Quick answer
Cyprus's tax reform, passed in December 2025, applies mostly from 1 January 2026. It raises the tax-free threshold to €22,000, adds new deductions for children, rent or mortgage interest and green upgrades, abolishes defence contribution on rent, raises the foreign pension allowance to €5,000, and requires every tax resident aged 25 to 70 to file a return from the 2026 tax year.
- As of 2026, the first €22,000 of income is tax-free; rates then run at 20%, 25%, 30% and 35% above €72,000.
- New deductions: €1,000–€1,500 per child, up to €2,000 for rent or home loan interest and up to €1,000 for green upgrades or an electric car.
- Foreign pensions: optional flat 5% on amounts above €5,000 a year (previously €3,420).
- Defence contribution on rental income is abolished; crypto gains are taxed at a flat 8%.
- From the 2026 tax year, tax residents aged 25 to 70 must file a return even with no income.
Cyprus passed its first major tax overhaul in more than two decades in December 2025, and most of it applies from 1 January 2026. Here is what changes for expats who live, work or retire on the island.
When does the reform apply?
Parliament approved the reform on 22 December 2025, and most measures apply from 1 January 2026. That means they affect the 2026 tax year, which you report in 2027. Your return for the 2025 tax year, due by 31 October 2026, still follows the old rules. See our guide to filing a tax return in Cyprus.
What are the new income tax bands?
As of 2026, personal income tax works like this:
| Taxable income (per year) | Rate |
|---|---|
| Up to €22,000 | 0% |
| €22,001 – €32,000 | 20% |
| €32,001 – €42,000 | 25% |
| €42,001 – €72,000 | 30% |
| Above €72,000 | 35% |
The tax-free threshold rises from €19,500, so most employees pay a little less tax. Existing reliefs for people relocating to Cyprus for work, such as the 20% and 50% employment income exemptions, remain, each with its own conditions.
Which new deductions can you claim?
The reform introduces deductions linked to family and housing. As of 2026 they are:
- Children: €1,000 for the first dependent child, €1,250 for the second and €1,500 for each further child. Students up to 24 can count as dependants.
- Home: up to €2,000 a year for rent or interest on a loan for your main residence.
- Green upgrades: up to €1,000 for energy upgrades to your main residence or buying an electric vehicle.
- Home insurance: up to €500 for cover against natural disasters.
Household income limits apply. For the child deductions, reported limits are €100,000 for families with one or two children, €150,000 with three or four, and €200,000 with five or more. If you are employed, you declare these deductions to your employer on form T.F.59 so that they are reflected in your monthly withholding.
What changes for pensioners?
If you are a Cyprus tax resident receiving a pension for work done abroad, you can still choose each year between the normal tax scale and a flat 5% rate. As of 2026, the flat rate applies only to the amount above €5,000 a year, up from €3,420. Because the tax-free band has also risen, many people with modest pensions will pay less on the normal scale, so compare both options each year. Our guide to retiring in Cyprus covers this in more detail.
What changes for landlords, investors and non-doms?
- Rental income: the special defence contribution (SDC) on rent is abolished from 2026. Rent is still subject to income tax. Rent for Cyprus property must now be paid by traceable means, such as bank transfer or card, rather than in cash.
- Dividends: for Cyprus-domiciled residents, SDC on dividends falls from 17% to 5% for profits from 2026. Deemed dividend distribution is abolished for profits earned from 2026.
- Crypto: gains from disposing of crypto-assets are taxed at a flat 8%.
- Capital gains on property: lifetime exemptions rise, including to €150,000 for a main residence (subject to conditions).
- Non-doms: non-domiciled residents keep their exemption from SDC on dividends and interest. A new optional regime lets long-term residents pay a lump sum of €250,000 per five-year period after 17 years in Cyprus. See our non-dom guide.
Who has to file a tax return now?
This is one of the biggest practical changes. From the 2026 tax year, every Cyprus tax resident who is at least 25 and under 71 on 31 December must file a return, even with no taxable income. Anyone with taxable income must file regardless of age. The first returns under this rule are due by 31 July 2027, although filing deadlines are often extended by decree.
To file, you need a tax identification number. Residents who had no income in 2026 or 2027 and are not yet registered have until 31 December 2027 to register. See how to get a Cyprus tax number.
Has the 60-day rule changed?
Yes. From 2026, you no longer need to show that you are not tax resident in any other country to use the 60-day rule. The other conditions remain. Our guide to Cyprus tax residency explains both tests.
Common questions and pitfalls
- Missing deductions: they are not automatic. Tell your employer (T.F.59) and claim them on your return.
- Paying rent in cash: both tenants and landlords should switch to bank transfer or card.
- Assuming you need not file: under the new rules, low or zero income no longer exempts residents aged 25 to 70.
- Double taxation: if you also have income or ties abroad, check the relevant double tax treaty and take professional advice.
What to do next
- Check you have a tax number and a Tax For All account.
- Give your employer an updated T.F.59 if you can claim new deductions.
- Keep records of rent, loan interest and green investments for your 2026 return.
- Read our practical guide to finances for expats.
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Contains affiliate linksFrequently asked questions
What is the tax-free allowance in Cyprus in 2026?
As of 2026, the first €22,000 of annual taxable income is taxed at 0%, up from €19,500. Income above that is taxed at 20%, 25%, 30% and then 35% above €72,000.
When does the Cyprus tax reform take effect?
Most measures apply from 1 January 2026, so they affect the 2026 tax year, which you report in 2027. Your 2025 return still follows the old rules.
Do I have to file a tax return in Cyprus if I earn nothing?
From the 2026 tax year, Cyprus tax residents who are at least 25 and under 71 on 31 December must file, even with no income. For 2025, only those with gross income above €19,500 must file.
How are foreign pensions taxed in Cyprus from 2026?
Tax residents can choose each year between the normal income tax scale and a flat 5% on foreign pension income above €5,000. The best option depends on your total income.
Is rental income still subject to defence contribution in Cyprus?
No. From 1 January 2026 the special defence contribution on rental income is abolished, although rent is still subject to income tax.
