- VAT on the purchase of new buildings in Cyprus: conditions and calculations
- Stamp duty cancellation and Transfer Fee calculation when buying on the secondary market
- Annual expenses of the Cyprus property owner
- Capital gains tax on sale: significant increase in benefits
- Cyprus Property rental income tax
- Non-dom status
- Summary: assessment of changes
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Cyprus is carrying out a large-scale tax reform in 2026. On December 22, 2025, the Parliament approved a large package of regulations that entered into force on January 1, 2026.
The changes apply not only to the real estate sector, but also to businesses and individuals: corporate tax has increased from 12.5% to 15%, non-taxable income tax has been raised from 19,500 to 22,000 euros, that is, if a person earns less than 22,000 he does not pay personal income tax. Next is the progressive rate, which starts at 20% and ends at 35%.
Innovations are fundamentally changing the economics of home ownership. Let's take it in order.
VAT on the purchase of new buildings in Cyprus: conditions and calculations
The most discussed change was the reformatting of the rules for applying the preferential VAT rate.
The standard rate is 19%. preferential 5% VAT, conceptually introduced in 2023, remain relevant, but starting in 2026 stricter time limits and limits are starting to apply.
It is important to remember that the reduced rate of 5% is not an automatic privilege for all new buildings, but a social benefit. It is intended exclusively for individuals who purchase real estate as their main residence in Cyprus.
To apply the 5% rate according to the current rules, it is necessary to comply with strict criteria:
- The cost of the object should not exceed 350,000 euros;
- The total cost of housing (including furniture and appliances) cannot exceed 475,000 euros (19% is charged on the difference between 350,000 and 475,000 euros);
- The preferential rate applies only to the first 130 sq.m. square meters;
- The total area of the dwelling should not exceed 190 sq. m.
The benefit is applied upon application.
If the purpose of the object changes (for example, the apartment has ceased to be the main dwelling), there may be consequences in the form of additional charges.
In 2026, there is a transition period. If an application for a building permit or an application for a benefit is submitted before June 15, 2026, the buyer can take advantage of the "old", more lenient conditions. They provide a benefit for 200 square meters. square meters of space without strict limits on the total cost of housing.
VAT calculation example for an apartment of 100 sq.m. m worth 300,000 euros according to the new terms:
- the object fully fits the limits (area up to 130 sq. m, price up to 350,000 euros);
- tax calculation: 300,000 euros; 5% = 15,000 euros;
- the savings compared to the standard rate (19%) is 42,000 euros.
Please note that if you are purchasing a property as a "holiday home" (not for permanent residence) or for investment purposes, you are required to pay the full 19% VAT.
Further tightening of the conditions for benefits is also being discussed. It is likely that in the future, the allowable area for a 5% tax will be reduced to 100,000 euros.
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Stamp duty cancellation and Transfer Fee calculation when buying on the secondary market
One of the most positive news of the reform was the complete abolition of Stamp Duty from January 1, 2026. Previously, this fee was charged at the conclusion of the contract and depended on the amount of the transaction.
Now the buyers are completely exempt from this payment. The scale of savings: when buying apartments for 200,000 euros - 400 euros, when buying a villa for 1 million, the investor will save about 2,000 euros.
The situation with the Transfer Fee has remained the same:
- if the transaction is subject to VAT (primary market), the Transfer Fee is not charged (0%);
- if the transaction is not subject to VAT (secondary market) , a 50% discount is applied on the tax amount.
| REAL estate VALUE | TAX RATE | 50% discount |
| Up to 85,000 euros | 3% | 1,5% |
| From 85,001 to 170,000 euros | 5% | 2,5% |
| From 170 001 euros | 8% | 4% |
Example of calculating the Transfer Fee for secondary real estate priced at 200,000 euros (one owner):
- For the first 85,000 euros, the 3% rate = 2,550 euros;
- For the next 85,000 euros, the rate is 5% = 4,250 euros;
- For the remaining 30,000 euros, the rate is 8% = 2,400 euros;
- Total amount at the base rates: 9,200 euros;
- Total amount to be paid (including 50% discount): 4,600 euros.
The secondary market is still attractive in terms of related costs.
The Transfer Fee is paid to the land registry on the day the title is transferred. Payments can also be made in stages. Sometimes it is advisable for spouses to issue two titles in order to optimize the tax.
Annual expenses of the Cyprus property owner
The state property Tax (Immutable Property Tax) is still missing. However, municipal fees are levied annually (garbage, street lighting, sewage/drainage, and the like). On average, the total amount is 90-300 euros per year, depending on the municipality, district and type of facility. It may be higher for some objects.
Utility bills must include maintenance of the house territory. If there is a management company, the cost of its services can range from 100 to 500 euros per year.
For independent properties (for example, villas), expenses will be uneven from month to month, depending on the schedule for inviting specialists:
- Pool maintenance: 150 euros per month;
- Gardener: 40 euros once every 3-4 months;
- Disinfection (control of parasites and rodents): 30 euros once every 2-3 months.
A separate item is the cost of resources:
- Water is paid for using flow meters. Usually the expenses for three months amount to 30-35 euros, the vodokanal issues an invoice once every 3 months.
- Electricity is also provided by meters. On average, expenses for 2 months range from 50 to 150 euros. The amount depends on the time of use of air conditioners and heating devices. The invoice is issued once every 2 months.
- Garbage collection is paid once a year on a bill from the municipality (as part of the aforementioned fees). On average, this component of expenses is 120-140 euros per year.
Real estate insurance remains voluntary (if there is no mortgage), the package price is from 60 euros per year and above.
The market is actively discussing the possible introduction of the so-called "mansion tax" (properties worth over 3 million euros). However, this is most likely not going to happen in 2026.
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Capital gains tax on sale: significant increase in benefits
The Capital Gains Tax rate remained at 20%. However, since 2026, non-taxable minimums have increased dramatically, which makes the sale much more profitable.
When selling your main home, that is, where you have lived for at least 5 years, you are exempt from tax if the amount of profit (the difference between the amount of sale and the amount of purchase) up to 150,000 euros. This is a once-in-a-lifetime benefit. You can reduce the amount of profit by reducing the cost of repairs, services, agent, lawyer.
Example of tax calculation for the sale of basic housing, that is, in which you have lived for more than 5 years:
- The apartment was bought for 200,000 euros, and you are selling for 380,000 euros plus 30,000 euros invested in repairs, agent services,a lawyer.
- It turns out: 380,00,200,000 30,000 = 150,000 euros tax base.
- Since the amount of profit does not exceed 150,000 euros, the tax is 0%
When investment housing is sold or the re-sale of the main housing20% tax will have to be paid, but benefits are provided.
Previously, the basic benefit was 17,086 euros for a profit of 85,430 euros, but now it is 30,000 euros for a profit of 150,000 euros.
Example of tax calculation for the sale of an investment apartment:
- Bought for 200,000 euros, sold for 300,000 euros. Profit: 100,000 euros.
- We subtract the new basic benefit: 100,000 - 30,000 = 70,000 euros (tax base).
- Tax payable (20%): 14,000 euros
There is no income tax for inheritance, donation, or charitable assistance. There will also be no tax when transferring real estate from one company to another, provided that the owner is alone.
Cyprus Property rental income tax
Significant changes for the better have taken place here.
Since January 1, 2026, the taxation of rental income has become much more loyal to the homeowner. Main news cancellation of the defense contribution (SDC) on rental income. Previously, this tax was 3% of 75% of gross income. Now it has been completely abolished for all categories of owners.
The landlord pays income tax (PIT) at a progressive rate from 0 to 35%.
General income tax conditions for both residents and non-dom residents:
Non-taxable income threshold 22,000 euros per year (previously 19,500). Then on the following scale:
| From 22,000 to 32,000 euros | 20% |
| From 32,000 to 42,000 euros | 25% |
| From 42,000 to 72,000 euros | 30% |
| Over 72,000 euros | 35% |
The tax can be optimized by deducting expenses from the tax base, for example, for repairs.
In addition to PIT, you also need to make a contribution to GESY 2.65% of gross income (healthcare tax).
Calculation example for an annual rental income of 20,000 euros:
- Income tax: 0 euros (since income is below the threshold of 22,000 euros);
- Defense contribution: 0 euros (cancelled);
- GESI: 20,000 euros; 2.65% = 530 euros;
- Total net income: 19,470 euros.
It should be noted that starting from July 2026, rental payments over 500 euros must be made by wire transfer.
Non-dom status
Since July 2015, Cyprus has had the status of a non-domiciled tax resident (non-domiciled tax resident), with which a foreigner is exempt from paying certain taxes. Now this status does not affect taxes on rental income (benefits are the same for everyone), but it still gives other privileges.:
- full exemption from the defense contribution to dividends (the standard rate is 17%); full exemption from the defense contribution on interest income on deposits (standard rate of 30%).
Non-domiciled tax resident "This is a foreigner for whom Cyprus is not legally the center of vital interests, but at the same time he must stay in the country for 183 days during one calendar year. A person born abroad who has been a tax resident of Cyprus for less than 17 years out of the last 20 years has the right to become a non-resident.
In 2026, the non-dom status remains relevant primarily for dividends and interest. At the same time, the reform introduces a mechanism for extending tax benefits after the expiration of the standard period (17 years). through a fixed annual payment for additional periods (5+5 years).
Summary: assessment of changes
Perhaps the tax reform of 2026 brought more advantages than disadvantages to the buyer and the owner of the property. The main thing: the complete abolition of stamp duty and the defense contribution for rent, an increase in the tax-free minimum for income tax (up to 22,000 euros) and capital gains tax (up to 30,000 euros).
However, there are challenges. First of all, the complication of access to the preferential VAT rate of 5%. Investors planning to buy expensive real estate should hurry up to take advantage of the transition period until June 15, 2026.
The conditions look the most advantageous for buyers of basic housing within the limits of preferential VAT and for landlords, since the abolition of the SDC has reduced the tax burden on rent for everyone.
In general, Cyprus retains the status of a country with one of the most loyal tax systems in Europe, shifting the focus of support to real residents and transparent investments.
Cyprus remains one of the best jurisdictions in Europe. There are a lot of expats coming, and the demand is high. Rental income, according to experts, is guaranteed at 7-7.5%. Housing is only getting more expensive, there are a lot of projects coming out, and a significant part of the supply is being bought up at the start.
Thank you for your help in preparing the material:
CEODOM Real Estate Kirill Ravchenko
company managerMySpace Real Estateto Victoria Yatsyuta
