Rental Income Tax in Cyprus: A Guide for Real Estate Investors

If you are considering Cyprus property investment to generate rental income, it is important to understand how rental income tax in Cyprus works. Many countries advertise high rental returns (10-15%), but significant property taxes and complex tax systems often reduce the actual profit. In contrast, real estate investment in Cyprus benefits from transparent tax rules, moderate tax rates and legal deductions. As a result, the rental yield in Cyprus is often more predictable and the net return can be higher than in many other European property markets.

This article explains the Cyprus investment property tax, including income tax, GeSY healthcare contributions, corporate taxation, and the main tax benefits available to property owners.

Annual Property Tax in Cyprus

One of the major advantages of owning property in Cyprus is the absence of an annual property ownership tax.

Unlike many European countries where property owners pay annual real estate taxes ranging from 1% to 5% of the property value, Cyprus abolished its Immovable Property Tax, meaning that property owners do not pay tax simply for owning real estate.

This significantly reduces long-term ownership costs and increases the attractiveness of buy-to-let investments in Cyprus, particularly for foreign investors purchasing apartments, villas, or commercial real estate for rental income.

As a result, landlords benefit from:

• lower fixed property expenses
• more predictable investment planning
• higher net rental returns

Property Rental Taxes in Cyprus for Individuals

When an individual rents out residential or commercial property in Cyprus, the rental income may be subject to the following taxes:

• Income tax
• General Healthcare System contribution (GeSY)

Previously, rental income was also subject to Special Defence Contribution (SDC), but this tax was abolished under the Cyprus tax reform effective from 1 January 2026.

1. Income Tax on Rental Income in Cyprus

Rental income is included in the total annual income of the taxpayer and taxed under the Cyprus progressive income tax system.

A key advantage for landlords is that only 80% of the rental income is taxable, because the Cyprus tax system allows a 20% deemed expense deduction on gross rental income.

In addition, as of 1 January 2026 the first €22,000 of annual income is tax-free, which significantly reduces the tax burden for many property owners.

Personal Income Tax Rates in Cyprus

Because of this tax-free threshold and rental deduction, many landlords pay little or no income tax on rental property income.

Tax Benefits for Landlords in Cyprus

Cyprus offers several tax deductions and allowances for property investors, which further reduce the taxable base, including:

• Depreciation allowance: 3% annual depreciation on the value of the building (excluding land value).
• Mortgage interest deduction: if the property was purchased using a mortgage, the interest paid on the loan used may be deductible from taxable income. For example, if you pay €3,000 in mortgage interest per year, that amount may reduce your taxable rental income.
• Tax-free income threshold: the first €22,000 of annual income remains completely tax-free.

Tax residents with income exceeding this threshold must submit an annual tax return through the Cyprus Tax Department portal.

2. General Healthcare System Contribution (GeSY)

GeSY is the national healthcare scheme in Cyprus that provides residents with access to public medical services, hospitals and doctors, similar to public healthcare insurance schemes in other European countries.

The GeSY contributions apply to various types of income, including rental income from property.

GeSY rate on rental income:

• 2.65% of gross rental income
• calculated before any deductions

Even if a landlord’s income is below the tax-free threshold, the GeSY contribution must still be paid.

3. Special Defence Contribution (SDC)

Under the Cyprus tax reform effective from 1 January 2026, SDC on rental income has been abolished. Previously, SDC was charged at 3% on 75% of rental income with an effective rate 2.25% of gross rent

The abolition of SDC reduces the overall tax burden for property investors in Cyprus and further improves the profitability of rental real estate investments.

Example: Rental Income Tax Calculation in Cyprus

Example for a Cyprus tax resident with Non-Dom status renting out an apartment for: €1,500 per month (€18,000 per year)

This demonstrates why Cyprus property investment returns are among the most tax-efficient in the European real estate market.

Corporate Tax on Rental Income in Cyprus

Investors who own multiple properties or large real estate portfolios often choose to hold property through a Cyprus company. In this case, rental income is subject to corporate income tax.

• Corporate tax rate: 15% on net taxable profits
• The taxable base is calculated after deducting allowable business expenses.

Companies benefit from a wider range of deductions compared with individuals which may include:

• mortgage interest
• property maintenance and repairs
• accounting and legal services
• property management fees
• insurance costs
• depreciation of the building (3%)

Despite the increase in corporate tax from 12.5% to 15% in 2026, Cyprus still maintains one of the lowest corporate tax rates in the European Union.

Advantages of Holding Property Through a Company

A corporate structure for real estate ownership can offer several advantages for investors:

• recognition of actual operating expenses
• improved tax planning opportunities
• more efficient management of large property portfolios
• flexibility in international holding structures

This structure is particularly useful for professional landlords, property developers, and real estate investment businesses.

Professional Tax Planning for Property Investors

Understanding Cyprus property taxation, rental income tax rules, and available deductions is essential for maximizing your real estate investment returns.

Proper legal structuring and tax planning can significantly reduce your overall tax burden and increase your net rental yield.

Feod Group provides professional legal and tax consulting for property investors, including:

• tax planning for rental income
• structuring property ownership
• corporate real estate structures
• legal support for property transactions in Cyprus

Contact our Larnaca office or schedule an online consultation to receive a personalized strategy for your investment.

Online consultations | Office in Larnaca