The Tax Department of Cyprus has announced the entry into force of an amendment that grants an extension under the transitional provisions for reduced VAT. The amendment is set out in Law N.109(I)/2026. Under the new rules, the Tax Commissioner may review applications under Article 63 even if the examination was not completed on time due to delays caused by planning authorities. This is welcome news for many applicants who have been waiting for a decision for months.
Who Qualifies Under the Previous Rules
Article 63 applies to transitional cases. It covers individuals who obtained or submitted an application for a building permit on or before October 31, 2023. If the project meets this condition, the property buyer may be eligible for the reduced VAT rate of 5% on the first 200 square meters of the residence.
The law clarifies two separate categories of applicants. If the building permit is issued after January 1, 2025, or is not issued by the end of 2026, the investor’s application will still be accepted for review. The key requirement is that the application for the permit must have been submitted or received by October 31, 2023.
For those who already hold a building permit issued by December 31, 2024, a separate deadline applies. To benefit from the reduced rate on the first 200 square meters, the declaration must be submitted by June 15, 2026. After this date, applications in this category will no longer be accepted.
Old and New Rules: What Has Changed
Under the legislation in force since 2016, the reduced VAT rate of 5% applied to the first 200 square meters of a residence without additional property value restrictions. After June 2023, the rules became stricter. Under the current law, the reduced rate applies only to the first 130 square meters, provided the property value does not exceed €350,000. If the area is between 131 and 190 square meters and the purchase price is up to €475,000, the remaining portion is subject to the standard 19% VAT rate. The transitional provisions under Article 63 allow applicants to benefit from the previous, more favorable rules.
Current Statistics: How Many Applications Have Been Approved
Throughout 2025, the Tax Department approved 6,657 applications for reduced VAT. Of these, 3,718 were processed under the previous law, using the rules that applied before 2023. The remaining 2,939 were approved under the newer and stricter criteria. In the first four months of 2026, another 1,800 approvals were issued, including 837 under the previous rules. This shows that demand for the tax benefit remains high, and the extension comes at a timely moment.
How and Where to Apply
The Tax Department reminds applicants that requests for the reduced VAT rate are accepted exclusively through the Tax For All system. The application must be completed accurately and in full. Paper submissions and applications sent by email are not accepted. If you are uncertain about the process, it is advisable to consult an accountant or tax advisor, as errors in the application may result in rejection or further delays.