From 1 September 2026, Cyprus changes the VAT framework applying to supplies of buildings and to the reduced 5% rate for residential property. This does not create one new rate for every purchase: the result depends on the property, the timing of the supply and whether the building has been first occupied.
What changes for buildings
The new framework places greater emphasis on first occupation and first use. First occupation is linked to the first use of a building after delivery or construction, including owner occupation, leasing or other systematic use.
First use means systematic use or exploitation for at least 18 months. Buyers should therefore verify the date and nature of first use, as well as the seller’s VAT position, before signing.
Why this matters to buyers
The VAT status of some resale and transitional properties may change under the new use-based approach. A property systematically used for at least 18 months may be treated differently from an unused property, even when a significant period has passed since completion. Ask for evidence of completion, first occupation and previous supplies.
The 5% reduced rate
The 5% rate is not automatic for every buyer. It is connected with the purchase or construction of a main and permanent residence and is supported through the Tax For All process. Eligibility, area and value limits, documents and transitional provisions must be checked for the specific transaction.
The amendments effective from 1 September 2026 also clarify how first occupation interacts with the reduced rate, including in the context of renovation and repair of residential property. Obtain written confirmation from a tax adviser or the seller before budgeting on the reduced rate.
Buyer checklist
- Confirm whether the supply is subject to VAT or exempt.
- Check the completion date and the first-occupation date.
- Confirm whether the property was systematically used for at least 18 months.
- If relying on 5% VAT, verify eligibility and the TFA documentation in advance.
- Record the VAT treatment and calculation in the sale agreement or its annex.
Official sources
- Tax Department: VAT and immovable property — https://www.gov.cy/mof-tax/documents/f-p-a-kai-akiniti-idioktisia/
- Tax Department: 5% reduced VAT rate — https://www.gov.cy/mof-tax/en/documents/meiomenos-syntelestis-f-p-a-5/
- Legislation index and Decrees 102/2026 and 103/2026 — https://www.gov.cy/mof-tax/documents/nomothesia-foroy-prostithemenis-axias-f-p-a/nomothesia-poy-ischyei-apo-1i-fevroyarioy-2002/diatagmata/
- Tax Department transitional clarification, 4 May 2026 — https://www.gov.cy/oikonomia/exetasi-ypefthynon-diloseon-gia-tin-epivoli-meiomenou-syntelesti-fpa-5-gia-tin-agora-i-anegersi-katoikias-apo-ton-eforo-forologias-mechri-31-dekemvriou-2026/
This article is informational and does not replace individual tax or legal advice.