Rental income from a property situated in Cyprus is taxable. Declaring the rental income to the appropriate Authorities in Cyprus is obligatory and failure to comply might result in penalties/interest, even when selling the property.

Tax:

The following contributions are applicable to rentals being made for residential purposes (where the landlord is a physical person):

  • General Health System Contribution (“GeSy”) of 2.65%, chargeable on the gross rental income received. Under specific circumstances (i.e., the landlord is a holder of A1 or S1) the tax payer is exempted.
  • Special Defence Contribution (“SDC”) of 3% on the 75% of the rental income is applicable on the gross rental income (3% x 75%)
  • Income tax only in case the annual income is exceeding the amount of €19.500 (tax deductions are applicable)

The following contributions are applicable to rentals being made for residential purposes (where the landlord is a legal person):

  • Special Defense Contribution (“SDC”) of 3% on the 75% of the rental income is applicable on the gross rental income (3% x 75%)
  • Corporate tax at the flat rate of 12.5%

In case the tenant and the landlord are physical persons or the landlord is a legal person and the tenant is a physical person, then the landlord has a responsibility to settle the GeSy (where applicable) and SDC (where applicable) twice per year (30/06 and 31/12). In any other case the responsibility lies to the tenant. The payment deadlines remain the same.

Cyprus tax residents (physical or legal persons) are obliged to pay SDC, noting that an exemption for 17 years from paying the SDC may be obtained by a Cyprus tax resident under the non-domicile tax residency status. The GeSy contribution is payable irrespective of the tax residency.

VAT:

The renting of a property (either long term or short term) to a tenant who is considered a tax resident of Cyprus and registered with the VAT Authority, for the purpose of carrying out taxable activities, is subject to VAT at the standard rate of 19%, provided the rental income surpasses the amount of €15,600 during the financial year. An exemption from VAT payment may be obtained upon request.

Short term rentals of a residential property used for holiday/tourist accommodation is subject to a reduced VAT rate of 9%. The rental income received from short term rentals and from a property registered as a self-catering accommodation and provided the landlord is registered with the VAT Authority and charges the reduced VAT rate of 9%, is not subject to SDC (GeSy and Income Tax are still applicable).

Properties offered for holiday/tourist accommodation via online platforms (eg. Airbnb, Booking.com etc.), websites or otherwise, a special permit for registering the property as “a self-catering accommodation” from the Deputy Ministry of Tourism is needed. The registration fee is €222.00= with a validity of three years.

VAT is not applicable on the leasing of properties that are used for residential purposes.

Stamp duty on contracts:

All rental agreements have to be duly stamped at the Tax Department in order to be legally valid.

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