Cyprus’ new tax reform has come into force and its results are already being reflected in the daily lives of citizens, families and businesses via a reduction in the tax burden and an increase in net disposable income.

Around 200,000 taxpayers have seen an increase in their net income with the payment of their January salary, while it is estimated 30,000 individuals will be fully exempt from income tax in 2026. The figures confirm the tax reform is achieving its core objectives: returning income to citizens, supporting the middle class and strengthening social cohesion through a fairer, more modern tax framework.

Strong support for families and employees

According to Commissioner of Taxation Sotiris Markidis, a family with four children and an income of €130,000 is expected to see an annual increase in its disposable income of around €7,000, while for a single-parent family with three kids and an income of €70,000, the corresponding boost exceeds €4,000.

A key element of the reform is the increase in the tax-free income threshold to €22,000, which means even more employees will not be taxed at all. This is a measure with unique characteristics at the European level, as it is not applied in any other EU country at this level and to this extent. Cyprus, already among the countries with the highest tax-free threshold, has proceeded with a further increase.

At the same time, the new, fairer tax tiers, and the targeted tax allowances based on family composition, significantly reduce the tax burden for thousands of households.

A lifeline for small and family businesses

The benefits for the real economy are also significant. The changes affecting businesses, including the abolition of deemed dividend distribution and the substantial reduction of the Special Defence Contribution, are expected to benefit more than 30,000 small family businesses, strengthening their liquidity and competitiveness.

At the same time, the new tax incentives for innovation, green investments and modern forms of business activity are shaping a stable and attractive tax environment, oriented towards sustainable development.

The tax reform, implemented by the government after two decades, lays solid foundations for a fairer society and a more competitive economy, with policies that have a direct and tangible impact on the daily lives of citizens.

For more information and to access the digital tax income calculation tool: https://www.gov.cy/taxreform/

Cyprus is changing, with responsible policies that make a difference.