The New Cyprus Personal Income Tax Scale for 2026

The tax-free threshold for Cyprus tax residents has risen to €22,000, and the top 35% rate now applies only to income above €72,000 per year (previously above €60,000).

An investor reviewing the Cyprus tax system — a map of the island, books on the Cyprus Tax System and Wealth Planning, a calculator and a financial report
Planning your Cyprus tax burden under the new 2026 personal income tax scale
Annual incomeTax rate
Up to €22,0000%
€22,001 — €32,00020%
€32,001 — €42,00025%
€42,001 — €72,00030%
Above €72,00135%

The rate is not applied to your entire income — only to the portion that falls within each bracket. The scale remains progressive, exactly as before.

Before vs. After: What Exactly Changed

ParameterBefore the reform (until 2026)From 2026
Tax-free threshold€19,500€22,000
20% bracket€19,501 — €28,000€22,001 — €32,000
25% bracket€28,001 — €36,300€32,001 — €42,000
30% bracket€36,301 — €60,000€42,001 — €72,000
35% bracket (top rate)from €60,001from €72,001

In practice, the difference is most noticeable for incomes in the €40,000–€90,000 range — a typical salary level for IT, consulting or management professionals, including those who have recently relocated to the country.

Worked Example: €80,000 Annual Income

Let's take an annual income of €80,000 — a common level for a relocating professional — and compare the tax due under the old and new scales.

Under the old rates (before 2026):

Income rangeRateTax
€0 — €19,5000%€0
€19,501 — €28,000 (€8,500)20%€1,700
€28,001 — €36,300 (€8,300)25%€2,075
€36,301 — €60,000 (€23,700)30%€7,110
€60,001 — €80,000 (€20,000)35%€7,000
Total under the old rates€17,885

Under the new rates (from 2026):

Income rangeRateTax
€0 — €22,0000%€0
€22,001 — €32,000 (€10,000)20%€2,000
€32,001 — €42,000 (€10,000)25%€2,500
€42,001 — €72,000 (€30,000)30%€9,000
€72,001 — €80,000 (€8,000)35%€2,800
Total under the new rates€16,300

The difference is €1,585 per year in favour of the new calculation, for the exact same income.

Dividends: Defence Contribution Cut from 17% to 5%

The reform also changed how dividends are taxed. For domiciled Cyprus tax residents, the Special Contribution for Defence (SDC) rate on dividends has been cut from 17% to 5% — but only for profits earned from 1 January 2026 onward.

Important nuance: dividends from profits earned before 1 January 2026 remain subject to the previous SDC rate of 17%. It is the date the profit was generated — not the date the dividend is actually paid out — that determines the applicable rate.

This isn't the only rate the reform changed: corporate tax, by contrast, has increased — from 12.5% to 15%. If you own a Cyprus company, these changes should be considered together.

Beyond the dividend rate, the reform also abolished two related defence-contribution rules:

  • The defence contribution on rental income has been abolished entirely. Previously, landlords who were Cyprus tax residents paid SDC on top of income tax on their rental income; from 2026 this surcharge has been removed.
  • The "deemed dividend distribution" rule has been abolished. Previously, the tax authorities could treat a company's undistributed profits as deemed distributed for SDC purposes — this mechanism has been scrapped.

Separately from the defence contribution, the reform also fully abolished stamp duty, which was previously charged on many commercial and legal documents in Cyprus.

Additional Deductions That Reduce Your Taxable Base

Beyond the scale itself, the reform also expanded the deductions applied before tax is calculated:

  • life insurance premiums — a deduction of up to 7% of the sum insured;
  • pension contributions — a deduction of up to 10% of income;
  • medical expenses — a deduction of up to 2%;
  • a new relief for home insurance against natural disasters — up to €500;
  • dependent-children relief — the amount now depends on the number of children and the family's combined income, rather than just one spouse's income, which extends eligibility to families with a single working parent.

These deductions apply to income before the progressive scale is calculated — meaning your real savings may be higher than simply the difference between the old and new thresholds.

Need an exact calculation of your tax burden?

We handle income tax filing and tax residency matters in Cyprus, and help plan your income structure around the new scale — including deductions, non-dom status and the 60-day rule.

Calculate My Tax Burden
We'll reply within 15 minutes

What to Watch Out For

A calculation in advance doesn't protect you from filing mistakes. Rates have changed, but the obligation to correctly classify your income (salary, dividends, rent, crypto, etc.) remains — each category has its own rules and separate taxes.

The tax-free threshold doesn't apply automatically to non-residents. Eligibility for deductions and the scale's thresholds is tied to Cyprus tax residency status — it's important to confirm residency (for example, under the 60-day or 183-day rule), rather than simply being physically present in the country.

Some sources online may still cite the outdated €19,500 tax-free threshold. That was the threshold in effect before the reform — the current figure as of 1 January 2026 is €22,000. When planning, check the publication date of your source.

Who Must File a Tax Return Under the New Rules

From 2026, all Cyprus tax residents aged 25 and over are required to file an annual tax return, regardless of whether they have taxable income. This also applies to people who previously did not file — for example, spouses with no income of their own. The first filings under the new rules will be submitted in 2027, for the 2026 tax year.

What to Do If You're Relocating to Cyprus or Already Working Here

  • Recalculate your tax burden using the new table — especially if your income falls in the €40,000–€90,000 range, where the difference is most noticeable.
  • Check which deductions (life insurance, pension, medical) you're already using, and which ones you could add.
  • Confirm your Cyprus tax residency status — this determines whether the tax-free threshold and deductions apply to you.
  • If you have mixed income (salary + dividends + rent + crypto), don't calculate everything on one scale: income tax, the defence contribution and crypto-asset tax are each calculated separately, under their own rules.
Official Source
Tax Department of the Republic of Cyprus
gov.cy/mof/en/tax-department

Frequently Asked Questions about Cyprus Personal Income Tax in 2026

The tax-free threshold for personal income tax in Cyprus is €22,000 per year as of 1 January 2026 — raised from the previous €19,500 as part of the tax reform. This means income within that amount is fully exempt from personal income tax for individuals who are Cyprus tax residents. Raising the threshold is part of a broader revision of the personal income tax scale that also affected the top-rate threshold (see the next question). The threshold applies to total annual income taxed under the progressive scale, not to separate income types such as dividends, which are taxed under different rules. We help clients estimate their actual tax burden across all the current thresholds when planning a move to Cyprus.
From 2026, the top 35% personal income tax rate applies to income above €72,000 per year — the threshold was raised from the previous €60,000 as part of the tax reform. This means a portion of income that used to fall into the top bracket now stays in a lower bracket, reducing the effective tax burden for many mid-to-high earners. The intermediate brackets of the scale, between the €22,000 tax-free threshold and the €72,000 top-rate threshold, were also adjusted as part of the same reform. The overall tax burden depends on the structure of your income and applicable deductions — we calculate this individually as part of a Cyprus relocation consultation.
No, income up to €22,000 per year is fully exempt from personal income tax for Cyprus tax residents — this is the tax-free threshold that took effect on 1 January 2026. The exemption applies automatically when calculating tax under the progressive scale and doesn't require a separate claim or application. It's worth distinguishing between gross salary and taxable income: certain deductions (such as pension and social insurance contributions) can reduce the taxable base further, below the actual salary received. Note that this exemption applies specifically to personal income tax — mandatory Social Insurance and GESY (the state healthcare system) contributions are paid separately and are not affected by this threshold.
The obligation to file a tax return in Cyprus from 2026 applies to all Cyprus tax residents aged 25 and over, regardless of whether they have taxable income above the tax-free threshold. This change widens the pool of people required to file compared with previous rules, where the obligation typically only arose once income exceeded a certain level. In practice, this means even a resident earning below €22,000 a year must now formally declare that fact rather than simply not filing by default. Failing to comply can result in penalties, even where the actual tax due is zero. We help clients work out exactly which returns they need to file in their specific situation.
No, the tax-free threshold and the brackets of the progressive income tax scale apply exclusively to Cyprus tax residents — that is, those who meet the 183-day rule or the 60-day rule (subject to additional conditions for the latter). Non-residents are taxed in Cyprus under separate rules depending on the type and source of income — generally only income actually sourced in Cyprus, not worldwide income. If you're considering relocating to Cyprus and want to become a tax resident to benefit from the favourable thresholds and the non-dom regime, it's worth planning your move with the day-count requirements in mind from the start — we help with this during a consultation.
No. Dividends, interest and part of rental income are taxed in Cyprus under the Special Contribution for Defence (SDC) at a separate flat rate, rather than under the progressive income tax scale with its €22,000 and €72,000 thresholds. This is a fundamentally different tax with its own logic: for example, non-domiciled (non-dom) residents are entirely exempt from SDC on dividends and interest for 17 years — one of the key tax advantages of relocating to Cyprus. For domiciled residents, the SDC rate on dividends was reduced in 2026 (see the next question). Rental income, meanwhile, is taxed partly under the income tax scale and partly under SDC, depending on the specifics. We help structure a client's income with these distinctions in mind.
Yes. The Special Contribution for Defence (SDC) rate on dividends for domiciled Cyprus residents was cut from 17% to 5% as part of the 2026 tax reform — a significant reduction for those who don't qualify for the favourable non-dom regime. An important clarification: the reduced 5% rate applies only to dividends paid out of profits earned from 1 January 2026 onward — the rate cut does not automatically extend to a company's previously accumulated undistributed profits (see the next question). Non-domiciled (non-dom) residents, as noted, continue to benefit from a full exemption from SDC on dividends throughout their 17-year status, independent of this reform.
No. Dividends paid out of profits earned before 1 January 2026 remain subject to the previous SDC rate of 17%, even if the dividend is actually paid out after that date. The new 5% rate applies only to profits earned from 1 January 2026 onward. In practice, this means companies with accumulated undistributed profits from prior years need to track carefully which period's profits a given dividend is actually being paid from, since this directly determines the applicable SDC rate. This kind of period-based split is standard practice during transitional tax reforms and requires careful bookkeeping. We help clients structure dividend payouts correctly in light of this rule.

This material is for informational purposes only and does not constitute tax advice. Your actual tax burden depends on your residency status, income structure and applicable deductions — we recommend confirming the details with a tax advisor. Certain provisions of the reform may be further clarified by secondary legislation during 2026.