Φορολογική μεταρρύθμιση 2026 – Σύνοψη φόρου εισοδήματος

A) New tax-free threshold & 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

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 the main residence and purchase of an electric vehicle

Certain conditions apply for eligibility for the new allowances:

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 a 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 by family members within the deadlines.

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

1. Allowance for dependent children – amount per parent

• €1,000 for the 1st dependent
• €1,250 for the 2nd
• €1,500 for the 3rd and each additional

What is considered a dependent child (as at 31/12):

• under 18, or
• a secondary school student under 20, or
• a soldier under 21, or
• a student under 24, or
• a child with a permanent disability (regardless of age).

Single-parent family: own income criteria apply and the allowance per child is doubled.

Joint parental responsibility (child does not live with the parent): the parent is entitled to an allowance based on income, depending on whether they are considered a single person or a family.

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

An allowance 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 in Cyprus, or
• rent of a main residence in Cyprus.

Conditions:

• The rent must be paid electronically (bank transfer/card).
• Government subsidies reduce the expenditure on which the allowance is given.

3. Allowance for energy upgrade & electric vehicle

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

• energy upgrade of the main residence;
• RES systems / storage batteries;
• electric vehicles (Road Transport Department registration).

If the capital expenditure is higher than the allowable amount:

• the balance can be carried forward and an allowance of up to €1,000 per year can be given for the next 4 years, provided that the income criteria are met in those years;
• if the income criteria are not met in the year of expenditure, the allowance cannot be carried over to subsequent years.

4. Home insurance against natural disasters

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

It is given without income criteria.

5. Life & disability insurance premiums and redemption taxation

The Tax Department guidance explains:

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

C) How allowances are declared

The final allowance amount per category is declared through the TD59 declaration, without analysing income criteria/details.

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

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