Income, earned by a Cyprus tax resident individual, arising from the rental of immovable property which is situated in Cyprus is taxable both under the Cyprus Income Tax and the Special Contribution Tax legislation
The taxation of rental income under Income Tax follows the below rules
Rental income has three allowable deductions:
2.1.1. 3% (33.33 years) wear and tear per annum is for commercial buildings (houses, offices, shops, showrooms, apartments).
2.1.2. 4% (25 years) wear and tear per annum is granted for hotels and factories.
2.1.3. The tax office has introduced an increased rate of 7% wear and tear per annum for any acquisition of hotels or factories made in the years 2012, 2013 or 2014 in an attempt to encourage expenditure and development.
2.1.4. No wear and tear is granted in the cost of land.
2.1.5. Such wear and tear allowances are restricted to the months of rental period.
Any interest on loan taken out for acquisition of the rented property. As with wear and tear, this interest is restricted to the months of rental period.
Under the Special contribution tax, an amount of twenty five percent (25%) is deducted from the gross amount of rental income. After such deduction has been effected, the remaining gross amount is subject to special contribution tax at a rate of three percent (3%).