Tax reform: benefits and practical considerations

The Tax Reform has entered into force and citizens, families and businesses are beginning to see in practice the immediate benefit through a reduction in the tax burden and a corresponding increase in net disposable income.

A fairer, modern and competitive tax system is being implemented, simpler and more effective, tailored to the real needs of society and the economy, with people, the middle class, the family and sound entrepreneurship at its core.

At the heart of the reform is the increase of the tax-free income threshold to €22,000 for all, regardless of family status.

Tax rates are structured in a fairer and more proportional manner, specifically 20% for income from €22,001 to €32,000, 25% from €32,001 to €42,000, 30% from €42,001 to €72,000 and 35% for income above €72,000, reducing the tax burden on the middle class.

The changes are clearly illustrated through indicative examples below, which show how the Tax Reform translates in practice into lower tax and increased net income for different types of households.

Household with two children, a housing loan and photovoltaic systems

A household with two working parents, two children or students up to the age of 24, a recent housing loan of €200,000 and the installation of photovoltaic systems benefits from a combination of tax allowances that significantly reduce the total tax payable.

Single-parent family with two children, rent and an electric vehicle

The reform treats single-parent families in the most favourable scenario. A parent with two children, annual rent of €7,000 and a recent purchase of an electric vehicle sees a clear benefit.

Single person with rent and an electric vehicle

The reform also covers single individuals. A single person with rent of €6,000 and a recent purchase of an electric vehicle benefits immediately.

Large family with five children and an energy upgrade

For large families, the benefits are even greater. In a family with five children or students up to the age of 24, a housing loan of €250,000 and a recent energy upgrade of the home, tax allowances accumulate significantly.

The Tax Reform that was advanced and adopted after two decades has a clear objective to return the benefit directly to the citizen, strengthen social cohesion and create stable foundations for sustainable and competitive growth.

With the new digital calculation tool, citizens can immediately see their personal benefit from the Tax Reform: https://www.gov.cy/taxreform/.

Cyprus is changing. With responsible policies that make a difference.