Cyprus extends VAT incentive on housing: New deadlines and conditions

The Tax Department of the Republic of Cyprus has announced an extension of the reduced 5% VAT rate for the purchase or construction of a primary residence. According to the amendment to Law No. 109(I)/2026, the review of unresolved applications will be possible until December 31, 2026.

This applies to cases covered by transitional provisions where town planning permit applications were submitted or approved by October 31, 2023. Authorities clarify that many applications were not processed in time due to delays from planning services, and these cases can now be reconsidered.

Under the new rules, the preferential VAT rate can be applied if the building permit was issued after January 1, 2025, or is not issued by the end of 2026, provided that the application for it was submitted before the set deadline. For properties where the permit was obtained before December 31, 2024, declarations for the incentive must be submitted by June 15, 2026.

It is specifically emphasized that the reduced rate applies to the first 200 square meters of the residence. All applications must be submitted through the Tax For All (TFA) electronic system and must be correctly completed.

Experts note that the extension of the measure is aimed at supporting homebuyers and accounting for administrative delays that affected the processing of documents.