Cyprus's House of Representatives has passed legislation extending the eligibility window for a reduced VAT rate on first home purchases, giving buyers more time to benefit from the 5 per cent rate that would otherwise have lapsed mid-year.

What the Law Does

Under the newly passed bill, the period during which permit applications can be processed — and thus qualify for the discounted VAT — has been pushed back from the end of June 2026 to the end of December 2026. The extension means that first-time home buyers whose permit applications are still being examined by the relevant authorities will not lose access to the lower tax rate simply due to administrative delays.

The reduced rate of 5 per cent VAT applies to the first 200 square metres of a primary residence. Any area above that threshold continues to attract the standard rate of 19 per cent VAT.

Background

The origins of this provision date back three years, when regulations were introduced allowing applicants who submitted permit requests between June and the end of October 2023 to qualify for the reduced VAT rate, irrespective of the property's construction date. A transitional deadline of end of June 2026 had been set for permit examinations to be completed under those terms.

The bill was brought forward by Greens MP Stavros Papadouris and fast-tracked directly to a plenary vote.

Lawmakers supporting the measure pointed to a specific administrative bottleneck: the district self-government organisations, known as the EOA, which assumed responsibility for processing these permit applications following the reform of local government in 2024, have been unable to keep up with demand.

What Lawmakers Said

Diko MP Christiana Erotokritou said the legislation was designed to "avoid penalising home buyers for the delays of town planning authorities."

Not all parties backed the bill, however. Akel voted against it, with MP Giorgos Loukaides raising concerns that the measure could be exploited by developers of large properties.

"We must not allow those building sprawling buildings to benefit from reduced VAT," Loukaides argued during floor debate.

What Happens Next

With the law now in force, applicants whose permits are being processed by the EOA have until the end of 2026 to have their applications examined and still qualify for the 5 per cent VAT on the first 200 square metres of their home. Buyers whose properties exceed that area will continue to pay the full 19 per cent rate on the surplus.

The move is expected to provide relief to a significant number of first-time buyers caught in the backlog created by the transition to the new local government structure.