Cyprus has introduced important tax reforms that directly affect rental properties and rental income, with changes taking effect mainly from 1 January 2026. These updates aim to simplify taxation, increase transparency, and modernize compliance — all of which landlords should understand clearly.
Below is a practical overview of the key changes, what they mean in practice, and how property owners can prepare.
Key Changes in Cyprus Rental Taxation
1. Abolition of Special Defence Contribution (SDC) on Rental Income
As of 1 January 2026, SDC on rental income has been abolished.
Previously, rental income was subject to:
• SDC at 3% on 75% of the gross rent (effective rate approx. 2.25%)
This tax no longer applies, resulting in higher net rental income for property owners.
2. Rental Income Still Subject to Income Tax & GHS
Although SDC has been abolished, rental income remains subject to:
• Personal Income Tax, based on the applicable tax bands
• General Healthcare System (GHS) contributions, currently 2.65%, subject to the annual cap
3. Mandatory Electronic Payment of Rent (From July 2026)
From 1 July 2026, rental payments exceeding €500 must be made via:
• Bank transfer
• Card payment
• Other traceable electronic methods
Cash payments above this threshold will no longer be acceptable for tax purposes.
Failure to comply may result in:
• Loss of deductibility of rental-related expenses
• Increased tax exposure during audits
4. Increased Compliance & Transparency
The reform strengthens the Tax Department’s ability to:
• Cross-check declared rental income
• Monitor electronic payments
• Enforce filing and documentation obligations
Landlords are therefore encouraged to maintain clear records, contracts, and payment trails.
Landlord Checklist: How to Prepare
To stay compliant and maximize returns, landlords should:
✅ Update rental agreements to specify electronic payment methods
✅ Ensure all rent is received via bank or traceable means
✅ Keep clear records of rental income and expenses
✅ Review tax planning in light of the SDC abolition
✅ Confirm GHS contributions are correctly declared
✅ Consult a tax advisor for personalized guidance
The 2026 rental tax reform is a positive development for property owners, reducing tax costs while promoting transparency and professionalism in the rental market. With proper preparation, landlords can benefit from higher net income and clearer compliance rules.
At NProperties, we continuously monitor regulatory changes affecting property owners, investors, and tenants across Cyprus. For guidance on rentals, investments, or property management, our team is here to help.
☎️ +357 24 818 000
📧 info@nproperties.cy