedule (reduced rate on renovation/repairs), amended by ΚΔΠ 102/2026, Official Gazette No. 6000, 27.2.2026 — CyLaw: http://www.cylaw.org/KDP/data/2026_1_102.pdf
• Reduced 5% VAT on primary residence — VAT (Amendment) Law N.42(I)/2023 — CyLaw: http://www.cylaw.org
• Stamp duty abolition, Capital Gains Tax allowances, abolition of SDC on rental income, and the electronic rent-payment obligation (2026 tax reform) — Cyprus Tax Department / Ministry of Finance: http://www.mof.gov.cy
• PwC Cyprus, "New rules on the VAT applied to the supply of buildings and on renovation and repairs services as of 1 September 2026," Tax Insights, Issue V-5-2026, 12 March 2026

Trifonas Mamas 

Property Valuer (MRICS–ΕΤΕΚ)

Registered Estate Agent