The tax reform provisions of the relevant legislation are applicable on income earned after 1/1/2026.

Revised personal income tax rate brackets effective as of 1/1/2026 –

Obligation to file an annual tax return for income earned after 1/1/2026 –

1. Anyone with gross income earned in Cyprus per the provisions of Article 5 of the Cyprus income Tax law (i.e., gross income includes salary, dividends, interest, rental income, IP rights, etc.)
2. Any Cyprus tax resident aged between 25 and 71 years (meaning 25 years old and not yet having reached the 71st birthday), regardless of the level of gross income (a tax return must be submitted even if gross income is zero)
3. Tax returns are not required to be filed by individuals with zero income who are under 25 years old or who are aged 71 years and over

Cyprus Tax Residency – The requirement under the 60-day tax residency rule that an individual must not be tax resident in another jurisdiction has been abolished. As a result, an individual may be regarded as tax resident in two jurisdictions simultaneously.

Additional allowances available only to Cyprus Tax Residents subject to gross family income criteria/ thresholds:

1. Criteria/ thresholds are based on gross family income which must not exceed:
   1. €100.000, for families without children, or with 1 or 2 children
   2. €150.000, for families with 3 or 4 children
   3. €200.000, for families with 5 or more children

2. Tax allowances to each spouse:
   1. Dependent Children - €1.000 for the 1^st child, €1.250 for the 2^nd child, €1.500 for the 3^rd child, and any child thereafter (Dependent children – based on specified criteria up to the age of 24)
   2. Family’s primary residence - rental expense or interest on a performing loan for its acquisition – Up to €2.000
   3. Energy efficient upgrade of the family’s primary residence, or for the purchase of an electric car – Up to €1.000 (If actual expense is higher than the allowance, any excess can be carried forward and be set off with the respective annual allowance for the next 4 years – provided the prescribed gross family income thresholds continue to be met)
   4. Allowances are double the amounts mentioned above to single parent families with dependent children

Tax allowance for housing insurance covering natural disasters up to a maximum of €500 per year, per spouse, irrespective of family income.

To be eligible to claim all of the above allowances, the employee must submit the Tax Declaration form (TD59) to the employer each January. (https://www.gov.cy/media/sites/29/2026/01/IR59_2026_English__.pdf )

Retirement payments in excess of €5.000 paid to Cyprus Tax Residents for services provided overseas will be taxed at a flat rate of 5%

Provisions were introduced to tax benefits arising from stock options schemes given to employees/ managers of a company at a flat rate of 8% with maximum limits on the said benefits, and specified criteria.

Ex-gratia payments to employees on their retirement, early retirement, termination of employment, etc. to be taxed at a flat rate of 20% for any payment exceeding €200.000.

Net gains from cryptocurrency sales within the same tax year will be subject to an 8% flat tax rate.

Special Defense Contribution of rental income is abolished as of 1/1/2026. Rental income is added on gross income for personal income tax purposes, and General Health System contributions as previously. Individuals earning rental income should pay their income tax applicable on that income by self-assessment semi-annually similarly to the GHS obligation.

The Special Defense Contribution applicable to dividends received by Cyprus tax residents domiciled in Cyprus will be reduced from 17% to 5%, with the reduced rate applying to dividends arising from profits earned from 1 January 2026 onwards.