16/03/2026
Thinking of buying, renting or investing in property in Cyprus? The 2026 tax reform is bringing significant changes you should know about.
Important tax changes are being introduced in Cyprus affecting rental income, rent payments, and the reduced 5% VAT scheme on residential property. These reforms aim to modernise the tax system, increase transparency, and align Cyprus with EU requirements.
📌 Rental Income – SDC Abolished
From 1 January 2026, Special Defence Contribution (SDC) on rental income is abolished. Rental income will therefore be taxed only under Income Tax (for individuals) or Corporate Tax (for companies).
💳 Electronic Rent Payments
From 1 July 2026, rent payments exceeding €500 must be made electronically through traceable methods such as bank transfers, debit/credit cards, or other recognised electronic payment systems. Cash payments above this threshold will no longer be accepted for tax purposes. For businesses, rent expenses may only be tax-deductible if paid electronically.
🏡 Updated 5% VAT Scheme for Primary Residences
The revised 5% VAT rate applies to the first 130 m² of a new property intended as the buyer’s primary residence, provided certain criteria regarding property value and buildable area are met. The property must also be used as the main residence for a minimum period, otherwise part of the VAT benefit may need to be repaid.
⏳ Transitional VAT Rules
A transitional regime applies until 16 June 2026. The previous VAT rules (allowing 5% VAT on the first 200 m²) may still apply if the planning permit was issued or applied for before 31 October 2023 and the VAT application is submitted within the transitional deadline.
Understanding these changes is essential for property owners, investors and tenants navigating the evolving real estate landscape in Cyprus.
✨ Work with professionals who understand both the property market and the regulations that shape it. For guidance on property investment, rental management, or navigating the new tax rules, feel free to contact us
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📞 +357 97747197
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