In a major move to combat the shadow economy, the Cyprus Tax Department has announced that all rent payments must transition to electronic methods starting July 1, 2026. The new directive effectively bans the use of cash and cheques for property rentals, requiring a traceable financial trail for all transactions within the Republic.
The cashless rental initiative is designed to tackle widespread tax evasion, following a surge in reports of landlords failing to declare significant rental earnings. By requiring bank transfers or card payments, authorities aim to create verifiable records that simplify audits and ensure fiscal transparency.
New Rules for Landlords and Tenants
The legislative shift places strict obligations on both parties. Landlords are now legally prohibited from accepting physical currency, while tenants must ensure their payments are made through recognized digital channels.
Approved Payment Methods Include:
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Direct Bank Transfers (SEPA/Wire)
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Debit and Credit Card Transactions
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Recognized Digital Wallets and Electronic Portals
Failure to comply with these regulations could result in administrative penalties for both owners and renters. The Tax Department is expected to release a comprehensive compliance guide before the July deadline to help the public navigate the transition.
Revised 2026 Tax Bands and New Deductions
To balance the stricter enforcement, the government is introducing significant tax relief measures. Starting in the 2026 tax year, residents can benefit from a more generous personal income tax structure and a specific deduction for housing costs.
Updated Personal Income Tax Brackets:
| Annual Income Range | Tax Rate |
| €0 – €22,000 | 0% (Tax-Free) |
| €22,001 – €32,000 | 20% |
| €32,001 – €42,000 | 25% |
| €42,001 – €72,000 | 30% |
| Above €72,001 | 35% |
Additionally, tenants whose annual income exceeds €22,000 are now eligible for a deduction of up to €2,000. This allowance covers both rent payments and interest paid on performing loans for a primary residence, provided the payments are made through the new mandatory electronic channels.
Digital Shift for VAT Declarations
In a parallel effort to digitize the tax system, the Department has moved VAT exemption filings for property leases exclusively to the Tax For All (TFA) online portal.
Following a formal notice in the Official Gazette on April 3, 2026, landlords seeking to exempt their property rentals from VAT must submit Form T.F.1220 2026 digitally within 30 days of a lease being signed. The application requires several digital attachments, including:
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A certified copy of the signed lease agreement.
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Identity documents for all signatories.
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Director certificates (for corporate landlords).
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Detailed descriptions if the lease covers only a portion of a property.
Source: news.cyprus-property-buyers.com