Changes to Cyprus primary residence VAT regulations

In 2023, Cyprus revised its VAT legislation for primary residences following European Commission directives to ensure the tax reduction serves social purposes. Previously, a 5% VAT rate applied to the first 200 square metres of any property regardless of total size or value. Under the new law, the 5% rate applies only to the first 130 square metres of homes valued up to €350,000. For properties between 131 and 190 square metres with a value up to €475,000, a tiered VAT system is applied. Beyond these thresholds, the standard 19% VAT rate is imposed. To stabilize the market, transitional provisions allowing the old regime for planning applications submitted between June and October 2023 have been extended until the end of 2026. High construction costs and interest rates, combined with these regulatory changes, have contributed to a shift in consumer preference toward smaller properties, with data indicating the average size of qualifying residences is now 100 square metres.