The Cyprus Tax Department has published an explanatory guide on its website outlining the implementation of the tax reform for individuals who are tax residents of Cyprus. The guide provides detailed information and instructions on income tax and the claiming of tax deductions.
The tax reform will apply from the 2026 tax year, for which income tax returns will be submitted in 2027. The deadline for submission is July 31, 2027.
Increase in tax-free threshold
Under the reform, the tax-free income threshold, meaning the portion of taxable income subject to a zero tax rate, has increased from €19,500 to €22,000, effective from the 2026 tax year onwards.
For the 2025 tax year, based on existing legislation and a relevant decree issued by the Council of Ministers, individuals with gross income exceeding €19,500 are required to submit an income tax return.
Obligation to file tax returns
From the 2026 tax year, an individual is required to submit a tax return if they:
-
Have gross income, defined as income before any exemptions or deductions, that falls under the provisions of Article 5 of the Income Tax Law, or
-
Are a tax resident of Cyprus and have reached the age of 25 but not 71 by December 31 of the relevant tax year, regardless of income level.
The Council of Ministers retains the authority, through a decree, to exempt specific categories of individuals from the obligation to submit a tax return.
Individuals with no gross income who, by December 31 of the tax year, are either under the age of 25 or have reached the age of 71 are not required to submit a tax return.
New personal tax deductions
The tax reform introduces a series of significant new personal deductions aimed at easing the tax burden on individuals who are tax residents of Cyprus, based on family status and income criteria. These deductions relate to:
-
Dependent children
-
Rental expenses or interest on a serviced housing loan for a primary residence
-
Expenditure on energy upgrades to a primary residence and the purchase of an electric vehicle
These new personal deductions do not reduce the taxable income used to calculate the maximum one-fifth allowance applicable to insurance premiums, GESY contributions and contributions to funds and schemes. Instead, they are granted in addition to those allowances.
How deductions are declared
The new personal deductions are declared using Form T.F.59, the declaration for claiming tax deductions used to calculate tax and contribution withholding by the employer.
On this form, the final amount of the deduction is declared per category, without reference to income thresholds or the number of dependants. For example, for two dependent children, a total child deduction of €2,250 is declared, consisting of €1,000 for the first dependent child and €1,250 for the second.
The Tax Department also provides practical examples illustrating how the tax reform applies to individuals who are tax residents of Cyprus.
In addition, the guide includes a section of Frequently Asked Questions (FAQs) on the 2026 Tax Reform for Individuals, along with corresponding answers.