Authored by the expert who managed and guided the team behind the Cyprus Property Pack
Everything you need to know before buying real estate is included in our Cyprus Property Pack
Cyprus has established itself as one of Europe's most attractive property investment destinations from a tax perspective.
The island nation abolished annual property tax in 2017, maintains a progressive income tax structure for rental income, offers extensive double taxation treaty protection, charges no inheritance tax, and provides various incentives for foreign property buyers that make it significantly more tax-efficient than most European countries.
If you want to go deeper, you can check our pack of documents related to the real estate market in Cyprus, based on reliable facts and data, not opinions or rumors.
Cyprus offers no annual property tax, progressive rental income tax rates starting at 0% up to €19,500, a flat 20% capital gains tax, no inheritance tax, and extensive double taxation treaty protection.
The country provides significant tax advantages for both resident and non-resident property owners compared to other European nations.
| Tax Type | Cyprus Rate | Key Benefits |
|---|---|---|
| Annual Property Tax | 0% (abolished 2017) | No recurring property tax burden |
| Rental Income Tax | 0% - 35% progressive | 80% of income taxable, 20% standard deduction |
| Capital Gains Tax | 20% flat rate | Lifetime exemptions for primary residence |
| Inheritance Tax | 0% (abolished) | No estate or succession tax |
| Transfer Fee | 3%-8% (50% reduction) | Often reduced rates available |
| Stamp Duty | 0.15%-0.20% | Very low transaction costs |
| Municipal Fees | €85-€200 annually | Minimal local service charges |
What are the property tax rates in Cyprus compared to other European countries?
Cyprus abolished annual property tax completely in 2017, making it one of the most attractive European destinations for property ownership.
Most European countries impose significant annual property taxes ranging from 0.5% to 2% of property value. France charges taxe foncière averaging 1.2% annually, while the UK imposes council tax that can reach £3,000+ per year for higher-value properties. Italy levies IMU (municipal property tax) at rates between 0.76% and 1.06% of cadastral value.
In contrast, Cyprus property owners pay zero annual property tax, with only minimal municipal fees of €85-€200 per year for local services. This represents substantial savings - a €500,000 property in France would incur approximately €6,000 annual property tax, while the same property in Cyprus would cost under €200 in municipal fees.
Only a few European countries offer similar advantages: Malta has very limited property tax for individuals, and Estonia imposes no annual property tax on improved land. However, Cyprus combines this zero property tax with other favorable conditions like no inheritance tax and extensive double taxation treaty protection.
It's something we develop in our Cyprus property pack.
How much income tax would I pay if I rented out my property in Cyprus?
Cyprus rental income tax follows a progressive structure that can be very favorable, especially for moderate rental earnings.
Individual property owners pay progressive income tax rates on rental income: 0% on the first €19,500, 20% from €19,501 to €28,000, 25% up to €36,300, 30% up to €60,000, and 35% above €60,000. Importantly, only 80% of gross rental income is taxable due to a standard 20% deduction for expenses, making effective tax rates lower.
For example, if your property generates €30,000 annual rental income, only €24,000 (80%) is taxable. You'd pay 0% on the first €19,500 and 20% on the remaining €4,500, resulting in €900 total tax - an effective rate of just 3% on gross rental income.
Additional charges apply to residents: Special Defence Contribution (SDC) at 2.25% for Cyprus-domiciled tax residents only (non-domiciled residents are exempt), and General Healthcare System (GeSY) contribution at 2.65% of gross rental income for all residents, capped at €180,000 annual income. Non-residents are exempt from both SDC and GeSY.
Corporate ownership offers an alternative with a flat 12.5% corporate tax rate on net rental profit after expenses, which can be more favorable for higher rental incomes.
Are there any double taxation treaties that protect me if I live abroad but own property in Cyprus?
Cyprus maintains an extensive network of double taxation treaties (DTTs) that provide strong protection for foreign property owners.
The island has signed DTTs with over 60 countries, including all major economies like the US, UK, Germany, France, Russia, and China. These treaties generally eliminate double taxation by allowing income taxed in Cyprus (such as rental income or capital gains) to be credited against tax obligations in your country of residence.
For instance, if you're a UK resident earning €20,000 rental income from Cyprus property, you'll pay Cyprus income tax on this amount, then claim this as a foreign tax credit on your UK tax return. The specific mechanics depend on each treaty, but the principle prevents you from paying full tax in both countries.
The treaties also typically provide reduced withholding tax rates on various income types and include provisions for information exchange and mutual agreement procedures to resolve disputes. Cyprus's DTT network is particularly robust because the country has positioned itself as an international business center.
However, you should always consult tax advisors in both Cyprus and your home country, as treaty interpretation can be complex and tax residency rules vary significantly between jurisdictions.
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What capital gains tax applies if I sell my property in Cyprus?
Cyprus imposes a flat 20% capital gains tax on property sales, regardless of whether you're a resident or non-resident.
The 20% rate applies to the gain calculated as the difference between sale price and acquisition cost, including improvement costs. This rate is competitive compared to many European countries - Germany charges up to 26.375% on real estate gains for short-term holdings, while France imposes rates up to 34.5% for non-residents.
Cyprus residents benefit from significant lifetime exemptions when selling their primary residence. The current exemption is €85,430 per individual, meaning couples can claim up to €170,860 in tax-free gains. Additional conditions apply: the property must have been your main residence for at least five years, and you can only claim this exemption once per lifetime.
The calculation basis is straightforward - if you bought a property for €300,000, spent €50,000 on improvements, and sold for €450,000, your taxable gain would be €100,000 (€450,000 - €350,000), resulting in €20,000 capital gains tax.
No indexation or inflation adjustments are available, and holding period doesn't affect the tax rate, making the Cyprus system simpler than many other jurisdictions.
Is there inheritance tax on property in Cyprus?
Cyprus completely abolished inheritance tax, making property transfers upon death entirely tax-free.
As of September 2025, there is no estate tax, succession tax, or inheritance tax on property or any other assets passed to heirs in Cyprus. This represents a significant advantage over most European countries, where inheritance taxes can be substantial.
For comparison, France imposes inheritance tax rates up to 45% for non-relatives, Germany charges up to 50% for distant relatives, and the UK levies 40% inheritance tax on estates exceeding £325,000. Even family members often face significant tax burdens in these countries.
The absence of inheritance tax means Cyprus property can pass to children, spouses, or other beneficiaries without any tax liability. This makes Cyprus particularly attractive for estate planning and generational wealth transfer strategies.
However, you should still consider inheritance tax implications in your country of residence, as some countries tax worldwide inherited assets regardless of where they're located. Professional estate planning advice is recommended to optimize the overall tax position across all relevant jurisdictions.
How much transfer fee or stamp duty would I need to pay when buying property there?
Cyprus property acquisition costs include stamp duty and transfer fees, with rates that vary depending on whether you're buying new or existing property.
| Cost Type | Rate | Application |
|---|---|---|
| Stamp Duty | 0.15% (first €20,000) 0.20% (above €20,000) |
All property purchases |
| Transfer Fee (with VAT) | Not applicable | New properties with VAT |
| Transfer Fee (no VAT) | 3% (first €85,000) 5% (€85,001-€170,000) 8% (above €170,000) |
Existing properties, often 50% reduced |
| VAT | 19% standard 5% reduced rate |
New properties from developers |
| Legal Fees | 1-1.5% + VAT | Professional services |
For a €400,000 existing property purchase, you'd typically pay stamp duty of €800 (€30 + €770), plus transfer fee of approximately €6,750 assuming the common 50% reduction applies. Total acquisition costs would be around €7,550 plus legal fees.
New properties from developers include 19% VAT but are exempt from transfer fees. However, first-time buyers purchasing their primary residence may qualify for reduced 5% VAT on the first €350,000 of property value, making new property purchases more attractive for eligible buyers.
It's something we develop in our Cyprus property pack.
Does Cyprus offer any tax exemptions or incentives specifically for foreign property buyers?
Cyprus provides several tax advantages for foreign property buyers, though most benefits apply equally to residents and non-residents rather than being specifically targeted at foreigners.
The primary incentive is the reduced 5% VAT rate (instead of 19%) on the first €350,000 of property value for buyers purchasing their first home in Cyprus as a primary residence. This can save up to €49,000 on a €350,000 property purchase. Foreign buyers who establish Cyprus residency can access this benefit.
Non-resident foreign buyers benefit from exemption from Special Defence Contribution (SDC) on rental income and are not subject to General Healthcare System (GeSY) contributions. This means non-residents pay only basic income tax on rental earnings, while residents face additional charges of 2.25% SDC and 2.65% GeSY.
Cyprus's extensive double taxation treaty network effectively provides tax protection for foreign investors, ensuring they don't face double taxation on Cyprus property income in their home countries. This is particularly valuable for investors from the US, UK, Germany, and other major economies.
The country's favorable tax regime - no annual property tax, no inheritance tax, and competitive capital gains tax - creates an inherently attractive environment for foreign investment without requiring specific additional incentives.
Foreign investors can also access the Cyprus Investment Programme for residency, though property investment alone doesn't automatically grant tax residency status.
How do taxes differ between residents and non-residents who own property in Cyprus?
Cyprus tax treatment varies significantly between residents and non-residents, with non-residents often enjoying certain advantages for property-related taxes.
Non-residents are taxed only on Cyprus-sourced income, meaning they pay income tax solely on rental income from Cyprus properties. Residents face taxation on worldwide income if Cyprus is their center of economic interest, though new residents with non-domiciled status may receive exemptions on certain foreign income.
For rental income specifically, non-residents pay only the progressive income tax rates (0% to 35%) with the standard 20% deduction. Residents must additionally pay Special Defence Contribution at 2.25% (if Cyprus-domiciled) and General Healthcare System contribution at 2.65% of gross rental income. Non-domiciled residents are exempt from SDC but must pay GeSY.
Capital gains tax applies equally at 20% for both residents and non-residents, but residents can claim lifetime exemptions of €85,430 per person for primary residence sales. Non-residents cannot access these exemptions but face the same flat 20% rate.
Both residents and non-residents pay identical stamp duty and transfer fees on property purchases. However, residents may access the reduced 5% VAT rate for first-time primary residence purchases, while non-residents typically cannot unless they establish residency.
Municipal fees apply equally to all property owners at €85-€200 annually, regardless of residency status.
We did some research and made this infographic to help you quickly compare rental yields of the major cities in Cyprus versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.
Are there annual property ownership taxes or municipal fees I need to budget for?
Cyprus property owners face minimal annual costs, with no national property tax and only modest municipal fees for local services.
Annual municipal fees typically range from €85 to €200 per year, covering local services like street lighting, road maintenance, and community facilities. These fees vary by municipality and property size but remain very low compared to European standards.
Additional annual costs include refuse collection fees, which depend on property location and size. Urban areas like Limassol or Nicosia may charge €100-€300 annually for garbage collection, while rural areas often have lower fees.
Some gated communities or developments impose annual service charges for common area maintenance, security, and amenities. These private fees can range from €500 to €2,000+ annually depending on the development's facilities and services.
Property insurance is not mandatory but highly recommended, typically costing €300-€800 annually for comprehensive coverage on a standard residential property. Building maintenance and repairs should also be budgeted, though these aren't taxes or mandatory fees.
The total annual carrying costs for Cyprus property typically remain under €1,000 for most residential properties, making it one of Europe's most cost-effective jurisdictions for property ownership from a tax and fee perspective.
What is the corporate tax treatment if I buy property in Cyprus through a company?
Corporate property ownership in Cyprus offers a flat 12.5% tax rate on net rental profits, which can be advantageous for high-income rental properties.
Cyprus companies pay 12.5% corporate income tax on net rental income after deducting all legitimate expenses including mortgage interest, maintenance costs, property management fees, legal fees, and depreciation allowances. This compares favorably to the top personal income tax rate of 35% for individuals.
Corporate ownership becomes particularly attractive when annual rental income exceeds €60,000, as the 12.5% corporate rate is lower than the 35% top personal rate. However, you must consider additional costs: annual company filing fees (approximately €350), accounting costs (€1,000-€3,000 annually), and potential complications with double taxation treaties.
Capital gains on property sales through companies are generally exempt from capital gains tax in Cyprus, unlike the 20% rate for individual ownership. However, this exemption may not apply if the company's main activity is trading in immovable property.
Corporate ownership also provides flexibility for estate planning and can facilitate ownership by multiple investors. International companies registered in Cyprus can benefit from the extensive double taxation treaty network for income repatriation.
Annual property tax remains zero for corporate ownership, and municipal fees apply at the same rates as individual ownership. Companies are subject to annual defence contribution on rental income, but this is minimal for most property investments.
How does becoming a tax resident in Cyprus change the way my property is taxed?
Cyprus tax residency fundamentally changes your tax obligations, extending beyond just property-related taxes to your worldwide income situation.
Tax residency in Cyprus is established through the 183-day rule (spending 183+ days annually in Cyprus) or the 60-day rule (60+ days in Cyprus, provided you don't spend more than 183 days in any other country and maintain certain Cyprus connections). Once resident, you're taxed on worldwide income, not just Cyprus-sourced income.
For property taxation specifically, residents face additional charges: General Healthcare System (GeSY) contribution at 2.65% of gross rental income, and potentially Special Defence Contribution at 2.25% if you're Cyprus-domiciled. Non-domiciled residents (new arrivals) are exempt from SDC for their first 17 years of Cyprus tax residency.
Residents gain access to primary residence capital gains exemptions of €85,430 per person (€170,860 for couples) when selling their main home, provided they meet the five-year residence requirement. This can represent substantial tax savings on property disposals.
Cyprus tax residents can also access the reduced 5% VAT rate for first-time home purchases up to €350,000, potentially saving €49,000 compared to the standard 19% VAT rate.
However, becoming tax resident means Cyprus will tax your global income, including rental income from properties in other countries, foreign dividends, and employment income, though double taxation treaties provide relief.
It's something we develop in our Cyprus property pack.
What legal or banking structures do people commonly use to reduce their tax burden on Cyprus property?
Several legitimate structures can optimize tax efficiency for Cyprus property ownership, ranging from simple residency planning to sophisticated corporate arrangements.
Non-domiciled residency status is highly popular among high-net-worth individuals. New Cyprus residents can maintain non-domiciled status for up to 17 years, exempting them from Special Defence Contribution on rental income while still accessing resident benefits like primary residence capital gains exemptions.
International Business Companies (IBCs) incorporated in Cyprus offer 12.5% corporate tax on rental profits and potential capital gains exemptions. This structure works particularly well for high-rental-income properties or when multiple investors want to co-own property. IBCs can also facilitate inheritance planning and provide operational flexibility.
Holding company structures using Cyprus as a base benefit from the extensive double taxation treaty network. For example, a Cyprus holding company owning property can repatriate rental income to parent companies in other jurisdictions with reduced withholding taxes.
Trust structures, while more complex, provide estate planning benefits given Cyprus's zero inheritance tax. International trusts can own Cyprus property while providing succession planning and potential tax optimization in the settlor's home jurisdiction.
Simple timing strategies include purchasing property before establishing tax residency to avoid certain charges, or using the 60-day residency rule to minimize global tax exposure while accessing resident benefits.
Professional advice is essential as these structures must comply with both Cyprus tax law and the investor's home country regulations, including anti-avoidance rules and beneficial ownership requirements.
Conclusion
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
Cyprus offers one of Europe's most favorable tax environments for property investment, combining zero annual property tax with competitive income and capital gains rates.
The country's extensive double taxation treaty network, absence of inheritance tax, and various optimization structures make it particularly attractive for international property investors seeking tax efficiency.
Sources
- FEOD Group - Property Taxes in Europe 2024
- Karma Developers - Property Tax Solutions for Cyprus Buyers
- Immigrant Invest - Real Estate in Europe Taxes and Costs
- LP Lawyers Firm - Cyprus Rental Income Tax Overview
- SquareOne - Cyprus Rental Income Tax 2025
- Clover Tax - Cyprus Rental Income Tax Guide
- Kyprianou & Co - Cyprus Double Taxation Treaties
- Grant Thornton Cyprus - Tax Facts 2025
- Meridian Trust - Cyprus Tax Residency Insights
- PwC Cyprus - Tax Facts and Figures 2025