The Cyprus real estate market has entered a new era. On December 22, 2025, the Parliament approved a massive tax reform package, the provisions of which came into force on January 1, 2026. These changes radically alter the economics of home ownership: outdated fees are being abolished and tax-free limits are being raised, but at the same time, the conditions for obtaining benefits when purchasing property are being tightened.
In this review, we will analyze in detail how the new rules affect investors and residents, and provide up-to-date calculation examples for all mandatory payments.
The most discussed change has been the restructuring of the rules for applying the reduced VAT rate. The standard rate is 19%. The conditions for reduced VAT, conceptually introduced in 2023, remain relevant, but stricter timeframes and limits begin to apply from 2026.
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 purchasing real estate as their primary place of residence in Cyprus(permanent residence for at least 10 years). The benefit is applied upon application and subject to compliance with the law; if the purpose of the object changes (for example, it ceases to be the main home), consequences in the form of additional charges are possible.
To apply the 5% rate under the current rules, strict criteria must be met:
Transition Period: A transition period is in effect in 2026. If an application for a planning permit or an application for the benefit is submitted before June 15, 2026, the buyer can take advantage of the “old” conditions. They provide for a benefit on 200 sq. m of area without strict limits on the total value of the housing.
Example of VAT calculation (apartment 100 sq. m, price €300,000) subject to conditions:
If a buyer purchases real estate as a “holiday home” (not for permanent residence) or for investment purposes, they are required to pay the full 19% VAT.
One of the most positive pieces of news from the reform was the complete abolition of Stamp Duty. The law on abolition came into force on 01.01.2026. Previously, this fee was charged upon signing the contract and depended on the transaction amount. Now buyers are completely exempt from this payment.
To understand the scale of savings:
The situation with the Transfer Fee remains the same:
Example of Transfer Fee calculation for secondary real estate priced at €200,000 (one owner):
This makes the secondary market still attractive in terms of associated costs.
When selling real estate, the owner is required to pay Capital Gains Tax (CGT) at a rate of 20% of the net profit. The most significant change in 2026 was a substantial increase in non-taxable minimums (exemptions), which had not been revised for decades.
New exemption thresholds from January 1, 2026:
Example of tax calculation when selling an investment apartment:
Thanks to the increased exemption, the tax burden on the seller has noticeably decreased, which stimulates the resale market.
There is still no state Immovable Property Tax. However, municipal fees are charged annually (waste, street lighting, sewerage/drainage, etc.).
The market is also actively discussing the possible introduction by 2026 of a so-called “Mansion Tax” (on objects worth over €3 million). Even if adopted, the impact on the mass market will be minimal: the tax will affect a limited number of ultra-high-value objects, while transactions in the mass segment (apartments and mid-range houses) will remain unchanged.
Utility costs: Maintenance of the adjoining territory is necessarily included in utility payments. If there is a management company, the cost of its services can range from 100 to 500 euros per year.
For standalone objects (e.g., villas), expenses will be fractional and depend on the schedule of specialists:
Resource costs are a separate item:
Insurance of real estate remains voluntary (if there is no mortgage), the cost of the package starts from 60 euros per year.
Since January 1, 2026, taxation of rental income has become much more profitable.
The main news is the abolition of the Special Defence Contribution (SDC) on rental income. Previously, this tax was 3% of 75% of the gross income. Now it is completely abolished for all categories of owners.
In this regard, the question arises: why is Non-domicile status needed now? Non-dom (non-domiciled for SDC purposes) is a tax resident of Cyprus who is not considered domiciled/deemed-domiciled in Cyprus.
Even after the abolition of the rental tax, this status remains a critically important tax planning tool, as it provides the following privileges:
How rental taxes are calculated now (for everyone): For an ordinary landlord (with or without Non-dom status), the calculation looks the same:
Calculation example (annual rental income €20,000):
The 2026 tax reform has made the Cyprus market more balanced, although it has introduced new filters for buyers.
Key pros and cons of the current situation:
Conditions look most favorable for buyers of primary residences within the preferential VAT limits and for landlords, as the abolition of SDC has reduced the tax burden on rent for everyone.
Overall, Cyprus retains its status as a jurisdiction with one of the most loyal tax systems in Europe, shifting the focus of support to real residents and transparent investments.
Cyprus has quickly become one of Europe’s most desirable...
