The Cyprus Tax Department is preparing to introduce compulsory electronic rent payments as part of a wider crackdown on tax evasion and undeclared rental income.
Under the new legislation, which comes into force on 1 July, all rent payments for properties in the Republic of Cyprus must be made exclusively through bank transfers, debit or credit cards, or other recognised electronic payment methods. Cash and cheque payments will no longer be permitted.
The authorities say the measure forms part of a broader strategy to improve tax compliance after receiving numerous complaints that some landlords with significant rental income were failing to declare earnings in their tax returns.
Cash and cheque rent payments banned
The Tax Department is currently finalising procedures and preparing guidance documents ahead of the implementation date.
Under the new legal framework, landlords will also be prohibited from accepting rent payments in any form other than approved electronic methods. Officials believe the move will create a clear financial trail, making it easier to identify undeclared rental income and reduce tax avoidance.
The government expects the reforms to benefit both the state and the wider property market. Increased transparency is expected to boost tax revenues, while landlords and tenants could gain access to larger tax allowances and deductions.
Tax relief for tenants and landlords
Tenants will be eligible for an income tax deduction of up to €2,000 for rent payments and interest on performing home loans for a primary residence, provided annual income exceeds €22,000.
The reforms are also linked to revised income tax bands. Under the updated structure, income between €22,001 and €32,000 will be taxed at 20%, income from €32,001 to €42,000 at 25%, and income from €42,001 to €72,000 at 30%. Earnings above €72,001 will remain taxed at 35%.
These tax measures will apply from the 2026 tax year and will be reflected in tax returns submitted the following year.
Authorities have warned that anyone breaching the new payment rules could face penalties. Before the legislation comes into force, the Tax Department is expected to issue detailed guidance outlining the obligations of both landlords and tenants.
VAT declarations now Through Tax for All
Separately, the Tax Department has announced that declarations for the exemption of property leases and rentals from VAT must now be submitted exclusively through the Tax for All online portal.
The updated process follows a notice published in the Official Gazette of the Republic on 3 April 2026. The declaration form, T.F.1220 2026, must be submitted within 30 days of signing a lease agreement, although the Tax Commissioner may approve a later submission date following a formal request.
Applications must include a copy of the lease agreement, identification documents for the signatory, and, in the case of companies, a certificate of directors. Where the declaration concerns only part of a property, a detailed description must also be attached.
