New legislation extends period for 5% VAT on housing

The Tax Department of Cyprus has announced the implementation of Law N.109(I)/2026, which allows for the processing of pending applications for a reduced 5% VAT rate on home purchases or construction until December 31, 2026. This measure specifically addresses Article 63, which covers transitional cases where town planning permits were applied for or secured by October 31, 2023. The Tax Commissioner is authorized to review declarations that were delayed due to administrative issues at planning authorities. For cases where building permits were issued after January 1, 2025, or will not be issued by the end of 2026, the 5% VAT rate remains applicable under the new rules. Conversely, for projects with building permits issued by December 31, 2024, relevant declarations must be submitted by June 15, 2026, to qualify for the reduced rate on the first 200 square meters. All declarations must be submitted electronically through the Tax For All (TFA) system. This regulatory update aims to resolve backlogs and provide clarity for property owners and developers.