Cyprus is continuing its push toward greater transparency in the real estate sector and the digitalisation of tax administration. Starting July 1, new regulations will come into force requiring all rental payments to be made exclusively through electronic methods. The reform forms part of a broader government strategy aimed at combating tax evasion and undeclared rental income.
Under the new legislation, rent payments for properties in the Republic of Cyprus may only be processed through bank transfers, debit or credit cards, or other officially recognised electronic payment methods. Cash and cheque payments will no longer be permitted. For the real estate market, this marks a transition toward a fully traceable financial system, where every transaction creates a clear digital record.
The primary objective of the reform is to reduce undeclared rental income. Tax authorities have repeatedly highlighted cases where property owners receiving substantial rental revenue failed to report earnings in their tax declarations. By introducing mandatory electronic payments, the government aims to strengthen tax compliance and improve the monitoring of financial flows within the property sector.
At the same time, the reform is being positioned not only as a control mechanism but also as a step toward creating a more transparent and mature market environment. Authorities expect the new framework to benefit both the state and market participants. Increased transparency is likely to boost tax revenues while also giving landlords and tenants access to broader tax deductions and incentives.
One of the key benefits for tenants will be the possibility of claiming an income tax deduction of up to €2,000 for rent payments and interest on performing home loans related to a primary residence. The deduction will apply to taxpayers with an annual income exceeding €22,000. These changes are directly linked to the revised income tax structure, which will take effect from the 2026 tax year.
Under the updated tax bands, 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 continue to be taxed at the maximum rate of 35%. In this way, the government is simultaneously tightening oversight while introducing a more structured system of tax incentives.
In parallel, the Tax Department has announced the full digitalisation of several administrative procedures. Applications for VAT exemption on property leases and rentals must now be submitted exclusively through the Tax For All online portal. The updated process concerns form T.F.1220 2026, which must be filed within 30 days of signing a lease agreement. Supporting documents must include a copy of the lease agreement, identification documents for the signatory, and, for corporate entities, a certificate of directors.
For the real estate market, these reforms carry significant strategic implications. Cyprus is steadily moving toward a more institutionalised and transparent rental sector, where digital processes and formal tax reporting become standard practice. This is particularly important for international investors, who increasingly view regulatory transparency as a key factor in assessing the reliability of a jurisdiction.
In the long term, such reforms are expected to strengthen confidence in the Cypriot property market, enhance its investment appeal, and create a more predictable environment for both property owners and tenants. For market participants, the changes also signal the importance of adapting to new compliance standards and taking a more structured approach to the financial and legal management of real estate transactions.