Cyprus tax reform 2026: what changes for you
New tax bands, family allowances and deductions for insurance and pensions change the way you look at your take-home pay.
The new tax bands
From 1 January 2026, the tax-free band rises from €19,500 to €22,000 and new income tax bands apply:
| Taxable income | Rate |
|---|---|
| €0 – €22,000 | 0% |
| €22,001 – €32,000 | 20% |
| €32,001 – €42,000 | 25% |
| €42,001 – €72,000 | 30% |
| Over €72,000 | 35% |
Each rate applies only to the slice of income that falls within its band. An income of €35,000, for example, is not all taxed at 25%: the first €22,000 is tax-free, the next €10,000 is taxed at 20% and only the last €3,000 at 25%.
Deductions for families and housing
The reform introduces targeted deductions from taxable income, where the conditions are met:
- Children: €1,000 for the first dependent child, €1,250 for the second and €1,500 for the third and each further child.
- Main home: up to €2,000 for mortgage interest or rent.
- Green spending: up to €1,000 for energy-efficiency improvements, renewable energy systems or buying an electric vehicle.
- Home insurance against natural disasters: up to €500 for premiums covering your home against fire, earthquake, flood and similar risks.
The child deduction, like some of the other new deductions, depends on household income limits: €100,000 for families with up to two children, €150,000 with three or four and €200,000 with five or more. Single-parent families receive higher amounts.
Insurance, health and pensions
Tax also touches your insurance. Life insurance premiums are deductible from taxable income up to 7% of the sum insured. Total relief for life premiums, social insurance, GESY, provident and pension funds and medical funds cannot exceed one fifth (20%) of chargeable income.
According to EY, premiums for health plans approved by the Tax Commissioner are deductible up to 2% of total income, and approved pension plans or retirement annuities up to 10%. From 1 January 2026 there is also a deduction for premiums covering permanent or temporary total disability, subject to specific conditions and limits.
Why it matters to you
Tax is not just a question of how much you pay. It is part of your overall plan for income, saving and protection. If you know roughly what you take home and which deductions may apply to you, you can plan your budget, savings and cover more accurately.
To claim the deductions, you need to keep the paperwork: interest certificates, rental agreements, receipts and premium certificates. The earlier in the year you get organised, the easier your tax return will be.
What you can do now
- Run the tax estimator with your 2026 income and compare it with last year.
- Start a 2026 folder for interest or rent certificates, receipts for green spending and premium certificates.
- Ask your insurer for an annual premium certificate for life, health and disability cover.
- Check whether your home insurance covers natural disasters.
- If your income is close to a limit or your situation is complex, speak to an accountant before you file.
The VÉRO tax estimator gives an indication only and is not tax advice. The conditions and limits of each deduction are set by law.
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