Personal Income Tax in Cyprus After the 2026 Reform

Cyprus rewrote its personal income tax on 1 January 2026. The amending law, published in the Government Gazette on 31 December 2025, raised the tax-free threshold, stretched every band, added new deductions linked to family income, and changed how dividends and rents are charged.

The bands are the part that gets quoted, but they apply to taxable income: what is left after exemptions and deductions. For someone relocating, that distinction decides the bill. Three layers sit on top of the bands: reliefs for people who move to Cyprus to work, deductions that depend on family income, and income types that are charged outside the bands.

All of it applies to Cyprus tax residents. Holding a residence permit does not make someone one, so the route to Cyprus residency and the tax position need to be planned separately.

In short

• From 2026 the first €22,000 of taxable income is tax-free and the 35% rate starts above €72,000, against €19,500 and €60,000 before.
• On a €50,000 salary the bands alone produce about €6,900 of tax in 2026, against €7,885 in 2025, before social insurance, GESY and deductions.
• Employees who were not Cyprus tax resident for the previous 15 years and earn over €55,000 can exempt half their salary for up to 17 years.
• The new deductions for children, a main residence and green spending apply only below a family income of €100,000 (more with three or more children) and only with a return filed on time.

What the 2026 reform changed in the bands

The reform kept five bands and the same rates, and moved every threshold upwards. The nil band rose from €19,500 to €22,000, and the top rate of 35% now starts at €72,001 instead of €60,001. The previous bands had applied since 2008, so they still govern any return for 2024 or 2025:

Each rate applies only to the slice of income inside its band. Under the 2026 bands the tax on the first €32,000 is €2,000, on the first €42,000 it is €4,500, and on the first €72,000 it is €13,500. Above that, every further euro is taxed at 35%.

Spouses and civil partners are taxed separately, each on their own income, and the reform did not introduce joint filing. Family income matters for one purpose only: deciding who qualifies for the new deductions.

What the bands mean in euros

Three salaries show the scale of the change. The figures apply the bands to gross employment income. They leave out social insurance, GESY contributions and any deduction, all of which reduce taxable income in practice, so the actual tax comes out lower.

• On €30,000, tax is €1,600 in 2026, an effective rate of about 5%, against €2,200 in 2025.
• On €50,000, tax is €6,900, about 14%, against €7,885.
• On €100,000, tax is €23,300, about 23%, against €24,885.

The saving grows with income, from €600 to roughly €1,600 a year. In relative terms the effect is largest at the lower end, where the wider nil band removes a bigger share of the bill. For a household weighing a move, tax is one line in a longer budget, and the comparison of living costs in Cyprus and the UK puts it next to the others.

Reliefs for people who move to Cyprus to work

Those figures assume the whole salary is taxed. The first layer changes that: before the bands apply, an employee arriving from abroad may be able to exempt part of their salary. The reform left all three reliefs unchanged:

The 50% exemption is the one that changes the arithmetic for well-paid relocations. On a €120,000 salary it leaves €60,000 to be taxed, which costs €9,900 under the 2026 bands. Without it the same salary would cost €30,300, so the exemption is worth about €20,400 a year before contributions.

Deductions introduced in 2026

The second layer is new. The reform added four deductions from taxable income, claimed through the employer on form T.D.59 or in the annual return:

• Children: €1,000 for the first dependent child, €1,250 for the second and €1,500 for each further child, doubled for single-parent families.
• Main residence: up to €2,000 a year for each spouse, civil partner or single person, for interest on a housing loan for a main residence in Cyprus or for rent on one.
• Green spending: up to €1,000 a year per person for energy upgrades to the main residence, home batteries and solar systems, or a new electric car, with unused amounts carried forward for up to four years.
• Home insurance: up to €500 a year per person for natural-disaster cover on any home, including a let property, with no income test.

The first three depend on family income, which must not exceed €100,000 for a couple with up to two children, €150,000 with three or four, and €200,000 with five or more. For a single person without children the limit is €40,000.

Common mistake: testing the threshold against Cypriot salary alone. The limit counts the gross income of the whole family, earned in Cyprus or abroad. Spouses must also consent, in each return, to their tax data being cross-checked, and the return has to be filed on time. Miss either step and the deduction is lost for that year.

The housing deduction is also narrower than it first looks: it applies only to a main residence in Cyprus. A second home or an investment property does not qualify, and rent counts only if it is paid by bank transfer, card or another recognised electronic method.

Income that sits outside the bands

The third layer matters most to investors and retirees. Much of the income they live on is never taxed under the bands, or only by choice, so the 2026 rates say little about their bill.

Dividends and interest are exempt from income tax and are charged the Special Defence Contribution instead. From 2026 that contribution is 5% on dividends, down from 17%, with a transitional rule for profits earned before 2026. On interest it remains 17%, or 3% on certain government and listed bonds. Non-domiciled residents pay no defence contribution on either.

Foreign pension income can be taxed at a flat 5% on the amount above €5,000 a year, raised from €3,420, or under the ordinary bands. The choice is made each year, and which option costs less depends on the size of the pension, as the guide to retiring in Cyprus on a UK pension works through.

Rent is the exception: it is taxed under the bands, after a 20% allowance for expenses on buildings, and the defence contribution on rents was abolished from 2026. The full treatment of rental income and gains is set out in the guide to property tax in Cyprus.

Alongside income tax and the defence contribution, residents pay GESY contributions for the national health system, at 2.65% for employees, pensioners without an S1 form and on rent, interest and dividends, up to €180,000 of income.

Your first Cyprus tax year

The bands apply automatically. The layers on top of them have to be claimed, and in the first year the order matters:

1. Register for a tax identification number and a Tax For All account as soon as tax residence begins.
2. Tell the employer which relief applies, whether the 50%, 20% or 25% exemption, and claim deductions on form T.D.59, so tax withheld during the year reflects them.
3. Pay rent electronically and keep the paperwork for loan interest, green spending and home insurance.
4. File the return by 31 July of the following year, with each spouse giving consent to the data cross-check.
5. Revisit the choice between the 5% rate and the bands on any foreign pension every year.

The Tax Department's online calculator is the place to check a specific figure. For a family planning a move around a main residence in Cyprus, INEX Group can talk through suitable homes and how the purchase fits the household's plans.