How Rental Income Is Taxed for Cyprus Landlords in 2026

The way Cyprus taxes landlords changed materially in 2026. The headline is simple: the Special Defence Contribution (SDC) that used to sit on top of income tax on rent is gone, so rental income is now taxed under one regime — personal income tax — plus the General Healthcare System contribution for tax residents.Special Contribution for the Defence of the Republic Law N.117(I)/2002 (as amended, 2026 tax reform)

This guide gives the direct answer, then walks through what you can deduct, the 2.65% GESY charge, the new mandatory electronic rent-payment rule from 1 July 2026, how non-domiciled landlords now stand, and whether to hold property personally or through a company. Every figure below is framed with its statute and scope — Cyprus tax turns on the detail, so confirm your own position before acting.

How is rental income taxed for Cyprus landlords in 2026?

An individual landlord who is Cyprus tax resident pays personal income tax on net rent at the standard PIT bands, after a deemed 20% deduction for buildings, capital allowances and loan interest. A 2.65% GESY contribution also applies. Since 1 January 2026 there is no separate SDC layer on rent.

Net rental income is aggregated with your other taxable income and taxed under the personal income tax bands for the year, so the marginal rate on rent depends on your total income.Income Tax Law N.118(I)/2002, Article 5 (rents) and Article 8 (bands)

Because the first €22,000 of total taxable income is tax-free, a landlord with modest rent and little other Cyprus income may pay very little income tax on it — though the 2.65% GESY charge still applies from the first euro. Where the property is owned by a Cyprus company instead of an individual, net rent is taxed as ordinary company profit at the 15% corporate rate covered in our Cyprus corporate tax guide, with no GESY on the company.

Is rental income still subject to SDC in 2026?

No. The Special Defence Contribution on rental income was abolished with effect from 1 January 2026. Until 31 December 2025, rent was subject to SDC at 3% on 75% of gross rent — an effective 2.25% — for domiciled Cyprus tax residents. That charge no longer exists.

This is one of the more consequential parts of the 2026 tax reform for property owners. Two practical effects follow. First, the old requirement for tenants (in a business context) or landlords to withhold and remit SDC on rent falls away. Second, and importantly, the abolition applies to everyone — so the historic non-dom advantage on rent, which was simply exemption from that SDC, no longer differentiates a non-dom from a domiciled landlord.Special Contribution for the Defence of the Republic Law N.117(I)/2002 (repeal of SDC on rents, effective 1 January 2026)

What can I deduct from rental income?

From gross rent on buildings you deduct a deemed 20% (in lieu of actual repairs and maintenance, taken without receipts), capital allowances on the building, and interest on any loan used to acquire the property. The result is your net taxable rent.

• 20% deemed deduction. Applied automatically to gross rent from buildings, replacing actual repair and upkeep costs. It does not apply to bare land.Income Tax Law N.118(I)/2002, Article 9 (deemed deduction for buildings)
• Capital allowances.Annual wear-and-tear allowances on the building (not the land element) reduce taxable rent over the asset's life.
• Interest. Interest on a loan taken to acquire the let building or land is deductible against the rent it produces.

Note the 20% deduction is instead of, not in addition to, claiming actual repair costs on the same building — you take the deemed allowance rather than itemising maintenance. Keep clean records of the acquisition cost, loan interest and the land/building split, because capital allowances turn on that split.

Do I pay GESY on rental income?

Yes, if you are a Cyprus tax resident. The General Healthcare System (GESY) contribution of 2.65% applies to rental income, subject to the overall annual income cap of €180,000 across all income sources. It is charged on rent even though SDC is gone.

The 2026 reform did not touch the GESY rate on rents — it remains 2.65% for individuals, and the €180,000 cap applies to total annual income from all categories combined, not per source.General Healthcare System Law N.89(I)/2001 (contribution rate 2.65%, capped)GESY is a contribution rather than a tax, but for a landlord budgeting the real cost of letting, it is a 2.65% charge on the gross-rent base that should be planned for alongside income tax. A company holding the property does not pay GESY on its rental profit, which is one factor in the ownership-structure decision below.

What is the mandatory electronic rent-payment rule?

From 1 July 2026, all rent for immovable property in Cyprus must be paid by electronic means — bank transfer, debit or credit card, or another recognised electronic method. Cash is not permitted. The rule applies to every landlord and tenant regardless of the rent amount or the type of property.

The obligation is set out in Article 48A of the Assessment and Collection of Taxes Law N.4/1978, introduced by the 2026 reform, and was confirmed by a Cyprus Tax Department announcement in June 2026. An earlier suggestion of a €500 threshold was superseded — the requirement now applies to all rent, with no minimum.Assessment and Collection of Taxes Law N.4/1978, Article 48A (electronic payment of rent, from 1 July 2026)

The practical bite is on deductibility and evidence. Rent paid outside the permitted methods risks being disallowed as a tax-deductible expense for a paying business, and creates an obvious flag in any audit because the electronic trail is exactly what the authorities now expect to see. Landlords should ensure tenancy agreements name a bank account or electronic method and stop accepting cash before the date. If you are also buying or selling the underlying property, see how the transfer side works in our Cyprus conveyancing guide.

How are non-domiciled landlords taxed on rent in 2026?

The same as domiciled residents. The non-dom benefit on rent was exemption from SDC; with SDC on rent abolished for everyone from 1 January 2026, a non-dom landlord and a domiciled landlord now face identical treatment — income tax on net rent plus 2.65% GESY.

Non-dom status remains valuable — it still exempts qualifying residents from SDC on dividends and interest for up to 17 years (extendable) — but for rent specifically it no longer changes the outcome. Anyone who moved to Cyprus primarily for the non-dom regime should reassess the rent line of their plan; the full mechanics are in our non-dom status explainer. Note also that a non-resident landlord (living abroad but letting Cyprus property) is taxed in Cyprus on that Cyprus-source rent under income tax, but generally has no GESY liability, as GESY attaches to residents.

Should I hold rental property personally or through a company?

There is no universal answer. An individual pays income tax at marginal bands up to 35% plus 2.65% GESY; a Cyprus company pays 15% on net rent with no GESY, but distributing the profit and eventually selling can add layers. The right structure depends on scale, other income and exit plans.

For a single property producing modest rent alongside little other income, personal ownership often wins because the first €22,000 of income is tax-free. For a portfolio, or where the owner already has high personal income, the flat 15% corporate rate can be more efficient — but remember that getting cash out as a dividend and the capital gains position on a future sale both need modelling. Capital gains tax on the eventual disposal is a separate regime explained in our immovable-property CGT guide. A related point: stamp duty on immovable-property instruments was abolished in 2026, removing one historic cost from property transactions.

How do I declare and pay tax on rental income?

Report net rent on your annual personal income tax return (the TD1), settle income tax and GESY through self-assessment, and — because SDC withholding on rent is gone from 2026 — there is no longer a separate SDC-on-rent return to file. Keep the electronic payment records the new rule now requires.

• Include net rental income (after the 20% deduction, capital allowances and interest) in your annual income tax return.
• Pay income tax and the 2.65% GESY contribution on the rent as part of your personal tax settlement.
• Retain bank/card records evidencing that rent was received electronically from 1 July 2026.
• Where the property sits in a company, the rent flows through the company's audited accounts and TD4 return — see our complete 2026 tax guide for how the pieces fit together.