The three separate charges on Cyprus rental income
Most owners think of rental tax as one number. It is three, they are worked out on different bases, and one of them depends on a status many foreign owners hold without realising it.
This guide explains what each charge is and how they differ. It states no rates or percentages — those change, and there has been active reform discussion in Cyprus. Get the current figures from the Tax Department or your accountant.
Income tax: charged on what is left
Income tax on rent is charged on net rental income, after the deductions the law allows. It is also charged on top of everything else you earn, which is the part people miss.
Rent does not have its own tax rate. It sits above your salary or pension in the same bands, so the same €10,000 of rent costs a retiree with a small pension far less than it costs someone on a full salary. Any estimate that taxes rent on its own is understating the bill, usually by a lot.
SDC: charged on gross, and not on everyone
The Special Defence Contribution is charged on gross rent rather than on profit. Deductions that reduce your income tax do not reduce it.
It applies only to those who are both tax resident in Cyprus and domiciled here. Non-domiciled residents — which many owners who moved to Cyprus are, for a substantial period — do not pay it at all. This is not a technicality worth ignoring: on a portfolio it is the difference between two materially different annual bills, and it is worth establishing your status in writing rather than assuming.
GESY: charged on gross, capped overall
The health system contribution is also charged on gross rent, not profit, and applies regardless of domicile. It is subject to an overall ceiling that counts your income from all sources together, so someone with a large salary may already be at the ceiling before any rent is counted.
Why a loss-making property can still owe money
This is the consequence owners find hardest to accept. Because SDC and GESY are charged on gross rent, a property whose interest and allowances wipe out its taxable income still owes both. There is no version of the arithmetic in which a property that made no profit costs nothing.
It is also why "my accountant says the flat makes nothing" and "the flat costs me nothing" are different statements, and the gap between them is worth knowing before you decide whether to keep it.
What to establish before you file
- Your domicile status, in writing, if you moved to Cyprus
- Gross rent per property for the year, separate from deposits and from any charges recovered from tenants
- Loan interest attributable to each let property
- Your other income for the year, since it sets the rate your rent is taxed at
- Whether each property was available to let, and for how much of the year
General information about how these charges differ, not tax advice. It states no rates, bands or thresholds, and the rules change. Confirm your position with the Cyprus Tax Department or a qualified accountant.