Deadline Alert: 5% VAT Housing Scheme Ends June 2026

Source: Cyprus Mail article – “June 2026 deadline set for old 5 per cent VAT housing scheme” (05 Nov 2025).

For anyone eyeing property in Cyprus, here’s a timely alert: the transitional phase of the reduced-VAT housing scheme is ending June 2026. According to Cyprus Mail,: “Anyone who benefited from the previous 5 per cent VAT scheme … will remain covered only until June 2026.”

In our opinion, this is a critical deadline for buyers, sellers, developers and agents alike — and one that deserves careful attention if you want to optimise value and avoid surprises.

What the “Old” 5 % Scheme Covered

Under the previous framework (before the amendment of June 2023), eligible buyers of a newly-constructed home for primary residence could benefit from a VAT rate of 5 % for the first 200 sq m of buildable area, without further value or size caps.

We believe this generous threshold helped stimulate demand in the Cyprus housing market by lowering acquisition costs for many.

What Changed with the 2023 Amendment

The law amendment (Law Ν.42(I)/2023) introduced tighter conditions, effective June 16 2023. Key shifts include:

• The reduced 5 % rate now applies only up to 130 sq m of buildable area (for standard applicants).
• Total property value ceiling of €350,000, with the transaction value not to exceed €475,000, and buildable area capped at 190 sq m.
• For persons with disabilities the reduced rate covers up to 190 sq m (but still the €350k value cap).
• We think these changes reflect a shift toward more targeted support for “genuine” primary-residence buyers, rather than speculative investors.

The Deadline – What It Really Means

Here’s the key point: If a purchaser or developer applied for a planning permit between June 1 and October 31 2023, they may still rely on the “old” favourable 5 % terms — but only if the VAT declaration is submitted by 15 June 2026.

After 15 June 2026 the transitional rules expire — meaning, in our view, fewer buyers will qualify for the old regime and more will have to abide strictly by the new rules (or the standard 19 % VAT) thereafter.

Compliance & Risk Factors

A few risk-factors to watch:

• The Cyprus Tax Department has carried out over 5,000 inspections and recovered around €50 million in cases where the 5 % VAT was used but the property was not used as the buyer’s main residence.
• Buyers who subsequently use the property for other purposes (e.g., rental) before the expiry of the required period must repay the VAT benefit. The minister noted that some face an additional ~14 % charge in such scenarios.
• In our opinion, the enforcement emphasis indicates that simply securing the reduced rate is not enough — ensuring ongoing compliance is equally important.

What This Means for Buyers, Sellers & Agents

For Buyers:

• If you applied for planning permission by 31 Oct 2023 and you intend to use the property as your main residence, act now to submit all VAT declarations before mid-June 2026.
• If you’re purchasing after that or the permit was issued later, ensure you are clear on whether you fall under the new regime (130 sq m / €350k etc) or will face full VAT.
• We believe entry-timing and paperwork will make a difference to total cost.

For Sellers / Developers:

• For schemes that applied before 31 Oct 2023, remind potential buyers about the deadline and use it as a marketing-feature (“secure 5% VAT”).
• For new builds where permits come after that date, clearly reflect the relevant VAT rules in contracts to avoid misunderstandings.

For Agents:

• This is a prime opportunity to educate clients: highlight the deadline, the value cap, and the use-as-main-residence requirement.
• We advise including a VAT-eligibility checklist in your buyer packs: permit date, buildable area, property value, dwelling usage timeframe.

Looking Ahead — What to Expect

Given the stricter regime, we think the following may unfold:

• A surge of buyers pushing to get permits and declarations done ahead of June 2026 deadline.
• Post-June 2026, fewer transaction-structures will qualify for 5 % VAT which may raise effective costs and slow some segments of demand.
• Greater scrutiny by authorities (inspections, repayments) — so transparency in usage is crucial.
• For investors specifically — if you plan to let the property or intend an exit sooner rather than later, evaluate carefully whether the reduced VAT truly applies or whether you’re exposing yourself to repayment risk.

The June 2026 deadline for the old 5 % VAT housing scheme is real — and it matters. At RealtyHub, we believe timely action, clarity on eligibility and correct documentation are the difference between capturing the benefit or losing it.

If you are considering purchasing or selling a property in Cyprus, we encourage you to contact us or your tax/legal adviser now to:

• Confirm your permit date and VAT-eligibility
• Prepare or review the declaration submission
• Ensure your intended use of the property aligns with the “primary residence” requirement.