Cyprus Tax Reform 2026: Key Changes You Should Know

The tax-free threshold has increased from €19,500 to €22,000, while the income thresholds for the existing tax rates have also been revised.

• €0 – €22,000→0%
• €22,001 – €32,000→20%
• €32,001 – €42,000→25%
• €42,001 – €72,000→30%
• Over €72,000→35%

New progressive deductions are available per parent for dependent children:

• 1st Child: €1,000 deduction
• 2nd Child: €1,250 deduction
• 3rd Child & Above: €1,500 per child

Who counts as a dependent child?

• Children up to 18 years old.
• University students up to 24 years old.
• Soldiers in the National Guard up to 21 years old.
• Children with permanent disabilities (no age limit).

Note: Single parents and parents with full custody are treated as families with two parents, meaning they benefit from double these amounts. Income eligibility applies up to €100k for 1–2 children, up to €150k for 3–4 children and up to €200k for 5 or more children.

The 2026 Tax Reform introduces new deductions for housing and qualifying green expenses:

• Primary Residence: Up to €2,000 for mortgage interest or rent.
• Energy Efficiency: Up to €1,000 for qualifying energy upgrades, solar panels or an electric vehicle.
• Home Insurance: Up to €500 for qualifying home insurance against natural disasters.

These deductions are subject to the applicable conditions and income criteria.

The Cyprus corporate income tax rate increased from 12.5% to 15% from 2026. The reform also introduces other important changes affecting businesses and shareholders.

• The SDC rate on dividends from profits earned from 2026 has been reduced from 17% to 5%.
• The deemed dividend distribution rules are abolished for profits from 2026 onwards.
• SDC on rental income is abolished from 2026 onwards.

Qualifying gains from cryptoassets are now subject to a flat 8% tax rate, with specific rules applying to losses and certain activities.