For a short time longer, a small number of new homes in Cyprus can still be bought at 5% VAT under the previous, more generous scheme — with no value cap. That window closes on 31 December 2026, and once a property is sold, it is gone from the pool.
If you are planning to buy a new home as your main residence, the next few weeks could make a difference of tens of thousands of euros. Here is what the 5% VAT alert means, why availability is limited, and why acting early matters.
Previous scheme vs current rules
The previous 5% VAT scheme applies to the first 200 m² of a primary residence, whatever the price. The current rules, in force since June 2023, are far stricter.
New-build homes in Cyprus normally carry 19% VAT. Buyers of a new home used as their main and permanent residence can apply for the reduced 5% rate — but which rules apply depends on when the project’s planning permit was filed.
| Previous 5% scheme | Current 5% rules (since June 2023) | |
|---|---|---|
| Area at 5% | First 200 m² | First 130 m² |
| Maximum home size | No limit (19% above 200 m²) | 190 m² total, or no 5% at all |
| Value limit | None | €350,000 at 5%; total price up to €475,000 |
| Which projects | Planning permit filed by 31 Oct 2023 | All other new builds |
| Available until | Application by 31 Dec 2026 (qualifying cases) | Ongoing |
In short: under today’s rules, a larger or higher-value family home simply does not qualify for 5% VAT. Under the previous scheme, it still can.
Why availability is limited
Only homes in projects whose planning permit was filed by 31 October 2023 can use the previous scheme — and no new project can ever join that group.
Three things make this window narrow:
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- A fixed, shrinking pool. The list of eligible projects was locked in 2023. Every home sold in them is one fewer left at the old terms.
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- A hard deadline. The transition was due to end on 15 June 2026. In April 2026, Parliament extended it to 31 December 2026, but only for projects whose building permit was issued after 1 January 2025 or is still pending. After that date, the previous scheme ends for good.
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- Paperwork takes time. The reduced rate is not automatic. Buyers must apply to the Tax Department, and where the building permit is still pending, the building permit application must be submitted with it. Leaving it to December leaves little room for anything to go wrong.
As the deadline gets closer, demand for the remaining eligible homes is likely to rise. The best choice of units — size, view, position — goes to those who move first.
Karma homes that qualify
Five Karma developments currently qualify for the previous 5% VAT scheme, all in the Famagusta coastal area.
Olivia — Pernera
Almaria D — Pernera
Alaya — Cavo Greco
Narine — Ayia Triada
Ariel — Kapparis
Each offers contemporary homes close to the coast. Units in each development are limited, and availability changes as reservations come in.
Who can benefit
The 5% rate is for buyers who will live in the home as their main and permanent residence — it is not for investment or holiday lets.
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- Primary residence. The home must be your main residence. Eligibility is approved by the Tax Department.
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- Ten-year commitment. The property must remain your primary residence for 10 years. If it is used for another purpose, the VAT benefit must be repaid.
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- Closer checks. The authorities are stepping up checks on homes in coastal and tourist areas to confirm genuine primary-residence use.
We recommend speaking with your lawyer or tax adviser early to confirm your eligibility and prepare the application.
Act now: request availability
With the previous scheme ending on 31 December 2026 and a limited number of eligible homes left, the time to decide is now.
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- Request availability for Olivia, Almaria D, Alaya, Narine or Ariel.
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- Visit or view the homes with a Karma sales advisor.
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- Reserve your unit and start the 5% VAT application with your lawyer.
Or call 80 03 03 03 / +357 23 730 777, or visit karmadevelopers.com.
Terms and conditions apply. This article is general information, not tax or legal advice. Eligibility for the reduced VAT rate is decided by the Cyprus Tax Department.
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claudia@karmadevelopers.com.cy
16 Kennedy Avenue (Kapparis), Paralimni
