As of 1 January 2026, important legislative amendments have come into force in Cyprus, affecting both the taxation of rental income and the permitted methods of rent payment.
End of Special Defence Contribution on Rental Income
Up to 31 December 2025, income derived from rent has been subject to two separate charges: Income Tax and Special Defence Contribution (SDC), effectively creating a combined tax burden.
From 2026 onwards, SDC will no longer apply to rental income. Such income will be taxed exclusively under the standard Income Tax regime (for individuals) or Corporate Tax regime (for companies), removing the previous dual taxation framework.
Compulsory Electronic Settlement of Rent
As of 1 July 2026, rent relating to immovable property situated in Cyprus must be paid solely via traceable electronic payment methods.
Permitted methods include:
- Bank transfers
- Debit or credit card transactions
- Other officially recognised electronic payment solutions
Cash payments and other non-traceable forms of settlement will no longer be acceptable.
⚠️ Compliance Considerations
Where rent is not paid through the prescribed electronic channels, the expense may be disallowed for tax deduction purposes. This may create additional tax liabilities, particularly in cases involving corporate tenants.
Key Practical Impact
For Landlords:
- Removal of SDC from rental income starting 2026
- Review and amendment of lease agreements to ensure compliant payment clauses and banking details
For Tenants:
- Legal obligation to pay rent through approved electronic methods
- Potential loss of deductibility if payment requirements are not met
The team at M. Target Group is available to assist with reviewing lease structures, ensuring compliance with the new framework, and advising on the tax implications of these upcoming changes.
