The Cyprus Parliament has approved an extension of the transitional period for the reduced 5% VAT rate on first-home purchases until December 31, 2026. This is great news for both local buyers and international investors looking to buy property on the island. Originally, the transitional period was set to expire in summer 2026, but the government decided to extend it.
The extension is especially important for buyers who still qualify under the so-called “old” VAT rules. Under these conditions, the reduced 5% VAT applies to the first 200 sqm of a property, with no strict limit on the property’s value. Any area above 200 sqm is taxed at the standard 19% VAT rate.
In comparison, the new rules introduced following EU legislation changes are much stricter. The 5% VAT rate now applies only to the first 130 sqm of a home valued up to €350,000. If the property price or size goes beyond those limits, buyers may have to pay a mixed VAT rate or even the full 19%.
As a result, the extension until the end of 2026 gives buyers extra time to purchase larger and more premium properties under far more favorable tax conditions.
At 5Queens, clients can already take advantage of this opportunity. The reduced 5% VAT rate is available when purchasing property in the modern residential developments Dilogia Residence and Indigo 2 Residence. Both projects combine contemporary architecture, excellent locations, and strong investment potential, making them an attractive choice for both permanent living and long-term investment in Cyprus.
Real estate experts believe that extending the reduced VAT scheme could become one of the key drivers of market demand in 2026, especially among buyers looking for spacious apartments or villas as their primary residence. At the same time, the Cyprus authorities have already confirmed that from January 1, 2027, only the new VAT framework with stricter limitations will remain in force.
That’s why the current period can be seen as a limited-time opportunity to buy property in Cyprus with significant tax savings.
