The benchmark comes from a Q1 2026 index produced by the Royal Institution of Chartered Surveyors and KPMG. It reports gross yields of 5.44% for apartments and 5.67% for holiday apartments across the Republic. The 2026 tax reform is relatively favorable: the defense levy on rent has been abolished, and a non-resident with one modest rental may remain within the zero income-tax band. The main difference between gross and net return is therefore vacancy and operating cost.
Everything here was verified on August 14, 2026. Euro amounts govern; dollar figures are rounded at €1 = US$1.1534 (ECB reference rate, August 13, 2026).
What are current gross rental yields in Cyprus?
The strongest professionally produced benchmark available reports 5.44% gross for apartments, 5.67% for holiday apartments and 2.97% for houses. The Central Bank of Cyprus publishes prices rather than yields, so this article uses the RICS/KPMG Q1 2026 index, a survey produced by property professionals.
The difference between apartments and houses is material. At 2.97% gross, a house begins with much less room for vacancy and costs than an apartment at 5.44%.
The worked model below begins with the published apartment figure rather than a rounded marketing yield.
How is rental income taxed in 2026?
The first €22,000 of taxable income falls within a 0% band, the defense levy on rental income has been abolished, and the General Healthcare System contribution generally applies at 2.65% of gross rent.
Income tax. Cyprus taxes rental profit through its ordinary bands. The 2026 reform provides a 0% band up to €22,000 (about US$25,000), followed by rates of 20%, 25%, 30% and 35%. A non-resident whose only Cyprus income is one modest rental may owe no Cyprus income tax if taxable profit, after the standard 20% notional allowance, remains within the zero band. Other Cyprus income or a second property can change the result.
The defense levy, known as SDC. This formerly created an effective 2.25% charge on rental income for residents domiciled in Cyprus. It was abolished on rental income entirely from January 1, 2026 and did not apply to non-resident owners.
The General Healthcare System contribution is 2.65% of gross rent, capped once total income passes €180,000 (about US$208,000). It applies in every case in our model.
Three points still need confirmation from a Cyprus tax specialist: whether the 20% allowance can be combined with itemized deductions, the exact amending-law citation for the defense-levy change and how the health-system contribution applies to non-residents. None changes the broad comparison, but each can affect an individual return.
What might the net return look like in different years?
For an illustrative €300,000 apartment, the model produces a 2.59% net yield in a base year, 3.33% in a good year and 0.90% in a bad year. The starting gross rent is €16,320, based on the 5.44% benchmark above. The model then deducts vacancy, management, communal charges, insurance, a maintenance reserve equal to 1% of price, municipal and sewerage charges, the health-system contribution and income tax. Every input is labeled and none is a quote for an actual property.
| Base year | Good year | Bad year | |
|---|---|---|---|
| Vacancy assumption | 1 month | 2 weeks, self-managed | 6 weeks, plus a €1,500 special levy and a repair over reserve |
| Net operating income | €8,168 (2.7%) | €10,392 (3.5%) | €5,399 (1.8%) |
| GHS | −€397 | −€416 | −€383 |
| Income tax | €0 (only Cyprus income; profit remains within the tax-free band) | €0 | −€2,311 (other Cyprus income already uses the tax-free band) |
| Net income | €7,771 (US$8,960) | €9,976 (US$11,500) | €2,705 (US$3,120) |
| Net yield | 2.59% | 3.33% | 0.90% |
| Share of the gross yield retained | ~52% | ~61% | ~17% |
In the bad-year case, six weeks of vacancy, a special communal levy, a repair beyond the reserve and a zero band already used by other income reduce the return from the advertised 5.44% gross to 0.9% net.
Operating costs, vacancy and the owner’s wider tax position drive most of the variation. SDC contributes zero in every column, and GHS remains a smaller, relatively stable line.
How do rental yields compare across five Cyprus markets?
City-level yield evidence is uneven, so the figures below should not be treated as equally reliable. The Global Property Guide Q1 2026 screen, based on asking prices, covers three cities. Larnaca relies on a small crowdsourced sample, while the resort towns have no city-level screen.
| Market | Published gross yield and source | Estimated net yield after costs and tax | Market context |
|---|---|---|---|
| Limassol | 5.76% (established publisher) | ~3.0% | Year-round corporate tenancy, the island’s deepest pool, and its highest prices and communal charges |
| Larnaca | ~6.7% (crowdsourced, 13 contributors; treat as directional only) | ~3.3% | Lowest entry prices of the four cities; the small sample makes the figure less reliable |
| Paphos | 4.43% (established publisher) | ~2.1% | Retiree and lifestyle demand; mixed long-term and holiday letting |
| Nicosia | 4.69% (established publisher) | ~2.0% | The least tourism-exposed market: civil-service and professional tenants, minimal seasonality |
| Ayia Napa / Protaras | No city screen exists; the 5.67% Republic-wide holiday-apartment figure is the only defensible proxy | Not comparably modeled; see the short-stay section | An overwhelmingly seasonal short-stay market where long-term comparisons mislead |
Across the markets with a usable screen, the model retains about half to two-thirds of the advertised gross yield in a normal year. A pro forma showing materially more should be checked for missing vacancy, management, maintenance, communal or tax costs.
Can short-term rental produce a better return?
It can in the model, but the result depends heavily on occupancy, which commercial data providers estimate very differently.
The regulatory fact. Cyprus requires registration of self-catering units with the Deputy Ministry of Tourism, at €222 (about US$255) per unit per three-year period. Advertising on platforms without a registration number is prohibited, with penalties reported up to €5,000 (about US$5,800) and imprisonment. Budget the compliance before the bookings.
The modeling assumption. Using invented inputs for a €220,000 holiday apartment, a €150 nightly rate and 40% occupancy, short-stay rent totals €21,900 (about US$25,300), a 9.95% gross yield. After turnover costs, platform commissions and the same operating-cost model, the net yield is about 4.17%, above the long-term base case.
Commercial short-stay analytics platforms differed by 28 percentage points of occupancy for the same town on the same day, reporting 61% and 33%. If the model’s invented 40% assumption falls to 25%, the return moves toward the long-term case while requiring more active management.
Request 12 months of statements from the actual unit or close comparables before relying on an occupancy assumption. Whether short-stay income is taxed as passive rent or as a trade also requires advice for the individual operation.
How should you use this analysis on a real listing?
Replace the model with the property’s actual operating evidence before treating an advertised gross yield as an expected return. Use:
- The actual communal charges from the management company, in writing.
- A management quote.
- Your honest vacancy assumption for the tenant type.
- The building’s levy history.
- Your own Cyprus income position for the tax line.
Ask the seller for 12 months of actual statements. If they are unavailable, use a more conservative assumption and understand why the evidence is missing.
Companion guides cover Cyprus property tax, Cyprus transfer fees, and the latest Cyprus property market data.
If Cyprus is your market, buying property in Cyprus covers the permit, deposit and title process, while our Cyprus destination guide covers the regions and developments from builders that have passed our review. DSH is an education and referral platform. None of the modeled figures is a promised return, and the tax line should be completed by an adviser who can see the owner’s full income position.
Disclaimer
Dream Second Home is not an investment or tax adviser, and this article is not investment or tax advice. It is an educational analysis verified on August 14, 2026. Every worked figure is a labeled illustration, and the short-term-rental occupancy and rate are assumed inputs rather than market data. Run the property’s actual numbers with a licensed Cyprus tax adviser before relying on any projected yield.
