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Cyprus is rolling out the biggest tax shake-up in more than two decades, promising a fairer system that supports families, strengthens local businesses, and keeps the economy competitive.
According to President Christodoulides, the reform plan, approved by the Council of Ministers and now headed to Parliament for a vote, is being billed as one of the most important structural changes since Cyprus joined the EU. It aims to make taxes simpler, fairer, and better aligned with today’s economic reality, while staying fiscally neutral so it doesn’t blow a hole in public finances.
Government officials say the new framework promotes social cohesion and economic growth while ensuring Cyprus remains an attractive place to work and invest.
More tax-free income for families and workers
For the first time in 20 years, the tax-free threshold for all individuals will rise by €1,000 to €20,500 and could exceed €24,500 depending on family circumstances and eligible deductions.
Families will see a range of new deductions:
- €1,000 for each dependent child or student (double for single-parent families)
- €1,500 for mortgage interest or rent on a main residence
- €1,000 for green home upgrades or electric vehicle purchases
The goal, officials say, is to ease the cost of living, support parenthood, and encourage the green transition, while helping young couples cope with rising housing costs.
Support for businesses, especially local ones
The new tax structure also tackles what the government calls “distortions” that previously favored large, foreign-owned firms.
For the first time in 20 years, the tax-free threshold for all individuals will rise by €1,000 to €20,500 and could exceed €24,500 depending on family circumstances and eligible deductions.
The corporate tax rate will be set at 15%, in line with global standards. Meanwhile, the tax on actual dividends will be cut from 17% to 5%, encouraging companies to reinvest profits into productive ventures rather than move them abroad.
Cypriot-owned companies stand to benefit most, with the government saying the changes will “correct a real imbalance” and give local entrepreneurs a fairer footing.
To promote innovation, businesses will now get an enhanced 120% tax deduction on research and development spending, and for the first time, individuals will also receive tax breaks for green investments.
Simplification, transparency and stability
The plan also aims to simplify bureaucracy, reducing stamp duty to essential transactions, allowing losses to carry forward for seven years instead of five, and updating special tax regimes and capital gains exemptions.
Officials say these steps will boost transparency and predictability, key to attracting investors who want a stable environment to plan long-term.
Economy in good shape, government says
The government argues that the timing for reform is right. Cyprus is projected by both the EU and the IMF to remain one of Europe’s fastest-growing economies, with one of the lowest inflation rates.
Public debt is expected to fall below 60% of GDP this year, a major milestone, while rating agencies have continued upgrading Cyprus, placing it in the coveted “A” category for the first time since 2011.
Unemployment, too, has dropped to “full employment” levels for the first time since 2008, the Finance Ministry said.
Consultation and consensus
Officials emphasize that the reform didn’t appear overnight. It’s based on a detailed study by the University of Cyprus’ Center for Economic Research, using real tax data and econometric models to predict social and fiscal impacts.
The proposal went through multiple rounds of consultation with unions, business groups, professional associations, political parties, and even the National Council, and many of their suggestions were incorporated into the final draft.
“This is how modern governance should work, with evidence, dialogue, and consensus,” the government said in a statement.
Implementation by 2026
If Parliament gives the green light, the new tax framework will take effect on January 1, 2026.
Officials warn that any delay would hurt citizens and businesses alike, postponing relief for households and creating uncertainty for investors making decisions today.
The government calls the plan a “big step forward” for a more modern, socially fair Cyprus, one that rewards hard work, supports families, and stays competitive on the international stage.
