🏠 Cyprus has extended the transitional regime for the reduced 5% VAT rate for buyers of a first primary residence. The new deadline has been set for December 31, 2026.

💰 In Cyprus, the standard VAT rate on the purchase of new property is 19%. The reduced 5% rate applies to housing purchased not for resale or rental purposes, but for the buyer’s own residence. The difference between the two rates is substantial: for a property worth €300,000, the potential saving can reach €42,000.

💡 Previously, the reduced 5% VAT rate applied to the first 200 sq. m of a new residential property. There was no separate limit on the total value of the property or its overall size. In 2023, the rules became stricter. The 5% rate now applies only to the first 130 sq. m of a property, provided that the total area does not exceed 190 sq. m. In addition, the value eligible for the reduced rate is capped at €350,000, while the total property value must not exceed €475,000.

⚖️ To ensure that buyers and developers who had started projects before the reform do not lose access to the previous rules because of administrative delays, the Cypriot authorities introduced a transitional regime. This regime has now been extended until the end of 2026, but only for specific cases.

🗓️ Following the extension, the transitional regime applies if the planning permit was obtained, or the application for it was submitted, before October 31, 2023, while the building permit was issued after January 1, 2025, or will not have been issued by December 31, 2026.

📋 Key conditions of the transitional regime:

— the planning permit must have been obtained or applied for before October 31, 2023;
— the building permit must have been issued after January 1, 2025, or still be in the application process;
— the application for the reduced VAT rate must be submitted by December 31, 2026;
— the property must be used as the buyer’s main and permanent place of residence.

💼 It is important to note that the extension does not automatically apply to all transactions. If the planning permit was obtained or applied for before October 31, 2023, and the building permit was issued before December 31, 2024, the previous application deadline remains unchanged: June 15, 2026.

📈 For the Cypriot real estate market, this extension is particularly important in the primary residence segment. Properties that retain the right to apply the previous rules may gain an additional advantage over new projects. This is especially relevant for larger apartments and houses, where the difference between the 5% and 19% VAT rates is most significant.

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