Special defence contribution
A Cyprus tax on certain income of residents, such as dividends and rent. On rent it was 3% on 75% of gross rent; it was abolished for rental income from 1 January 2026.
Updated 12 Oct 2026How it works
The special defence contribution (SDC) is a tax separate from income tax, charged on certain passive income of Cyprus tax residents, such as dividends and rent. For individuals, it applies only to those who are domiciled in Cyprus.
On rental income, until 31 December 2025, SDC was 3% on 75% of the gross rent, an effective rate of 2.25%. Where the tenant was a company, it withheld the SDC from the rent; otherwise the landlord paid it twice a year, by 30 June and 31 December.
Under the tax reform, SDC on rent is abolished from 1 January 2026. On annual rent of €12,000, that removes a cost of €270 a year. Rental income is still taxed: individuals pay income tax and companies pay corporation tax. The 2.65% contribution to the General Healthcare System (GESY) on rental income also remains.
The same reform cut SDC on dividends paid to Cyprus-domiciled individuals from 17% to 5% and abolished the deemed dividend distribution rules for profits earned from 2026. This matters if you hold property through a company.
Why it matters when you rent out a property
Older leases, guides and yield calculations may still list SDC as a cost of letting. For rent from 2026 there is no SDC to pay or withhold. If your tenant is a company that used to withhold it, make sure nothing is deducted from your 2026 rent. Your overall tax on rent depends on your income and residence status, so check it with a tax adviser.