The Cyprus Tax Department has announced updated rules on the reduced 5% VAT rate for the purchase or construction of primary residences, effective 24 June 2025. These changes affect both Cypriot and foreign buyers, introducing stricter conditions on eligibility and repayment, and impacting anyone planning to acquire a home in Cyprus.
New 5% VAT Eligibility Rules
The reduced 5% VAT applies to individuals over 18—whether Cypriot citizens or foreign nationals—who acquire a property to use as their primary and permanent residence in Cyprus for at least ten years. Importantly, the residence must be occupied by the owner themselves; properties used for investment or rental purposes do not qualify for the reduced VAT rate.
Repayment Obligations
If the residence ceases to be the owner's primary home within the ten-year period, the Tax Department may reclaim the VAT benefit originally granted. This provision applies retroactively to all cases where the reduced VAT was previously approved, not just new purchases.
Repayment Arrangements
The Tax Department advises individuals no longer meeting the primary residence conditions to immediately contact their District Tax Office to settle any VAT amounts owed. Those facing financial hardship may apply to pay the amount in up to 12 monthly instalments, with the possibility of additional instalments approved by the Tax Commissioner in special circumstances.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
