According to Cyprus Property News, citing figures obtained by Phileleftheros, the old reduced-VAT scheme for primary residences cost the state more than €1 billion, and the parallel use of old and new rules is due to end on 31 December 2026.
According to Cyprus Property News, which translated and adapted a Phileleftheros report, Cyprus has lost more than €1 billion in potential tax revenue through its reduced VAT scheme for homebuyers. Official figures show more than 26,000 taxpayers used the reduced rate. Under the 2016 law, buyers building or buying a primary residence paid 5% VAT on the first 200 square metres, regardless of the property's total size or value, versus the standard rate of 19%. The article notes that this allowed benefits to reach buyers of luxury villas, including third-country investors, some of whom also obtained Cypriot citizenship. Following complaints and talks with the European Commission, the law was changed. The revised rules limit the 5% rate to the first 130 square metres of a home valued at up to €350,000. For homes of 131 to 190 square metres valued at up to €475,000, the additional area is taxed at 19%. The old rules have not disappeared entirely: transitional provisions let some buyers keep using them if a planning-permit application was submitted between early June and 31 October 2023, even if construction finishes years later. The transition has already been extended by six and a half months, reportedly because of local-government reform and changes to planning and building-permit responsibilities. Parallel use of the old and new systems is currently due to end on 31 December 2026. Cyprus Property News reports that property-sector interests are expected to lobby for more time, so buyers should follow official announcements on whether the deadline holds.