Cyprus has long been a preferred destination for property investors due to its favourable tax framework, Mediterranean lifestyle, and access to the EU market. Whether you are renting out property long-term or earning short-term rental income through platforms like Airbnb, understanding the taxation rules is essential for ensuring compliance and maximising your returns.
This guide provides a detailed breakdown of how rental income is taxed in Cyprus in 2025 for both individuals and companies, highlighting key tax obligations, exemptions, and planning strategies so you can reduce your tax liability.
If you are considering property investment in Cyprus, understanding the buying process is just as crucial as taxation. We therefore recommend that you also check out our guide: How to Buy Property in Cyprus: A Complete Guide for 2025.
Tax on Rental Income in Cyprus: Key Rules and Obligations Rental income in Cyprus is subject to taxation, whether the property is owned by an individual or a company. The tax implications differ depending on whether the owner is a Cyprus tax resident or a non-resident:
Cyprus tax residents must declare worldwide rental income.Non-residents are only taxed on rental income generated in Cyprus.Additionally, taxation varies based on ownership type:
Individuals are taxed at progressive income tax rates.Companies are taxed at a flat corporate tax rate.To make informed investment decisions, it is essential to understand how these tax obligations apply to your situation.
How Individuals Are Taxed on Rental Income in Cyprus 1. Income Tax on Rental Income Individuals earning rental income in Cyprus must include it in their total annual income, which is taxed at progressive income tax rates. This means that rental income is added on top of other personal income streams, such as employment income, potentially pushing a significant portion into higher tax brackets:
Income Bracket (€)
Tax Rate (%)
0 – 19,500
0
19,501 – 28,000
20
28,001 – 36,300
25
36,301 – 60,000
30
60,001+
35
2. Special Defence Contribution (SDC) for Individuals Cyprus tax residents who are domiciled in Cyprus must pay Special Defence Contribution (SDC) on rental income at a rate of 3% on 75% of gross rental income.
Example Calculation:
If a domiciled tax resident earns €20,000 in rental income:
75% of €20,000 = €15,000 subject to SDC 3% of €15,000 = €450 payable in SDC Exemptions:
Non-domiciled Cyprus tax residents do not pay SDC. Non-tax residents do not pay SDC. 3. General Healthcare System (GHS) Contribution In addition to income tax, a 2.65% GHS contribution is applied to gross rental income, with an annual cap of €4,770 on income up to €180,000. Any income above this threshold is exempt from GHS contributions.
4. Deductible Expenses for Individuals Property owners can however reduce their taxable rental income by deducting allowable expenses, such as:
20% wear and tear deduction on gross rental income Property maintenance and repairs Insurance premiums Mortgage interest payments (if used to finance the property) Proper documentation is necessary to claim these deductions and to reduce your tax liability.
How Companies Are Taxed on Rental Income in Cyprus 1. Corporate Tax on Rental Income Companies that own rental properties in Cyprus are subject to a flat 12.5% corporate tax rate on net rental income, making it a far more attractive alternative compared to the progressive tax rates individuals face.
2. Special Defence Contribution (SDC) for Companies Just like individuals, companies must also pay 3% SDC on 75% of gross rental income. However, self-catering accommodations (e.g., Airbnb rentals) that meet specific conditions are classified as business income and are therefore subject only to the 12.5% corporate tax, making them exempt from SDC. 3. General Healthcare System (GHS) Contribution Unlike individuals, companies do not pay GHS contributions on rental income.
4. Deductible Expenses for Companies Similar to individuals, Cyprus-based companies can offset taxable rental income by deducting:
Interest on property-related loans Property maintenance and repair costs Property management fees Insurance costs These deductions can significantly lower the taxable amount, making corporate ownership a strategic option for investors with single or multiple rental properties.
Short-Term Rental Taxation: Airbnb & Holiday Lets 1. VAT on Rental Income & Licensing Requirements Long-term rentals (90+ days) are exempt from VAT.Short-term rental income (e.g., Airbnb, Booking.com) is subject to 9% VAT if annual revenue exceeds €15,600. Additionally, landlords offering short-term rentals must register their company with the Cyprus Tourism Organisation (CTO) to obtain a short-term rental license.If the property owner provides hotel-like services (e.g., cleaning, concierge services), VAT registration is required under certain conditions. 2. How Airbnb Hosts Are Taxed in Cyprus Individuals renting through Airbnb must pay income tax, SDC (if domiciled), and GHS contributions.Companies can classify Airbnb rental income as business income, taxed at 12.5% corporate tax exempting it from SDC.Our Recommendation on How to Minimise Tax on Rental Income in Cyprus 1. Choose the Right Ownership Structure For most rental property investors, we recommend using a company structure as it is the most tax-efficient option. Companies benefit from a flat 12.5% corporate tax rate, while individuals must add rental income on top of their income earned from employment, often pushing a large portion, if not all of it, into the 35% tax bracket.
Additionally, companies can deduct a wider range of expenses, such as property-related loan interest, maintenance costs, and management fees, further reducing taxable income and improving overall profitability.
2. Utilise Non-Domicile Tax Benefits Investors who utilise a corporate structure and also qualify for non-domicile tax residency in Cyprus
Read also: Cyprus Non-Domicile Tax Residency Status: Ultimate Guide .
3. Work with Professionals Tax laws are constantly evolving, and rental property owners should consult with experienced tax advisors to stay compliant and optimise their tax position. Whether structuring a company, applying for non-domicile status, or ensuring VAT compliance, expert guidance can prevent costly mistakes.
For tailored advice on structuring your rental investments, explore our Cyprus Real Estate Investment Service Cyprus Company Formation Service
Conclusion Understanding rental income taxation in Cyprus is essential for property owners looking to optimise their investment returns while remaining compliant with the country's tax laws. By structuring ownership efficiently, leveraging deductions, and planning for tax obligations, you can ensure that your rental business flourish and profitable.
If you need expert tax advice or assistance in structuring your property investments for maximum tax efficiency, contact us today
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