Beginning 1 January 2026, Cyprus will implement specific reforms impacting both the taxation of rental income and the method by which rent must be paid.
Removal of Special Defence Contribution (SDC) on Rental Income
Until the end of 2025, rental income was subject to two separate taxes:
- Income Tax (or Corporate Tax), and
- Special Defence Contribution (SDC).
This created a dual tax burden on rental earnings.
From 1 January 2026 onwards, rental income will be taxed solely under the standard Income Tax or Corporate Tax regime. The Special Defence Contribution will no longer apply to rental income.
Compulsory Electronic Payment of Rent
Accepted payment channels include:
- Bank transfers
- Debit or credit card payments
- Other officially recognised electronic payment systems
Cash payments and any other non-traceable payment methods will no longer be permitted.
Important Compliance Note
If rent is paid using non-approved methods, the expense may not qualify as tax deductible for the tenant. This may create additional tax exposure, particularly for businesses claiming rent as an expense.
Practical Impact
For Landlords
- Removal of SDC on rental income
- Need to amend lease agreements to include compliant payment terms
- Provision of appropriate banking/payment details to tenants
For Tenants
- Mandatory electronic settlement of rental obligations
- Risk of losing tax deductibility if payment requirements are not followed
Have Questions About Cyprus Rental Reforms 2026?
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