VAT on new apartments in Cyprus is generally charged at 19 percent, with a reduced 5 percent rate available under specific conditions related to residential use and eligibility criteria.
The VAT rate applied to a new apartment in Cyprus depends on how the property will be used and whether the buyer qualifies for a reduced rate. Cyprus applies standard VAT to most residential property transactions, while offering a lower rate for qualifying buyers purchasing a home intended for long-term residential use. Understanding how VAT is calculated is essential for accurately assessing total acquisition costs and ensuring regulatory compliance.
In Cyprus, VAT on new apartments is applied at two distinct rates. The standard VAT rate of 19 percent applies to all new residential properties unless the buyer qualifies for the reduced scheme. The reduced 5 percent VAT rate is available for the first 130 square meters of a qualifying property, provided the total covered area does not exceed 190 square meters and the property value remains within the thresholds set by legislation. The reduced rate applies only where the apartment is used as a primary and permanent residence and must be approved through a formal application process. Any non-qualifying portion of the property is taxed at the standard rate, resulting in a blended VAT outcome for larger or higher-value apartments.
According to the Cyprus Tax Department, the reduced 5 percent VAT rate on new residential property is subject to eligibility requirements, including permanent residence use and compliance with the applicable size and value thresholds set out in current VAT legislation.
Standard VAT rate on new apartments
New apartments in Cyprus are subject to the standard VAT rate of 19 percent when the buyer does not qualify for a reduced rate. This applies to investment properties, secondary residences, holiday homes, and purchases made by legal entities. VAT is calculated on the full contract value and becomes payable upon delivery of the property.
Reduced 5 percent VAT rate conditions
The reduced VAT rate of 5 percent applies to buyers acquiring a new apartment for use as their primary and permanent residence in Cyprus. The reduced rate is limited to the first 130 square meters of covered area, provided the total covered area does not exceed 190 square meters and the property meets the statutory value thresholds. Approval from the Tax Department is required before the reduced rate can be applied.
Mixed VAT application for larger apartments
When an apartment exceeds the qualifying limits, VAT is applied proportionally. The qualifying portion is taxed at 5 percent, while the remaining area or value is taxed at 19 percent, increasing the effective VAT cost for larger properties.
VAT planning should be considered early in the purchase process, as eligibility is not automatic and depends on intended use and formal approval. International investors should carefully evaluate how ownership structure and property use affect VAT exposure. Changes in use after purchase may lead to reassessment by the Tax Department. Proper planning helps avoid unexpected tax liabilities at completion.
For example, a buyer purchasing a new apartment for permanent residence may benefit from the 5 percent VAT rate on the qualifying portion of the property, while any excess area is taxed at the standard rate, resulting in a blended VAT charge.
Luma Developers operates within the Cyprus residential property market in accordance with applicable VAT legislation. VAT treatment is determined by buyer eligibility and intended use rather than the developer itself.
FAQ
Is VAT always payable on new apartments in Cyprus?
Yes, VAT applies to all new apartments, either at 19 percent or at a reduced 5 percent rate if eligibility criteria are met.
Can international investors qualify for the 5 percent VAT rate?
International investors may qualify if the apartment is used as their primary and permanent residence in Cyprus and all legal requirements are satisfied.
Does the reduced VAT rate apply automatically?
No, buyers must submit an application to the Cyprus Tax Department and receive approval before the reduced rate is applied.
What happens if the apartment exceeds the qualifying limits?
Any portion of the apartment that exceeds the applicable size or value thresholds is subject to VAT at the standard 19 percent rate.
