The Tax Reform has come into effect and citizens, families and businesses are beginning to see the direct benefit in practice with the reduction of the tax burden and the corresponding increase in net disposable income.
A fairer, more modern and competitive tax system is being implemented, simpler and more effective, adapted to the real needs of society and the economy, focusing on the individual, the middle class, the family and healthy entrepreneurship.
At the core of the reform is the increase in tax-free income to €22,000 for everyone, regardless of family status.
Tax rates are set more fairly and proportionally, specifically at 20% for incomes from €22,001 to €32,000, 25% from €32,001 to €42,000, 30% from €42,001 to €72,000 and 35% for incomes above €72,000, reducing the tax burden on the middle class.
The changes can be clearly seen through illustrative examples, 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, mortgage and photovoltaics
A household with two working parents, two children or students up to 24 years old, a recent mortgage loan of €200,000 and the installation of photovoltaics, benefits from a combination of tax exemptions that significantly reduce the total tax.
Example:
|
Taxable income of 1st spouse (annual salary after deductions) |
€30,000 |
|
Taxable income of 2nd spouse (annual salary after deductions) |
€30,000 |
|
Household tax exemption for home insurance (up to €500) |
€500 |
|
1st marriage tax exemption for dependent children (€1,000 + €1,250) |
€2,250 |
|
Tax exemption for 2nd marriage for dependent children (€1,000 + €1,250) |
€2,250 |
|
1st marriage tax exemption for mortgage interest (up to €2,000) |
€2,000 |
|
Tax exemption for 2nd marriage for mortgage interest (up to €2,000) |
€2,000 |
|
1st marriage tax exemption for PV installation (up to €1,000) |
€1,000 |
|
Tax exemption for 2nd spouse for PV installation (up to €1,000) |
€1,000 |
|
Total household deduction amount |
€11,000 |
|
Total tax before the reform |
€4,400 |
|
Total tax after the reform |
€1,000 |
|
Tax reduction – increase in household disposable income |
€3,400 |
Single-parent family with two children, rent and electric vehicle
The reform treats single-parent families in the most favorable scenario. A parent with two children, a rent of €7,000 per year and a recent purchase of an electric vehicle sees a clear benefit.
Example:
|
Parent's taxable income (salary after deductions and previously approved tax exemptions) |
€35,000 |
|
Parent's tax exemption for dependent children (double) |
€4,500 |
|
Parent's tax exemption for rent on a primary residence (up to €2,000) |
€2,000 |
|
Parent's tax exemption for the purchase of an electric vehicle (up to €1,000) |
€1,000 |
|
Total household deduction amount |
€7,500 |
|
Total tax before the reform |
€3,450 |
|
Total tax after the reform |
€1,100 |
|
Tax reduction – increase in household disposable income |
€2,350 |
Single person with rent and an electric vehicle
The reform also covers single individuals. A single person with a rent of €6,000 and a recent purchase of an electric vehicle benefits directly.
Example:
|
Taxable income (salary after deductions and previously approved tax exemptions) |
€28,000 |
|
Tax exemption for rent of a primary residence (up to €2,000) |
€2,000 |
|
Tax exemption for the purchase of an electric vehicle (up to €1,000) |
€1,000 |
|
Total discount amount |
€3,000 |
|
Total tax before the reform |
€1,700 |
|
Total tax after the reform |
€600 |
|
Tax reduction – increase in disposable income |
€1,100 |
Large family with five children and energy upgrade
For large families, the benefits are even greater. In a family with five children or students up to 24 years old, a mortgage of €250,000 and a recent energy upgrade of the home, the tax exemptions accumulate significantly.
Example:
|
Taxable income of 1st spouse (annual salary after deductions) |
€70,000 |
|
Taxable income of 2nd spouse (annual salary after deductions) |
€55,000 |
|
Household tax exemption for home insurance (up to €500) |
€500 |
|
1st marriage tax exemption for dependent children (€1,000 for the 1st, €1,250 for the 2nd, €1,500 for each of the following) |
€6,750 |
|
Tax exemption for 2nd marriage for dependent children (€1,000 for the 1st, €1,250 for the 2nd, €1,500 for each of the following) |
€6,750 |
|
1st marriage tax exemption for mortgage interest (up to €2,000) |
€1,200 |
|
Tax exemption for 2nd marriage for mortgage interest (up to €2,000) |
€1,200 |
|
1st marriage tax exemption for energy upgrading of a home (up to €1,000) |
€1,000 |
|
Tax exemption for 2nd spouse for energy upgrade of a home (up to €1,000) |
€1,000 |
|
Total household deduction amount |
€18,400 |
|
Total tax before the reform |
€23,770 |
|
Total tax after the reform |
€17,777 |
|
Tax reduction – increase in household disposable income |
€5,993 |
The Tax Reform that proceeded and was voted on after two decades has a clear goal of returning the benefit directly to the citizen, strengthening social cohesion and creating solid foundations for sustainable and competitive development.
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.
