Cyprus Extends 5% VAT Incentive for First Property Until End of 2026

The Cypriot Parliament has approved legislation extending the period during which first-time homebuyers can benefit from the reduced 5% VAT rate, addressing delays in the building permit approval process.

Under rules introduced three years ago, applicants who submitted building permit requests between June and the end of October 2023 were eligible for the 5% VAT rate, regardless of when the property was constructed. This transitional arrangement had been due to expire at the end of June 2026.

With the newly passed law, the permit examination period — which determines eligibility for the reduced VAT — has now been extended to the end of 2026.

The bill, proposed by Green Party MP Stavros Papadouris, was fast-tracked for approval. Lawmakers supporting the extension argued it was necessary due to ongoing delays by district self-governing organisations (EOA), which assumed responsibility for permit processing following the 2024 local government reform.

Speaking in Parliament, DIKO MP Christiana Erotokritou stated that the measure aims to “ensure that homebuyers are not penalised due to inefficiencies in town planning authorities.”

However, AKEL opposed the bill. MP Giorgos Loukaides warned that extending the incentive could allow large-scale developments to unfairly benefit from the reduced VAT rate.

Under current regulations, eligible buyers can apply the 5% VAT rate to the first 200 square metres of their primary residence, regardless of the total property size. Any area exceeding 200 square metres is subject to the standard 19% VAT.

What This Means

This extension effectively relieves pressure on pending applications affected by administrative delays. For both investors and end-users, the new deadline at the end of 2026 represents a key window to optimise tax savings when purchasing a first home in Cyprus.