Tax on Rental Income in Cyprus: What Holiday Let Owners Should Know

Sooner or later every owner who lets a flat in Paphos short-term asks the same thing: how much of this is actually mine after tax? The honest answer is that it depends on where you are tax resident, how much the property earns and whether Cyprus treats you as domiciled.

We manage holiday lets in Paphos and regularly sit down with owners who are working through this for the first time. So here is a plain overview of tax on rental income in Cyprus for short-term lets: income tax, the Special Defence Contribution, the GESY health contribution and VAT, plus the difference between residents and non-residents and which receipts to keep.

One thing first, and we mean it. This is not tax advice. We are property managers, not accountants. What follows reflects our understanding as of September 2026, and Cyprus is in the middle of implementing a tax reform that may change individual figures. Please have everything checked by a tax adviser in Cyprus before you make decisions.

Which taxes apply to rental income in Cyprus?

The rule in Cyprus is simple: income from letting a property located in Cyprus is taxed in Cyprus. That applies to everyone, whether you live on the island or not. For a short-term holiday let, up to four charges can come into play:

• income tax on the profit from letting
• the Special Defence Contribution (SDC), only for residents who are also domiciled in Cyprus
• the GESY contribution to the national health system, for Cyprus tax residents
• VAT, once turnover from accommodation passes a threshold

Income tax: progressive, with a tax-free allowance

Rental income counts as taxable income in Cyprus. What is taxed is not the gross rent but the surplus after deducting the costs connected with letting. The rates are progressive: up to a tax-free allowance of around EUR 19,500 a year no income tax is due, and above that the rate rises in bands.

Cyprus is implementing a tax reform that touches the allowance and the bands, among other things. EUR 19,500 is the figure we have worked with, but it may change for the current or the next tax year. Check it.

A worked example, purely for orientation. Say your flat in Kato Paphos earns EUR 90 a night at 55 percent occupancy. That is roughly EUR 18,000 gross rent a year. After the management fee, cleaning, platform fees, insurance and a few repairs, perhaps EUR 11,000 is left as surplus. If you have no other income in Cyprus, you are below the allowance. The figures are made up; yours will look different.

SDC and GESY: the two charges for residents

The Special Defence Contribution (SDC) is a Cypriot levy on certain types of income, rent among them. It applies only to people who are tax resident in Cyprus and also domiciled there. On rental income it is 3 percent on 75 percent of the gross rent, so effectively 2.25 percent of turnover. Note that the base is gross rent, not profit. If you are resident in Cyprus but count as non-domiciled, you pay no SDC. Whether that is your case, your adviser works out from your origin and your years on the island.

The GESY contribution (GHS, the national health system) is 2.65 percent on rental income and applies to Cyprus tax residents. Unlike the SDC, domicile plays no role here.

Back to the example: EUR 18,000 gross rent. SDC: 3 percent of EUR 13,500 (that is the 75 percent) comes to EUR 405. GESY: 2.65 percent of EUR 18,000 comes to EUR 477. Both apply only if you are resident (and, for SDC, domiciled).

VAT: 9 percent on short-term accommodation

Long-term residential letting is exempt from VAT in Cyprus. Short-term accommodation for guests, as in a registered self-catering property, is treated as tourist accommodation instead and falls under the reduced rate of 9 percent.

Registration for VAT becomes compulsory once annual turnover reaches EUR 15,600. Below that, registration is voluntary and can be worthwhile if you have a lot of input VAT to reclaim. In the example above (EUR 18,000) you would be over the line, and your prices on Airbnb or Booking.com would need to carry the 9 percent. Registration, quarterly returns and invoice formalities then belong with the adviser too.

Resident or not: what changes?

If you are tax resident in Cyprus, you declare your worldwide income there, rental income included. On top come GESY and, if you are domiciled, SDC.

If you are not resident in Cyprus, living in the UK, Germany, Switzerland or elsewhere, you still pay Cypriot tax on the Cypriot rental income because the property is there. SDC and GESY do not apply. Your home country will usually take an interest in the income too.

Double taxation treaties exist so you do not pay twice. Cyprus has such a treaty with Germany, for example. Typically the right to tax property income goes to the country where the property is, so Cyprus, and the home country takes that into account in its own way; how exactly is a question for an adviser at home. For Russian citizens the picture is more complicated: parts of the treaty between Cyprus and Russia have been suspended since 2023. Please talk to an adviser who knows both sides before your first season.

Which costs are typically deductible?

Income tax is charged on the surplus, so everything you can show you spent on letting reduces it. Typically that includes:

• the property manager’s commission
• cleaning and laundry
• platform fees from Airbnb, Booking.com and the like
• repairs and routine maintenance
• insurance, in particular the liability cover that registering the property requires anyway
• utilities and communal charges, where you bear them
• depreciation of the building and its furnishings, under the rules your adviser applies

Whether an item is deductible in your case, and how much of it, is decided by Cypriot tax law, not by this post. But the direction is clear: no receipt, no deduction.

Receipts, monthly statements and your accountant

The tax year in Cyprus is the calendar year. So that next year’s return does not turn into a treasure hunt:

1. A separate bank account for the property, so nothing mixes with private spending.
2. Every invoice filed digitally, with a date and a reference to the property.
3. Payout statements exported from the platforms every month. Airbnb and Booking.com show gross revenue, fees and payout separately, which is exactly what the adviser needs.
4. Proper invoices from tradespeople, even for small amounts.

This is also why a monthly statement from your manager matters. Owners who hand their property to a full-service manager get one from us every month: revenue per booking, platform fees, cleaning, consumables, repairs with receipts, commission, payout. Twelve of those side by side are essentially the groundwork for the tax return. They save your accountant hours they would otherwise bill, and save you the question in March of what the EUR 84 in July was for.

In short

• Cypriot rental income is always taxed in Cyprus, wherever you live.
• Income tax is progressive, with an allowance of around EUR 19,500 (reform under way, check).
• Residents also pay GESY at 2.65 percent; residents with domicile pay SDC at 3 percent on 75 percent of gross rent as well.
• Short-term accommodation: 9 percent VAT, compulsory registration from EUR 15,600 annual turnover.
• Keep receipts, keep the monthly statements, involve a tax adviser in Cyprus.

If you own a flat or villa in Paphos and want letting and accounting to run cleanly while you are elsewhere, get in touch through our enquiry form. We will look at your property and tell you honestly what we can do for it. Tax questions you settle with your adviser; the numbers for that, we deliver.