Cyprus: Changes to application of reduced VAT rate on supply or construction of permanent residence

The reduced VAT rate of 5% will apply to the first 130 m2 of buildable residential area

The reduced VAT rate of 5% will apply to the first 130 m2 of buildable residential area

The amending value added tax (VAT) Law (Ν.42(I)/2023)—which was passed by the House of Representatives and published in the Government Gazette on 16 June 2023—introduced important changes to the application of the reduced VAT rate on the supply or construction of a dwelling to be used as the main and permanent place of residence.

The amending law provides that the reduced VAT rate of 5% will apply to the first 130 m2 of buildable residential area of a property and for the maximum value of €350,000, provided that the total buildable residential area does not exceed 190 m2 and the total value of the transaction does not exceed €475,000.

Prior to the amendment, the reduced VAT rate was imposed on the first 200 m2 of buildable residential area without any limitations neither in terms of the total buildable area nor the value of the residence.   

A transitional period is also provided for, during which the new provisions will not apply in cases when a planning permit has been secured or an application has been submitted to obtain a planning permit by 31 October 2023, and on the basis that the duly completed application for the reduced VAT rate is submitted to the tax department within three years from the commencement date of the amending law i.e., until 15 June 2026.

Read a June 2023 report prepared by the KPMG member firm in Cyprus


The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.