Cyprus tax reform 2026 – Income tax summary

A) New tax-free & tax bands (from 2026)

From 1 January 2026 , the Cyprus tax reform comes into force, which brings immediate changes for taxpayers. These changes will be reflected in the January 2026 payroll.

Tax bands 2026

Taxable Income (€)	Tax rate (%)
0 – 22,000	0
22,001 – 32,000	20
32,001 – 42,000	25
42,001 – 72,000	30
72,001 and above	35

B) Claiming new tax allowances

In addition to the above, the reform introduces new tax allowances for:

• dependent children
• rent or interest on a primary residence mortgage
• Energy upgrade of main residence + purchase of an electric vehicle

 Certain conditions apply for eligibility of the new aforesaid discounts:

1. Income criteria
   • For families (gross family income)
     • up to €100,000 (1–2 children).
     • up to €150,000 (3–4 children).
     • up to €200,000 (5+ children).
   • For single person
     • Gross income up to €40,000.

2. Consent is required from both spouses/guardians for the disclosure of tax information between them (in a special field in the tax return).
3. Tax returns must be submitted within the deadlines from family members.

The calculation of family income includes many types of income (employment, pensions, rents, interest/dividends, etc.), with specific exceptions (e.g. income of full-time children from work, child benefit, etc.).

1. Discount for dependent children – discount amount per parent

• €1,000 for 1st dependent
• €1.250 for 2nd
• €1,500 for 3rd and each additional

What is considered a dependent child (according to 31/12)

• <18 or
• middle school student <20 or
• soldier <21 or
• student <24 or
• a child with permanent disability (regardless of age)

Single-parent family

• own income criteria.
• The discount per child is doubled.

Joint parental responsibility (child does not live together)

The parent is entitled to an allowance, based on income depending on whether he is considered a single person or a family.

2. Allowance for rent or mortgage interest (main residence)

A discount of up to €2,000 is granted to each spouse/partner or single person for:

• interest on a performing mortgage loan for a primary residence (Cyprus).
• or rent of a main residence (Cyprus) Conditions:
  • The rent must be paid electronically (remittance/card/e-mail).
  • government subsidies reduce the expenditure for which a discount is given.

3. Discount on energy upgrade & electric vehicle

Discount of up to €1,000 per spouse/partner or single person, for:

• Energy upgrade of the main residence.
• RES systems / storage batteries.
• electric vehicles (TOM registration).

– If the capital expenditure is higher than the allowable amount:

• The balance can be transferred and a discount of up to €1,000/year for the next 4 years can be given, provided that the income criteria are met in these years.
• If the income criteria are not met in the year of expenditure, then the discount cannot be carried over to subsequent years.

4. Home insurance discount against natural disasters

• For any residence (main/holiday/rented).
• Premium paid from 01/01/2026.
• Discount up to a total of €500.

It is given without income criteria.

5. Life & disability insurance premiums and redemption taxation

The guide (Explanatory Guide) explains:

• when life/disability insurance premiums are deductible (and a 7% limitation on coverage).
• How is the partial redemption of an insurance policy taxed (differently before/after 4 years).

C) How discounts are declared

The final discount amount per category is declared through TD 59 declaration, without analysing income criteria/details.

 

In order to fully benefit from additional personal allowances, deductions, exemptions or tax reliefs provided by law, carefully study the Explanatory Guide (Explanatory Guide) of Taxation, the frequently asked questions (FAQs) and examples issued by the Department of Taxation.

At ACLA AUDITORS, we can provide you with any additional information regarding the tax reform 2026.