Nicosia, Cyprus. A tax reform has entered into force, with citizens, families and businesses beginning to see a reduction in the tax burden and an increase in net disposable income. The reform introduces changes intended to create a fairer, simpler and more competitive tax system.
Tax-free threshold raised
At the centre of the reform is an increase in the tax-free income threshold to €22,000 for all taxpayers, regardless of family status.
Revised income tax brackets
Tax rates have been restructured, with 20% applied to 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. The reform is intended to reduce the tax burden on the middle class.
Indicative household examples
The changes are presented through indicative examples describing how the reform may translate into lower tax and increased net income across different household types.
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 is described as benefiting from a combination of tax allowances that reduce total tax payable.
Single-parent families are described as receiving the most favourable treatment, with an example of a parent with two children, annual rent of €7,000 and a recent purchase of an electric vehicle showing a clear benefit.
For single individuals, an example cites a person with rent of €6,000 and a recent purchase of an electric vehicle as benefiting immediately.
For large families, an example cites 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, where tax allowances are described as accumulating significantly.
Stated objectives of the reform
The reform, described as advanced and adopted after two decades, is stated to aim to return benefits directly to citizens, strengthen social cohesion, and create stable foundations for sustainable and competitive growth.
How do you expect the new tax-free threshold and revised tax brackets to affect your household finances?
