Rental income taxes

1. Corporate Taxation

• Cyprus companies are subject to a 12.5% tax on net profits.
• A 2.25% defence tax is applicable but is not required for short-term rentals.

2. Taxation for Individuals

(a) Income Tax Rates

(b) Defence Tax

• No defence tax applies to short-term rentals.

(c) National Health System (GESY) Contribution

• GESY is charged at 2.65% with a maximum cap of €4,755.

3. Important Considerations

3.1 Tax Residency & Domicile

• Non-domiciled foreign individuals in Cyprus do not pay defence tax.
• Non-domicile Cyprus-registered companies are also exempt from defence tax.

3.2 Stamp Duties on Property Contracts

3.3 Taxable Income

• Personal income tax applies to all annual income.

3.4 Additional Property Taxes

• Owners must also pay municipal taxes, sewerage fees, and local authority fees.

4. Tax Deductions for Individuals

• Wear and Tear Allowances: Based on property type and age.
• Flat Rate Expense Deduction: 20% (not applicable to land).
• Loan Interest Deduction: If the property was purchased using a loan, the interest is tax-deductible.
• Defence Tax and GESY Contributions: Both are tax-deductible.

5. VAT Considerations

• Property rentals to taxable persons: Subject to 19% VAT, unless used for residential purposes.
• Short-term rentals (tourist accommodation): Subject to 9% VAT.
• VAT Registration Requirement: If rental income exceeds €15,600 per year, registration with the VAT Department is mandatory.

Final Note

For a precise tax assessment, it is crucial to consider all individual circumstances. Professional tax advice is recommended to ensure compliance with Cyprus tax regulations.