A reduced VAT system for primary residences to boost home ownership is already in place. The reduced percentage for primary residences is 5% against a general percentage of 19%. This reduced percentage of 5% is still the same, but some criteria were changed by law in June 2023.

New criteria for the VAT on primary residence were introduced in June 2023 with Law 42(I)/2023. The reduced rate remains the same (5%), but the property’s square meters are now lower. The transitional or grace period will end on the 31^st October 2023.

Conditions under the previous regime

The previous rules will be applicable to any project for which an application for planning permission will be submitted until the 31st of October 2023.

A reduced rate of 5% is applied to the first 200 square metres (sq m) of a property, provided:

1. It is a new house/apartment.
2. Will be used as the individual’s primary and main residence for 10 years.
3. The applicants have completed their 18th year of age.
4. The 200 sq m includes the internal covered areas (not including stairs).

For house areas greater than 200 sq m the standard 19% will apply to the remaining square metres.

New changes to the Cyprus reduced VAT system for a primary residence 

In June 2023, Cyprus changed the reduced VAT on primary residence criteria.

Under the new rules, the reduced rate of 5% applies to the first 130 sq m of a primary residence, provided that:

1. The primary residence is up to EUR 350,000 in value, and
2. The total transaction value does not exceed EUR 475,000, and
3. The total constructed internal areas do not exceed 190 sq m.
4. Individuals with disabilities are allowed a reduced rate of 5% on the first 190 sq m of a primary residence.
5. Families with more than three children are allowed a further exemption of 15 sq m per child.

For house areas greater than 190 sq m and/or exceeding EUR 475.000 in value the applied VAT is 19% for the total area and price.

The new rules will not apply where planning permission has already been issued and/or application for planning permission is filed until 31 October 2023.