LESS €10 million FROM INCOME TAX - Filenews 5/7 by Eleftheria Paizanou
Although tax revenues in the first five months of 2026 were increased compared to the same period last year, the tax reform, which has been in place since 1 January, limited collections in certain categories, mainly in terms of personal income tax.
This is attributed to the generous tax credits received mainly by middle-class taxpayers, who in recent months have seen their incomes increase.
Specifically, from January to May 2026, an amount of approximately €3.1 billion ended up in the coffers of the Tax Department, while during the corresponding period of 2025, €2.92 billion had been collected. In other words, an increase of 5.9% was recorded, with tax revenues increasing by €171.3 million. However, the analysis of the data shows that some tax categories were affected by the tax reform, recording reduced revenues.
Income tax reduced by 2%
* Until the end of May, personal income tax revenues were reduced by 2%, corresponding to €9.9 million. Specifically, from €507.8 million. collected last year, this year revenues from individuals were limited to €497.8 million.
* Receipts from stamp duty, which was abolished from January 1, were also reduced. According to the data of the Tax Department, the state's revenue from stamp duty was reduced by 71.6%, or by €12.9 million, compared to 2025. Specifically, this year the state collected €5.1 million, while by May last year €18.1 million had been collected.
* At the same time, revenues from various other taxes decreased by 36.2%, corresponding to €2.7 million, due to changes in a number of other taxes. By May 2026, revenues from this category amounted to €4.8 million, compared to €7.5 million in the corresponding period last year.
* The state's revenues from the casino tax were also lower, which yielded €10.4 million, compared to €12.4 million by May 2025. In addition, VAT receipts at customs recorded a decrease of 0.5%, with revenues falling to €317.8 million. It is noted that the reductions in the last two tax categories are not directly related to the tax reform.
Tax reform is a milestone
However, the tax reform was an important milestone for the state. Its implementation was the result of systematic work and cooperation between the Government, the House of Representatives and all the stakeholders involved.
According to the Tax Department, this is a holistic tax reform, the likes of which had many years to be implemented. As the competent Department points out, the expected results are positive both for businesses and, in particular, for citizens-taxpayers and Cypriot entrepreneurs.
The incomes of 200,000 taxpayers increased
For individuals, the changes made contributed to the increase in the net income of 200,000 taxpayers, while 30,000 individuals now fall under the zero income tax rate in 2026.
With the tax reform, the tax-free limit was increased to €22,000, tax rates were changed and a series of new personal deductions were introduced. These discounts aim to relieve natural persons who are tax residents of Cyprus, based on their marital status and income criteria.
Discounts are granted depending on the number of dependent children and students, the costs for rent and interest on a performing mortgage for a main residence, as well as for the energy upgrade of the main residence and the purchase of an electric vehicle.
The new tax scales were formed as follows: for incomes from €22,001 to €32,000 the rate is 20%, from €32,001 to €42,000 at 25%, from €42,001 to €72,000 at 30%, while for incomes over €72,001 the rate is set at 35%.
At the same time, additional discounts, based on children, students, mortgage interest, rents and green investments, are granted to families with incomes of up to €100,000 for those who have no children or have one to two children, up to €150,000 for families with three or four children and up to €200,000 for families with five or more children.
For unmarried persons, their income must not exceed €40,000. For the first dependent child and student, the discount amounts to €1,000, for the second dependent child to €1,250 and for the third and each additional dependent child to €1,500.
Discounts for interest and rents amount to €2,000 and for green investments to €1,000. It is noted that the new personal deductions do not reduce the taxable income on which the maximum deduction of one fifth is calculated for insurance premiums, GHS contribution and contributions to funds and plans, but are granted additionally. The submission of tax returns is mandatory for all taxpayers between the ages of 25 and 71, regardless of income.
The rest of the changes in tax
In addition to the changes for individuals, the tax reform brought significant differentiations for businesses and individuals, with the aim of strengthening competitiveness and tax justice.
For Cypriot companies, as of 1 January 2026, the deemed dividend distribution for profits earned after that date was abolished, while the rate of the extraordinary defence contribution on the actual dividend distribution was drastically reduced, from 17% to 5%. At the same time, the imposition of an extraordinary defense levy on rental income was completely abolished.
For all businesses, Cypriot and foreign, the reform provides for an increase in corporate tax to 15% from 12.5%, a special way of taxing profits from the disposal of crypto-assets at a rate of 8%, when they are included in the taxable profit, as well as an extension of the loss transfer period from five to seven years.
At the same time, the 120% super-deduction for research and development expenses of intangible assets is extended until 2030, while the maximum limit for entertainment expenses deductible for tax purposes is increased from €17,086 to €30,000.
Regulations have also been introduced for stock options, crypto-assets, and the extension of non-domicile status, enhancing attractiveness for investors and foreign taxpayers. Additional tools were also given to the Tax Department for the collection of overdue tax debts, through the sealing of companies and the freezing of shares. Finally, rents within Cyprus will now be paid exclusively by bank transfer, debit card or other recognized electronic means of payment.
