Rental Income - taxation

Information Sheet No. 43
Rental Income - Cyprus Tax Treatment

General Tax Issues for Rental Income
Rental income earned from the renting of immovable property is usually taxed at the hands of the
recipient in accordance with the relevant provisions of the recipient’s country of tax residence.
If the property is situated in another country, the recipient of the rental income may also be taxed in
that other country as well (i.e. from the source country).
For example, assume the case where rental income is earned by a person (company or individual)
resident in country A from a property situated in country B. Country B may have the right to tax that
rental income. This will depend on the relevant legislation in country B as well as the relevant provisions
of the double tax treaty in force (if any) between country B and country A.
In order to avoid double taxation on the same income, the country where the recipient of the rental
income is tax resident may grant credit for the foreign tax suffered on the same income. This may be
done either by unilateral provisions, which may exist in the legislation of the recipient’s resident country
or through the relevant provisions of the applicable double tax treaty.
It is noted that the national tax legislation of Cyprus provides for such unilateral tax relief, irrespective
of whether a double tax treaty with the other country is in place.

Cyprus Taxes on Rental Income
Rental income earned from immovable property situated in Cyprus or abroad, received by a
Cyprus tax resident person (company or individual), is subject to the following two taxes:
(1) Income Tax
(2) Special Defence Contribution
Individuals tax resident but non-domiciled in Cyprus and non-Cyprus tax residents are only
subject to Cyprus Income Tax and NOT subject to Special Defence Contribution on rental income
received from immovable property situated in Cyprus.
Note: Rental income is taxed in Cyprus on an accruals basis.
Actual Cyprus Tax Treatment of Rental Income
This information sheet demonstrates in a tabular form the applicable Cyprus taxes in the following
cases:
(a) Rental income earned by a Cyprus tax resident and domiciled individual
(b) Rental income earned by a Cyprus tax resident company
(c) Rental income earned by a non-Cyprus tax resident individual from a Cyprus situated property
Rental income earned by a non-Cyprus tax resident company from a Cyprus situated property

Tabular outline of Cyprus tax on rental income
Income Tax Special Defence
Contribution
Individual who is
Cyprus tax
resident and
domiciled
The gross worldwide rental income, after a
20% exemption and certain allowable
deductions, is pooled along with all other
taxable incomes of that person and taxed in
accordance with the Cyprus personal income
tax band rates*
Gross worldwide rental
income taxed at the
rate of 3% after
allowing for a 25%
exemption*


Company which
is Cyprus tax
resident
Gross worldwide rental income is pooled with
all other taxable incomes and tax allowable
expenses of the company. The resulting profit
is taxed at the flat rate of 12.5%*
Gross worldwide rental
income taxed at the
rate of 3% after
allowing for a 25%
exemption*


Individual who is
a non-Cyprus tax
resident
The gross rental income earned from Cyprus
properties, after a 20% exemption and
certain allowable deductions, is pooled, along
with all other Cyprus taxable incomes (if any)
and taxed in accordance with the Cyprus
personal income tax band rates *
N/A


Company which
is non-Cyprus tax
resident
Gross rental income earned from Cyprus
properties is pooled with all other Cyprus
taxable incomes (if any) and after deduction
of tax allowable expenses the resulting profit
is taxed at the flat rate of 12.5%
N/A


*NOTE 1 - Credit for foreign tax:
In the case of rental income earned from abroad, any foreign tax suffered on such rental income, may be claimed
as credit against the Cyprus tax (income tax and special defence contribution) resulting from the same income. In
order to receive this credit, original documentation supporting the foreign tax claimed as credit must be provided
to the Cyprus tax authorities. Thus, in cases where the Cyprus tax is lower than the foreign tax this credit will
eliminate all the Cyprus tax from that rental income.
NOTE 2 - Cyprus Personal Income Tax Band Rates for 2015:
The first €19,500 of taxable income is tax exempt. The remaining taxable income is progressively taxed as
follows:
Between €19,501 and €28,000 taxed @ 20%, between €28,001 and €36,300 taxed @ 25%, between €36,301 and
€60,000 taxed @ 30%, over €60,001 taxed @ 35%.
NOTES:
The above is intended to provide a brief guide only. It is essential that appropriate professional advice
is obtained. P.G. Economides & Co Ltd will be glad to assist you in this respect. Please do not hesitate
to contact us

SOURCE - https://www.pgeconomides.eu/Assets/Imag … 305208.pdf