Domakihub 5% reduced VAT on renovation
Not a grant but a permanent entitlement: renovation and repair of older private homes in Cyprus is invoiced at 5% VAT instead of 19% — a direct saving on every eligible project.
Who qualifies
Private dwellings at least 3 years after their first occupation (rules as tightened from 1 September 2026, incl. demonstrated prior use). Applies to labour and materials, provided materials do not exceed 50% of the value of the service.
What you can use it for
Renovation and repair of private dwellings — plumbing, electrical, carpentry, painting, bathrooms, kitchens and more
Timing: Permanent entitlement — no application window; the qualifying conditions tighten from 1 September 2026.
How to apply
- 1 Confirm the dwelling qualifies (3+ years since first occupation; use as a residence)
- 2 Prepare the documents confirming the age and use of the dwelling
- 3 Agree the works with a contractor who applies the reduced rate correctly
- 4 Keep the material share within 50% of the value of the service
- 5 Pay 5% VAT instead of 19% on the eligible works
What the 5% renovation VAT is
Cyprus charges a standard VAT rate of 19% — but the renovation and repair of older private homes is invoiced at a reduced rate of just 5%. Unlike Εξοικονομώ or Ανακαινίζω – Ενοικιάζω, this is not a grant scheme: there is no budget that runs out, no application window and no approval lottery. It is a permanent entitlement written into the VAT law, and it applies to eligible works whenever they happen. On a €20,000 renovation, the difference between 19% and 5% VAT is €2,800 kept in your pocket — before any grant is even considered. Because it is claimed through correct invoicing rather than an application, the main risk is simply not using it: owners who don't know the rule, or contractors who invoice everything at the standard rate to be safe. Getting the VAT treatment right is part of how Domakihub scopes every renovation project in Cyprus.
Which homes qualify
The reduced rate is for private dwellings that are no longer new. Under the rules as they apply from 1 September 2026, a home qualifies once at least three years have passed since its first occupation, and the owner must be able to demonstrate that the dwelling has actually been used as a residence — the amended law expects evidence of at least 18 months of use, running within those years. In practice this covers the vast majority of renovation candidates: family homes, older flats, inherited properties and homes bought on the resale market. What it does not cover is brand-new or never-occupied property. Because the entitlement now leans on documentation — when the home was first occupied, how its use can be evidenced — gathering the right records is the first step of any project that wants the 5% rate.
Which works are covered
The 5% rate applies to renovation and repair services on qualifying private dwellings — the everyday substance of a Cypriot renovation: plumbing and electrical works, carpentry, painting and plastering, bathroom and kitchen renewals, flooring and the associated repairs; the amended framework also brings qualifying extension works into scope. The reduced rate covers both the labour and the materials the contractor supplies as part of the service, subject to the materials rule described below. Note that it is the service that is reduced-rated: materials you buy yourself at the builder's merchant carry the normal VAT — one more reason the works should be structured, quoted and invoiced by the contractor as a complete service rather than split into separate purchases.
The 50% materials rule
There is one structural condition: the value of the materials must not exceed 50% of the value of the service. As long as materials stay at or below half of the total, the whole invoiced service — labour and materials together — is charged at 5%. Where the materials make up more than half, the excess falls outside the reduced rate and is taxed at the standard rate instead. This matters for material-heavy projects — think high-end kitchens, extensive tiling or expensive fixtures — where how the project is priced and invoiced determines how much of it enjoys the 5%. It is a planning question, not a loophole: the quote needs to reflect the genuine labour-and-material split, and a contractor who understands the rule will structure the works correctly from the start.
What changes on 1 September 2026
Cyprus amended its VAT law with effect from 1 September 2026, tightening how a dwelling qualifies. The amendments codify when a building stops being “new” — three years from first occupation — and require demonstrable use of the dwelling (at least 18 months, running concurrently within that period) before renovation services can enjoy the reduced rate. The practical consequence is a heavier documentation burden: proof of first occupation and evidence of use become part of the file, and record-keeping decides whether the 5% rate can safely be applied. If your renovation is being planned now, it should be assessed against the new regime rather than the old rules — we do that check as a standard part of scoping.
How to use it in practice
There is no application form. The reduced rate is applied on the contractor's invoice, backed by documentation showing the dwelling qualifies — its age since first occupation and its use as a residence. The practical sequence: confirm the home's qualifying status and gather the supporting documents; obtain quotes in which the VAT treatment is stated explicitly; make sure the labour/material split respects the 50% rule; and keep the records with the project file. The Cyprus Tax Department is the competent authority, and where a case is unusual — mixed-use buildings, recently transferred property, unclear first occupation — the safe route is to resolve the question before the works start, not at invoicing time. A renovation priced at the wrong VAT rate is either fourteen points too expensive or a compliance problem; both are avoidable.
How Domakihub handles it end to end
When Domakihub scopes a renovation in Cyprus, the 5% VAT treatment is built in from the first estimate: we check whether your dwelling qualifies under the current rules, plan the works and quotes so the labour-and-material structure respects the 50% threshold, and search project-specifically for the right businesses for each trade — businesses that invoice the reduced rate correctly. We also look at the full funding picture in one pass: whether your project can additionally claim a grant such as Εξοικονομώ – Αναβαθμίζω or Ανακαινίζω – Ενοικιάζω alongside the correct VAT treatment. For overseas owners, everything — documents, quotes, works, invoices — is coordinated remotely in your language. Tax rules change and individual cases differ, so we confirm the treatment for your specific property and works before you commit; for binding certainty the Cyprus Tax Department is the competent authority.
Domakihub handles it end-to-end
- 1
Free eligibility check for your property
- 2
We prepare the application + paperwork
- 3
Vetted contractors do the work
- 4
We coordinate to completion & payout
Amounts, deadlines and steps change per scheme round — we confirm exactly what applies to you.
Official scheme: https://www.mof.gov.cy/mof/tax/taxdep.nsf/index_en/index_en
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