5% VAT in Cyprus: New Thresholds and the €475,001 Relief
The 5% VAT rate in Cyprus still exists, but since 2026 it is a different relief. The old scheme — 5% on the first 200 square metres with no price cap — was closed on 15 June 2026. A one-euro difference in the contract price can cost you almost €49,000 in tax.
How the Reduced VAT in Cyprus Works from 2026
Then come the caps, and this is the main innovation. The relief applies as long as the property fits entirely within 190 square metres of total built area and €475,000 of transaction value. Exceeding either cap removes the relief entirely: 19% is charged on the full amount, including the first 130 metres and the first €350,000.
The legal framework is Law No. 109(I)/2026 of 24 April 2026. It also closed the old scheme: the tax commissioner is reviewing declarations filed under it.
VAT on Property Purchases in Cyprus: Calculation in Figures
Look at how the tax changes depending on the price, with an area within 130 square metres.
Contract €350,000: the whole amount is within the relief base. VAT = €17,500.
Contract €420,000: the first €350,000 at 5% (€17,500), the remaining €70,000 at 19% (€13,300). VAT = €30,800.
Contract €475,000: €17,500 + 19% on €125,000 (€23,750). VAT = €41,250.
Contract €475,001: the cap is exceeded, the relief is removed entirely. VAT = 19% on the full amount = €90,250.
The cliff at the threshold is a €49,000 difference when the price changes by one euro. The same effect comes from the area: a house of 191 square metres pays 19% on the entire value, even if the price is modest. That is why negotiating at the threshold is already tax planning: sometimes a discount of a few thousand euros saves tens of thousands in VAT.
What Housing in Cyprus Counts as New for VAT
VAT is paid on the first sale of new housing. From 1 September 2026, what makes a property «new» is the fact of first occupancy, and the age of the building does not matter. A property becomes used after first use — systematic operation for at least 18 months.
The practical consequence: a completed but never occupied house remains «new» even several years after commissioning — with all the VAT consequences. And conversely: a property that has been systematically operated for more than 18 months is no longer subject to VAT on sale. Before the deal, request documentary confirmation of the property’s status from the seller — a fifth of the purchase budget depends on it.
The 10-Year Commitment: What Happens on Early Sale or Rental
The 5% relief is granted on the condition that the property is used as a primary residence for 10 years. If you sell or rent it out earlier, the law requires notifying the tax commissioner within 30 days and repaying the 14% difference — proportionally for the unused years.
The arithmetic is simple. With a relief base of €350,000, the full difference is €49,000. A sale after 4 years means a repayment for the remaining 6 years: €29,400. This is not a fine but a repayment of part of the relief, yet in the budget for exiting the asset it must be taken into account in advance — along with the notification deadline.
What to Check Before Buying: A Short Checklist
- Area according to the title: does the property fit within the 130 m² relief base and the 190 m² cap of total built area.
- Contract price: how much tax falls into the 19% zone and whether the deal sits right at €475,000.
- Property status: first sale of new housing or a property with a history of use — request confirmation of first occupancy.
- Your plans for 10 years: are you ready to hold the property as a primary residence, and what will happen to VAT on early sale or rental.
- VAT calculation in the contract: the relief is formalised by a declaration, not applied automatically — check who files it and when.
Separately, it is worth looking at how a purchase in Cyprus works as a whole — VAT is only one line in its budget. We covered this in the video «Residency, Taxes, Yields: Buying Property in Cyprus»: the transaction process and tax benefits, obtaining residency through real estate, rental yields, and market trends — https://www.youtube.com/watch?v=TjeFduJ2vs0
If you would like us to calculate VAT and the full purchase budget for a specific property in Cyprus, write to us on Telegram: @Nevestate_admin. We will send you a calculation based on your parameters — area, price, property status — and a selection of new builds that fit entirely within the relief.
