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Rental Income Tax obligations 

Rental Income – Tax obligations 

As a rental property owner in Cyprus, it is important to understand the tax implications related to rental income. Rental income is considered as taxable income and it is subject to several taxes.

Income Tax

Firstly, as a rental property owner, you are required to register for tax purposes with the Cyprus Tax Department. Once you have registered, you will need to file an annual tax return and pay taxes on your rental income.

The tax rates for rental income are progressive, meaning that the more you earn, the higher the rate of tax you will pay. For example, if you earn up to €19,500 in rental income per year, you will pay a tax rate of 20%. If you earn between €19,501 and €28,000, you will pay a tax rate of 25%, and if you earn over €28,000, you will pay a tax rate of 30%.

Value Added Tax (VAT)

Also, When it comes to property rentals, VAT is charged on the rental fees for properties that are rented out for business or commercial purposes. This includes properties used for vacation rentals, as well as long-term rentals for office spaces, warehouses, and shops. The tax rate of VAT on property rentals in Cyprus is currently set at 19% for properties rented for commercial purposes and 9% for properties used as holiday accommodations.

The VAT on property rentals in Cyprus is governed by the VAT Law, which provides for various rules and regulations that must be followed. For example, landlords who are required to pay VAT on their rental income must register for VAT with the Cyprus Tax Department. An obligation for registration exist if the annual rental income exist the registration threshold of €15.600. Once registered, they must charge VAT on the rental amounts they receive and submit regular VAT returns to the tax authorities.

Special Defense Contribution (SDC)

Furthermore, there is also a special defense contribution tax that is charged on rental income. The rate of this tax is currently 3%, and it is calculated on the 75% of gross rental income earned.

Other taxes

In addition to income tax, rental income is also subject to additional taxes. The local authority tax, or “municipality tax”, is usually around 1-2% of the property’s market value, and it is assessed and collected by the local authority where the property is located.

General Health System (GESY)

Finally, there is also a contribution to the General Health System that is charged on rental income. The rate of this tax is currently 2,65%, and it is calculated on the gross rental income earned.

It is important to note that as a rental property owner, you are also able to claim certain expenses as deductions against your rental income, such as property repairs and maintenance, insurance, and other expenses related to the management and upkeep of the property.

Exemptions from the above taxes:

Non-domiciled individuals

Non-domiciled individuals can take an exemption from Special Defense Contribution tax.

In conclusion, rental income in Cyprus is subject to several taxes and it is important to understand and comply with the tax obligations as a property owner. It is recommended to consult with a tax professional or accountant to ensure proper compliance with tax regulations.

The above article is provided only for information purposes. It should not be consider as a professional advice. We recommend you to ask for a professional advice before acting on any information provided.  Should you require a professional advice please contact us at info@elaaccounting.com or call us at (+357 99 832578).

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