Guide
Rental Income Tax in Cyprus After the 2026 Reform
Rental Income Tax in Cyprus After the 2026 Reform: short answer
Last reviewed
The 2026 reform abolished the Special Defence Contribution on rental income. What remains is income tax for an individual or corporate income tax at 15 percent for a company, in both cases after a statutory 20 percent deduction on gross rents and the deductible expenses.
| SDC on rental income | Abolished with effect from 1 January 2026 |
|---|---|
| What still applies | Income tax for an individual, or corporate income tax at 15 percent for a company |
| Statutory deduction | 20 percent of gross rents |
| Other deductions | Capital allowances on the building, and interest on acquisition borrowing |
| GESY | Still applies to rental income, up to the annual ceiling |
| Non-domiciled residents | Were already outside SDC, so the abolition changes little for them |
Removing one of the two charges changes the arithmetic on whether property is better held personally or through a company, and structures built before 2026 were built against a different answer.
What changed, and what did not
Rental income in Cyprus used to attract two separate charges. Income tax under the Income Tax Law, and the Special Defence Contribution under its own statute, on the same rents.
The 2026 reform abolished the second of those. The Special Defence Contribution on rental income no longer applies.
What did not change is the first. Rents remain within income tax for an individual, at the progressive personal bands, or within corporate income tax at 15 percent where earned by a company. The reform removed a charge; it did not exempt the income.
A third element also survives. The GESY contribution applies to rental income as part of the other income category, on income up to the annual ceiling of 180,000 euro across all sources combined. Descriptions of the reform that mention the abolition without mentioning GESY overstate the change.
Who this actually helps
The size of the benefit depends entirely on whether the recipient was within the Special Defence Contribution before, and most readers of this site were not.
A Cyprus tax resident who is also domiciled here. Both charges applied to their rents. The abolition is a real and material reduction.
A Cyprus tax resident who is non-domiciled. They were outside the Special Defence Contribution already, on rents as on dividends and interest. Nothing changes for them, and this is the group most Doviandi clients fall into.
A non-resident receiving Cyprus rents. Income tax on Cyprus-source income continues, since the source is here regardless of where the recipient lives.
A company. Rents form part of taxable profit at 15 percent, and companies were treated differently from individuals under the old defence contribution rules in any event.
Deductions, which do more work than the rate
The headline charge is less interesting than what comes off before it.
A statutory 20 percent deduction on gross rents, given without needing to evidence expenditure. It is subtracted before the taxable figure is reached.
Capital allowances on the building, spreading the cost of the structure over its life. Land does not qualify, so an acquisition has to be apportioned between the two.
Interest on borrowing used to acquire the property, which for a leveraged purchase is frequently the largest deduction of the three.
The combined effect is that the taxable proportion of gross rents is often considerably lower than the headline rate implies, and the difference between holding personally and holding in a company narrows further once the deductions are applied on both sides.
Personally or through a company
The abolition changes the balance of this decision, so a structure set up before 2026 is worth re-examining.
Holding personally now attracts one charge rather than two for a domiciled resident. Progressive bands mean a modest portfolio may sit in low brackets, and the personal allowance applies.
Holding through a company gives a flat 15 percent on profit, which is favourable at higher rents and unfavourable at low ones. It adds audit and administration costs, which are real annual amounts, and it raises the question of how the money is taken out. For a non-domiciled shareholder that extraction is efficient, with no Special Defence Contribution on the dividend.
Common questions
Is rental income now tax free in Cyprus?
No. The 2026 reform abolished the Special Defence Contribution on rents. Income tax for an individual, or corporate income tax at 15 percent for a company, continues to apply, as does GESY up to the annual ceiling.
Does the abolition help a non-domiciled resident?
Very little. Non-domiciled residents were outside the Special Defence Contribution already, so the charge that was removed was not one they were paying.
What can I deduct from rental income?
A statutory 20 percent of gross rents, without needing to evidence it, plus capital allowances on the building and interest on borrowing used to acquire the property. Land does not attract capital allowances.
Does GESY still apply to rents?
Yes. Rental income falls within the other income category for GESY purposes and contributions apply up to the annual ceiling of 180,000 euro across all income sources combined.
Should I move my property into a company now?
The abolition narrows the gap rather than deciding it. A company gives a flat 15 percent and costs audit and administration annually; holding personally uses progressive bands. The answer depends on the rent level, the borrowing and whether you are domiciled here.
Technical definition
Rental income from Cyprus immovable property is charged to income tax in the hands of an individual, at the progressive personal bands, or to corporate income tax where earned by a company. A statutory deduction of 20 percent of gross rents is available, alongside capital allowances on the building and interest on borrowing used to acquire it. The Special Defence Contribution previously charged on rents was abolished with effect from 1 January 2026.
Practical implications
For a domiciled Cyprus resident individual the abolition is a material reduction, because both charges previously applied to the same rents. For a non-domiciled resident it changes little, since they were already outside the Special Defence Contribution.
Common misconceptions
Two recur. That rental income is now untaxed in Cyprus, when income tax or corporate income tax continues to apply. And that the GESY contribution went with it, when GESY continues on rents up to the annual ceiling.