Cyprus: Extension of zero VAT rate on certain goods; reduced VAT rate for educational buildings
Zero VAT rate extended until December 31, 2026; 5% VAT rate for construction and renovation of educational buildings
The Council of Ministers has issued decrees concerning the following value added tax (VAT)-related issues.
Extension of the zero VAT rate on essential goods
The Council of Ministers on November 21, 2025, issued Decree No. 337/2025, extending the temporary application of the zero VAT rate on specific goods until December 31, 2026. The goods covered under the zero VAT rate include baby milk, diapers for infants, adult diapers, women’s hygiene products, fresh or chilled (not frozen) edible vegetables, and fresh fruits.
Read a December 2025 report prepared by the KPMG member firm in Cyprus
Reduced VAT rate for school construction and renovation
The Council of Ministers on December 5, 2025, issued Decree No. 364/2025, providing a reduced 5% VAT rate for the construction and renovation of buildings used for VAT-exempt educational activities. Specifically, the reduced rate applies to public or private educational buildings used for exempt educational services, excluding private tutoring institutes and other non-exempt activities.
The reduced VAT rate does not apply to afternoon schools, tutoring institutes, or any educational activities not covered by the VAT exemption definition. Therefore, questions remain regarding mixed-use facilities that operate both exempt and non-exempt activities, and additional guidance from the Cyprus Tax Department is anticipated.
Read a December 2025 report prepared by the KPMG member firm in Cyprus