Rental Income Tax in Cyprus: Rates & Filing (2026)

Rental income from Cyprus property is taxable for both residents and non-residents. The tax treatment differs significantly depending on whether you are a Cyprus tax resident, a Non-Dom resident, or a non-resident.

This guide explains the rates, deductible expenses, SDC rules, and how to file.

Income Tax Rates on Rental Income (Residents)

Rental income for Cyprus tax residents is taxed under the standard personal income tax brackets, the same progressive rates that apply to salary and business income. The rates for 2026 are:

Rental income is added to all other income (salary, business income) and taxed at the marginal rate. A property owner with EUR 30,000 rental income and no other income pays: 0% on the first EUR 22,000, 20% on EUR 6,000 = EUR 1,200 income tax. If that same person also earns EUR 25,000 in salary, the rental income is stacked on top, pushing all EUR 30,000 rental income into higher brackets.

This stacking effect is important to understand when estimating your effective tax rate. A property owner with multiple income streams should calculate the combined income before estimating tax, not apply the individual rate to each stream separately.

Special Defence Contribution (SDC) on Rental Income

SDC (Special Defence Contribution) is a Cyprus-specific additional tax charged on certain passive income categories, including rental income. The mechanism for rental income is: SDC = 75% x gross rental income x 3%, which works out to 2.25% of gross rental income before any deductions.

The purpose of the 75% multiplier is a deemed allowance for expenses. Rather than requiring landlords to prove actual expenses to calculate net income, Cyprus applies SDC to 75% of gross rent, implicitly allowing a 25% deemed expense deduction within the SDC calculation. This is separate from and in addition to the income tax deductions.

Example: EUR 12,000 gross annual rent. SDC = 75% x EUR 12,000 x 3% = EUR 270. This is due regardless of whether the property generated a tax loss after deductions for income tax purposes.

Non-Dom residents are fully exempt from SDC. This is a direct saving of 2.25% of all gross rental income every year, for up to 17 years.

SDC applies only to Cyprus tax residents who are NOT Non-Dom. Non-residents (people who are not Cyprus tax residents) do not pay SDC on their Cyprus rental income. This is an important point for overseas investors holding Cyprus property.

Non-Dom exemption details: Cyprus Non-Dom Status Guide

GHS Contribution on Rental Income

GHS (GESY - the General Health System) contributions apply to rental income for Cyprus tax residents. The rate is 2.65% of gross rental income, before deductions. This applies to both Non-Dom residents and domiciled residents. Unlike SDC, there is no Non-Dom exemption from GHS.

GHS is capped at EUR 180,000 of total annual insurable income across all income categories (salary, self-employment, dividends, rental income). If your combined income from all sources exceeds EUR 180,000, the excess carries no further GHS liability. The maximum annual GHS contribution is therefore EUR 4,770 (EUR 180,000 x 2.65%).

For non-residents, GHS also applies at 2.65% on Cyprus rental income under the current rules. Non-residents must separately register with GHS if they file a Cyprus tax return with rental income.

Deductible Expenses

Cyprus allows property owners to deduct certain expenses from gross rental income before calculating income tax (not SDC, which uses a fixed 75% base). The main allowable deductions are:

Deemed maintenance deduction: 20% of gross rent with no receipts required. This is the simplest option and most landlords use it. It covers wear and tear, minor repairs, and ongoing maintenance. You choose either the deemed deduction OR actual expenses - you cannot combine them.

Depreciation: if you use actual expenses instead of the 20% deemed deduction, you can claim 3% depreciation on the building value (not the land value) per year. You need a professional valuation that splits the property price between building and land to calculate this.

Mortgage interest: interest on loans taken out to purchase or improve the rental property is deductible in full against rental income. Capital repayments are not deductible - only the interest component of the mortgage payment counts.

Insurance: building insurance and landlord liability insurance premiums are deductible.

Property management fees: fees paid to a Cyprus-based property management company for finding tenants, collecting rent and managing the property are deductible.

NOT deductible: capital improvements (adding a room, major renovation that increases value), periods of personal use by the owner or family, depreciation on land value, and the capital repayment component of mortgage payments.

Practical note: for most landlords with a single property and a simple mortgage, the 20% deemed deduction combined with mortgage interest deduction is the most practical approach and provides the best result without requiring extensive record-keeping.

Non-Residents with Cyprus Rental Property

Foreign nationals and non-residents who own Cyprus property and receive rental income must file a Cyprus annual income tax return (TD1), even if they have no other connection to Cyprus. This is a legal obligation regardless of whether tax is ultimately due.

Non-residents are taxed on Cyprus rental income at 30% flat rate on net rental income (gross income minus allowable deductions). This flat rate replaces the progressive bracket system that applies to residents. The same expense deductions are available - the 20% deemed maintenance deduction, mortgage interest, depreciation, insurance, and management fees.

SDC does not apply to non-residents. GHS at 2.65% does apply. Non-residents must obtain a Cyprus Tax Identification Number (TIN) before filing. Applications are made to the Cyprus Tax Department and typically take 2-4 weeks.

For non-residents owning multiple Cyprus properties, the 30% flat rate applies separately to the net income from each property after its allowable deductions. Properties that make a net loss can be offset against other rental income but not against other types of Cypriot income for non-residents.

Residential vs Commercial Rental: Key Differences

Residential property rental in Cyprus is VAT-exempt. If you rent an apartment or house to a tenant for residential use, no VAT is charged and the rental income is outside the VAT system. This means you cannot reclaim input VAT on expenses related to residential rental, but you also have no VAT compliance obligations for that property.

Commercial property rental operates differently. The standard 19% VAT can apply to commercial leases. The landlord can opt in to VAT on the property - this is a formal election that is irrevocable once made. Commercial landlords who opt in charge 19% VAT to tenants but can reclaim input VAT on renovation costs, fitting-out works, and professional fees related to the property.

Short-term rental via holiday letting platforms: properties rented for periods of less than 90 days and operated with hotel-style services (reception, cleaning, linen) may be classified as tourism accommodation. These must be registered with the Cyprus Deputy Ministry of Tourism. The income tax and VAT treatment differs from standard residential rental.

Mixed-use properties: if a property is used partly for residential and partly for commercial purposes (for example, a ground floor shop with a flat above), the income is apportioned and each part taxed under the relevant rules. This requires careful documentation of floor areas and income allocation.

Multiple rental properties: each property is a separate income stream for Cyprus tax purposes. Allowable expenses are calculated per property. A net loss on one rental property can be offset against net income from another rental property in the same year. Rental losses cannot be carried back but can be carried forward to offset future rental income.

How to File Rental Income Tax in Cyprus

Step 1: Collect all rental income records for the calendar year. This means rental agreements, bank records of rent received, and any invoices for deductible expenses. If your property was managed by an agent, request an annual statement.

Step 2: Calculate your net rental income. If using the 20% deemed deduction: multiply gross rent by 80% to get the deductible base for income tax. Add mortgage interest separately. If using actual expenses: total all allowable costs and subtract from gross rent.

Step 3: File your annual income tax return (TD1) by 31 July of the following year via the TAXISnet portal. For example, income earned in 2025 must be filed by 31 July 2026.

Step 4: Pay any income tax due. Tax payments are made via TAXISnet using a bank card, bank transfer or JCC payment. Late payment incurs interest at the annual rate set by the tax authority.

Step 5: If you are a domiciled Cyprus tax resident (not Non-Dom), you must also file and pay SDC quarterly. SDC is self-assessed and paid on a provisional basis during the year, with a final adjustment when the annual return is filed.

Filing portal guide: Cyprus Tax Portal (TAXISnet): How to Use

Deadlines: Cyprus Tax Filing Deadlines 2026

Summary: Tax on Rental Income by Residency Status

Frequently Asked Questions

Sources: PwC Cyprus Tax Facts 2026, Cyprus Tax Department.

Need personalized advice? Book a consultation with an expat tax specialist.

Sources: PwC Cyprus Tax Facts 2026, Cyprus Tax Department.

Questions about rental income tax? Get expert advice

Investors holding multiple properties should read our full Cyprus tax guide for real estate investors.