Filenews 5 November 2025 - by Eleftheria Paizanou
Anyone who caught up with the previous problematic and controversial legislation in relation to the reduced VAT of 5% when buying or building a main residence/apartment, as in mid-June 2026 the implementation of the transitional provisions of the new legislation approved in 2023 will stop.
Specifically, the transitional provisions provided that those who had applied for a planning permit from the beginning of June 2023 until October 31 of the same year, regardless of when the construction of the building will be completed, continue to pay 5%, as with the previous legislation. Therefore, for three years, i.e. from June 16, 2023 to June 15, 2026, due to the transitional provisions, both laws were applied in parallel.
Under the loose law of 2016, according to which 5% VAT was imposed on the first 200 square meters (sqm) of a property, regardless of the total area, and the new legislation of 2023, which was approved after strict recommendations by the Commission. The new legislation provides that 5% VAT will be imposed on the first 130 sq.m. of a house/apartment, with a value of up to €350,000.
At the same time, a graduated imposition of reduced VAT is also applied. For houses and apartments with an area of 131 sq.m. to 190 sq.m. and with a value of up to €475,000 19% VAT is imposed.
The above is confirmed by the Minister of Finance, Makis Keravnos, according to data he forwarded to the Parliament: "For the provisions of the Value Added Tax, transitional measures are provided for, for buildings for which a planning permit has been obtained by the competent authority or an application for a planning permit has been submitted to the competent authority by October 31, 2023 and for which the solemn declaration provided for in the Tax Department is duly completed for the imposition of the reduced VAT rate, as provided for in the relevant law, within three years from the date of its commencement until June 15, 2026," he indicated.
According to the minister, any person who benefited from the reduced VAT when buying or building a main residence, i.e. uses it for any other purposes than a main and permanent place of residence in the Republic, the legislation provides that he must pay the full amount of the tax, whether it concerns beneficiaries under the Cyprus Investment Program, or any other person in the Republic. Therefore, these taxpayers pay additional taxes of 14%.
Mr. Keravnos also refers to the campaigns carried out by the Tax Department for the recovery of VAT amounts from persons who benefited from the reduced tax without using the residence they acquired as their main and permanent place of residence in the Republic, including persons who have purchased a residence within the framework of the KEP.
In addition, the minister states that the infringement procedures against the Republic by the EU have been completed, in accordance with the new legislation. As he notes, the new legal framework was promoted to Brussels, which ruled that the Republic of Cyprus will not pay any additional amounts due to the infringement letter and the reasoned opinion it received from the EU. The data came to light after a question submitted by AKEL MP Irini Charalambidou.
