Personal Income Tax
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Basis of taxation for individuals
A Cyprus tax resident individual is taxed on taxable income from worldwide sources. A non-resident individual is taxed only on Cyprus-sourced taxable income.
Cyprus applies both the standard 183-day rule and the 60-day tax residency rule (subject to conditions).
From tax year 2026, the tax-free threshold increased and the progressive bands were revised as below. The reform increased the tax-free threshold and widened the lower tax brackets, reducing tax burden for middle-income earners.
- Up to €22,000: 0%
- €22,001 – €32,000: 20%
- €32,001 – €42,000: 25%
- €42,001 – €72,000: 30%
- Over €72,000: 35%
1) Investment & passive income (income tax exempt)
- Dividends (income tax exempt; may be subject to SDC depending on domicile/non-dom).
- Interest (other than interest arising in the ordinary course of business) – income tax exempt; may be subject to SDC for individuals depending on category.
2) Employment-related exemptions
- First employment in Cyprus – 20% exemption: 20% of remuneration (capped at €8,550 p.a.) for eligible employments commencing after 26 July 2022, for 7 years (conditions apply).
- First employment in Cyprus – 50% exemption: 50% of remuneration for eligible employments commencing from 1 January 2022 (salary threshold and conditions apply), for up to 17 years.
- Salaried services outside Cyprus for >90 days in a tax year for a non-resident employer (or overseas PE of a resident employer) – exempt (conditions apply).
3) Capital / one-off receipts
- Profit from disposal of “securities” (shares, bonds and other instruments included under Cyprus practice).
- Lump sums received as retiring gratuity, commutation of pension, death gratuity, or compensation for death/injury (subject to a lifetime limit of €200.000 – Amount received in excess of €200.000 taxed at 20%).
- Lump sums received from repayment of life insurance or approved provident funds.
- Foreign exchange gains (other than from trading in FX and related derivatives).
4) Other exemptions frequently used
- Rent from a preserved building (conditions apply).
- Capital gain from disposal of IP under the IP regime (conditions apply).
1) “Core” deductions
These are generally deductible subject to an overall cap of 1/5 of chargeable income (and each item has its own sub-cap/limit):
- Employee social insurance contributions.
- Contributions to approved provident/pension funds (often limited, e.g., provident/pension deduction restricted to a % of remuneration).
- GHS contributions.
- Life insurance premiums (with specific restriction on the deductible premium vs the insured amount).
- Approved medical fund contributions (typically limited as a % of income).
2) Other standard deductions (outside/alongside the core bundle, as applicable)
- Subscriptions to professional bodies and trade unions.
- Donations to approved charities (with receipts).
- Rental income allowance (a standard deduction/allowance applied on gross rent under the Income Tax framework).
3) Interest deductions (where applicable)
- Interest relating to the acquisition of assets used in a business, and/or interest relating to acquisition of a building for rental purposes (subject to conditions).
4) R&D and innovation deductions
- Scientific research / R&D expenditure (deductible; and Cyprus has also extended the R&D super-deduction framework for qualifying R&D through 2030).
5) Preserved buildings / political donations / innovation investments
- Maintenance of buildings under preservation order (conditions apply).
- Donations to political parties (subject to limits/conditions).
- Investment in innovative SMEs.
These are in addition to the traditional “1/5 bundle” and are subject to conditions (including household income thresholds for items 1-3).
1) Dependent children (per parent)
- 1st child: €1,000.
- 2nd child: €1,250.
- 3rd and each additional child: €1,500.
(“Dependent children” include students up to age 24.)
2) Housing (primary residence – per parent)
- Rent of a primary residence or interest on a performing home loan for a primary residence: deduction up to €2,000.
3) Green / modern living incentives (per parent)
- Energy efficiency upgrading of a primary residence or purchase of a new electric vehicle: deduction up to €1,000.
4) Home insurance (per parent)
- Home insurance against natural disasters: deduction up to €500.
Income thresholds
The reform introduces household income thresholds that determine eligibility for the above new deductions, excluding item 4 (follow the official Tax Department guidance).
Share-based benefits
The reform introduced a special flat tax framework for approved share option / share acquisition rights schemes:
- 8% flat tax rate on qualifying employee/director share-based benefits (within defined limits and conditions, including vesting/approval requirements).
The reform introduced a special flat tax framework for gains arising from crypto asset transactions:
- 8% flat tax rate on any profits arising from the disposal of crypto assets net of same year crypto asset and disposal losses. The 8% tax rate is not applicable to gains arising from crypto assets mining, which are taxed at the normal CIT rate.
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FAQs for Personal Income Tax
Cyprus applies the 183-day rule and the 60-day rule (subject to conditions on ties, work/business, and permanent home).
The 2026 reform updated the tax bands and increased the tax-free threshold.
Dividends and interest are generally income tax exempt, but may be subject to SDC depending on whether the individual is Cyprus-domiciled (and whether they qualify as non-dom).
Cyprus offers employment-related incentives including the 20% exemption (capped) and the 50% exemption (salary threshold and conditions apply), often used in relocation planning.
In many cases, individuals who qualify as non-dom may be exempt from SDC on dividends and interest, subject to the regime conditions and status.
Common deductions include social insurance and health contributions, approved pension/provident contributions, qualifying life insurance and health insurance premiums (subject to limits), and donations to approved charities.
Yes - reform measures introduced additional deduction concepts (e.g., family/housing/green themes) that operate alongside the traditional deduction framework.