Filenews 11 January 2026 - by Eleftheria Paizanou
No more cash from July for the payment of rents for properties in Cyprus. Following the implementation of the tax reform from January 1, rents will be collected from July by bank transfer or by payment by debit or credit card or any other recognized electronic means of payment.
The main reason for electronic rent payments is the effort to prevent the movement of black money, i.e. income that is not declared in the tax returns of natural persons.
Rents are excluded from the defense contribution
In the meantime, according to the new legal framework, from the 1st January 2026, the imposition of an extraordinary defense contribution on rental income was abolished. However, rental income continues to be taxed with income tax and GHS contribution.
According to the Tax Department, individuals are obliged to pay for rental income by submitting temporary income tax, in two instalments, i.e. on July 31 and December 31 of each tax year.
Also, natural persons are obliged to submit self-taxation for a GHS contribution, in case it has not been withheld from them by a tenant legal entity, in two instalments, i.e. on 31/7 and 31/12 of each tax year. In the meantime, in the event that the tenant of the property is a company, then he will continue to withhold the GHS contribution when paying the rents. Essentially, legal entities have an obligation to withhold a GHS contribution when paying rents.
Discounts on insurance
The tax reform introduces a deduction for the owners of any residence in Cyprus (e.g. main, holiday or rented to a third party) who take care of the insurance of their property, without any income criteria being set in the law.
The discount concerns an expense for a premium paid from January 1, 2026 for the insurance of the residence against natural disasters (such as fire, earthquake, flood, etc.), up to the total amount of €500 for all residences, for each tax year.
The discount is provided regardless of whether the home insurance includes insurance coverage other than that of natural disasters, e.g. coverage against theft.
It is noted that the deduction for home insurance reduces the net income on which the restriction of 1/5 is calculated for the purposes of deductions for premiums and contributions to funds and plans.
Life insurance premiums
In addition to the discount for life insurance premiums, a discount is also provided for premiums paid from the 1stof the year for an insurance policy for permanent or temporary, total or partial disability. The discount for such an insurance policy, as for life insurance, is limited to 7% of the amount payable by the insurance company to cover disability.
In the event that the same life insurance policy also covers disability, the 7% limitation applies to the total amount of coverage for life and disability.
This discount is included in the discounts for premiums and contributions to funds and plans, which are limited to the limit of 1/5 of net income.
At the same time, a provision is introduced for the taxation of the partial redemption of a premium contract as follows:
– If 4 years have not been completed from the date of the insurance policy and a partial redemption is made, then 50% of the amount of the partial redemption is added to the taxable income of the year in which the partial redemption was made and is taxed.
– If 4 years have elapsed from the date of the insurance policy and a partial redemption is made later, then 50% of the amount of the redemption that exceeds the value of the gross redemption3 is added to the taxable income and taxed on December 31 of the fourth year preceding the year of the partial redemption. The amount of the gross redemption is reduced by the amount by which the partial redemptions of the previous three years exceed the premiums paid in those three years.
When will the redemption be taxed?
The reform does not change anything in relation to the taxation of the redemption of a life premium. Specifically, it will continue to be taxed in case of redemption of a life insurance policy within three years from the date of the contract, 30% of the premiums for which a discount was granted is added to the taxable income and taxed.
Also, in case of redemption of a life insurance policy made within the fourth, fifth and sixth year from the date of the contract, 20% of the premiums for which a discount was granted will be taxed.
