Reduced VAT on a Residential Apartment in Cyprus: Eligibility Conditions, Who Qualifies and What Has Changed

1What is the reduced VAT on a residential apartment in Cyprus?

It is a tax benefit that allows an individual to pay VAT of 5% instead of 19% on the purchase or construction of an apartment that will serve as his main and permanent home in Cyprus. In Cyprus, unlike Israel, the first sale of a new apartment from a developer is subject to VAT, and VAT is usually added to the stated price. On a EUR 300,000 apartment this is a gap of tens of thousands of euros between the standard rate and the reduced rate, so it is one of the first questions to clarify before signing a contract.

It is important to understand the logic of the benefit: it is designed to help people who live in Cyprus to buy a home, and not to encourage investment. The practical meaning for an Israeli investor is simple: someone who buys a vacation apartment, an apartment for rental or an apartment "for the future" does not qualify. Someone who actually moves to live in Cyprus, for example a family relocating with a high-tech job or a business owner moving his center of life, may qualify, subject to all the conditions.

2What are the conditions for 5% VAT on an apartment in Cyprus?

As of October 2026, under the route that has applied since 16 June 2023 (Law 42(I)/2023), the reduced rate applies to the first 130 sq m of built residential area, provided that the value of the apartment does not exceed EUR 350,000, that the total area does not exceed 190 sq m and that the total transaction value does not exceed EUR 475,000. Alongside these ceilings there are personal conditions:

• The buyer is an individual and not a company. According to the circular of the Cyprus Tax Department, the benefit is intended for individuals over the age of 18, Cypriots and foreigners alike.
• Main and permanent residence. The apartment must serve as the buyer's main and permanent home within the territory of the Republic, and the buyer must live in it himself. Properties for rental or investment do not qualify.
• A 10-year residence period. The apartment must serve as a main residence for at least ten years.
• Citizenship is not a condition. The benefit is open to citizens of Cyprus, citizens of the EU and citizens of third countries, including Israel, who intend to live in the apartment as a main home.
• Online, timely submission. The application is submitted to the Tax Department online only, through the Tax For All (TFA) system.

According to a legal review published in 2024, large families receive an additional 15 sq m of permitted area for each child beyond three. Anyone for whom this is relevant should check the exact conditions against the wording of the law before planning the size of the apartment.

3What happens if the apartment is larger or more expensive than the ceilings?

Exceeding the value ceilings or the total area ceiling takes the transaction out of the reduced route, and according to the professional sources we checked, the standard rate of 19% then applies to the price. By contrast, an apartment that meets all the ceilings but is larger than 130 sq m enjoys 5% only on the proportionate part of the first 130 sq m, and the balance is taxed at 19%.

A few numerical examples for illustration only (simple calculation, before adjustments):

The practical conclusion: in expensive markets, and especially in new projects in Limassol, most new apartments are already above the value ceiling, so the benefit is relevant mainly to mid-range apartments. When checking an apartment "on the borderline", you also need to check what counts as the "transaction value", for example a parking space and storage unit sold separately, because a small item can push the transaction over the ceiling.

4What is the 10-year duty and what happens if you leave?

Someone who received the reduced rate must live in the apartment as a main home for 10 years. If the apartment ceases to serve as a main home before then, the Tax Department may collect the difference between 5% and 19%, proportionally to the remaining years. Under the 2023 amendment, the Commissioner of Taxation must be notified within 30 days of the cessation of use, and someone who does so and pays the proportionate difference can submit a new application for a reduced rate on another apartment.

In July 2025 the Cyprus Tax Department updated its guidelines and clarified that the refund mechanism also applies to cases approved in the past, and not only to new purchases. Someone who no longer meets the conditions is asked to approach the district tax office, and in cases of financial hardship the payment may be spread over up to 12 monthly installments, and in special circumstances even more, with the Commissioner's approval.

5What changed in 2026 in the VAT rules on apartments in Cyprus?

In 2026 there were two main changes: a conditional extension of the old transitional route to 31 December 2026, and, from 1 September 2026, new definitions of "new building" and "first use" for VAT purposes.

1. Extension of the transitional route. The old route (5% on the first 200 sq m, with no value ceiling and no area ceiling) applies to projects in which the planning permit was issued, or an application for a planning permit was submitted, by 31 October 2023. The final date for submitting an application under this route was supposed to be 15 June 2026, and in spring 2026 it was extended to 31 December 2026, but only if the building permit was issued after 1 January 2025 or has not yet been issued. If the building permit was issued by 31 December 2024, the date remains 15 June 2026.
2. From 1 January 2027 everyone is in the new route. According to the professional reviews, at the end of the extension all applications will be examined under the 2023 route, with the ceilings of 130 sq m, EUR 350,000 and EUR 475,000.
3. A new definition of "new building". Two orders (102/2026 and 103/2026), published on 27 February 2026 and in force from 1 September 2026, replaced the "five-year rule" with a usage test: a sale before "first occupation" is subject to VAT, and "first use" is defined as systematic use of the building for at least 18 months. The orders also change the definitions that determine eligibility for the reduced rate on a residential apartment.

For the Israeli investor this has two implications. First, someone buying an apartment in a project whose permits were submitted before the end of October 2023 needs to find out now, not in two months, whether he can still submit an application under the old route before the end of the year. Second, someone buying an "almost new" apartment from another investor, or an apartment that was rented for a short period, needs to check how it is classified under the new definitions, because the classification determines whether VAT applies at all and whether the reduced rate is relevant.

6How and when do you apply for reduced VAT?

The application is submitted online through the Tax Department's TFA system, and as a rule must be submitted during construction or before moving into the apartment. Amendment 55(I)/2024 allows late submission, within 12 months of moving into the apartment, only where the delay was due to absence from Cyprus, illness or another serious reason, and with supporting documents.

1. Preliminary check, before the contract: built area according to the permit, total price with all extras, the date the planning permit was submitted, and whether the developer is willing to commit to these figures in the contract.
2. Obtaining a tax identification number and registering on TFA. For a foreign buyer this is a stage that takes time, and it is worth starting early.
3. Submitting the application with the documents: the sale contract, permits and plans, and a declaration that the apartment will serve as a main and permanent home.
4. Receiving the approval and passing it to the developer, so that the invoices are issued at the reduced rate.
5. Proving actual residence after delivery, and keeping evidence throughout the ten-year period.

7Is there also a benefit on a plot on which you build a house?

In 2019 the Cypriot government decided on a refund mechanism that brings the effective VAT on a plot for building a main residential home to 5%, even though 19% is paid on the purchase of the plot itself. According to the announcement from that period, the refund application is submitted together with, or after, the application for the reduced rate on construction of the house, and the refund is paid after the applicant proves, within six months of delivery, that the house serves as his main residence. Someone considering buying a plot and building should confirm the current wording of the mechanism and its fit with the 2023 ceilings.

8What else affects the purchase cost when VAT applies?

When the purchase is subject to VAT, no transfer fees are paid at the Land Registry, and since 1 January 2026 stamp duty on the contract has also been abolished in most cases. That is, in a new apartment from a developer VAT is the main tax component of the transaction, so the difference between 5% and 19% is particularly significant. In a second-hand apartment that is not subject to VAT, the buyer pays graduated transfer fees (3%, 5% and 8%), with a 50% reduction.

9What to do before signing, and how we accompany you

Before signing a contract for a new apartment in Cyprus we check three things: whether the client really meets the residence conditions, and what the declaration means for his residency in Israel; whether the apartment meets the area and value ceilings, including all extras; and which route the project is in with regard to permit dates. We then include in the contract clauses that define who bears the risk if the approval is not received, and accompany the application with the authority together with our partners in Cyprus. If the apartment is intended as an investment and not for residence, we say so in advance and price the transaction at 19%.

Read next · 8 min readLand Registry Transfer Fees and Stamp Duty in Cyprus: Calculation, Exemptions and DiscountsHow much Cyprus Land Registry transfer fees cost, when a 50% reduction or exemption applies, and what happened to stamp duty from January 2026, with examples.Read the guide

The information in this guide is general in nature and does not constitute legal or tax advice on any specific transaction. Every transaction is assessed on its own facts.