Personal income tax in Cyprus is charged on a progressive scale, and from 2026 the first €22,000 of income is tax-free. Above that, income is taxed in four bands rising from 20% to a top rate of 35%. The 2026 tax reform raised the tax-free threshold from €19,500, widened every band above it, and layered in a set of household allowances aimed at families and home-owners. The result is a personal tax system that remains light by EU standards — and lighter still for new residents who qualify for the 50% exemption or pair their salary with the non-dom regime.
This guide sets out the 2026 bands and how the tax is actually calculated, the order in which Social Insurance and GHS are deducted before tax, the new household allowances and who can claim them, the 50% high-earner exemption, the foreign-pension election, and how the GHS healthcare levy and mandatory filing fit together. Every figure here reconciles with the framework in force for the 2026 tax year. For the wider picture — corporate tax, SDC and dividends — see our overview of the 2026 Cyprus tax reform.
The 2026 income tax bands
From 1 January 2026, Cyprus taxes the chargeable income of resident individuals using five marginal bands: 0% on the first €22,000, then 20%, 25%, 30% and 35%. Cyprus tax residents are taxed on their worldwide income; non-residents are taxed only on Cyprus-source income. The bands are:
| Chargeable income (€) | Rate |
|---|---|
| 0 – 22,000 | 0% |
| 22,001 – 32,000 | 20% |
| 32,001 – 42,000 | 25% |
| 42,001 – 72,000 | 30% |
| over 72,000 | 35% |
Because the bands are marginal, only the portion of income within a band is taxed at that band's rate. A common misconception is that crossing into a higher band re-taxes your whole income at the higher rate; it does not. Someone with €33,000 of chargeable income pays nothing on the first €22,000, 20% on the next €10,000 and 25% on just the final €1,000. You can model any figure instantly with our income tax calculator.
Some secondary websites still quote bands with breakpoints at €35,000 and €60,000, or a €19,500 tax-free band. Those are the pre-reform figures and are incorrect for 2026 — the enacted breakpoints are €22,000, €32,000, €42,000 and €72,000. Always check figures against the current law before relying on them.
The reform did more than lift the floor. By raising the tax-free band by €2,500 and pushing the breakpoints of every band upward — €28,000 to €32,000, €36,300 to €42,000 and €60,000 to €72,000 — it cut the tax bill at almost every income level and widened the 30% band considerably. A middle earner therefore reaches the 35% top rate only above €72,000 of chargeable income, rather than the previous €60,000. The change benefits the broad middle of the salary distribution most, while the top marginal rate of 35% is unchanged.
How the tax is actually calculated
Income tax does not bite on gross salary. For an employee, Social Insurance (8.8%) and GHS (2.65%) are deducted first, and income tax is then computed on the reduced figure; any household allowances are then subtracted before applying the bands. This ordering — contributions and allowances before tax — meaningfully lowers the effective rate. The steps are: take gross income, deduct Social Insurance and GHS, deduct any exemptions and allowances, then apply the bands to what remains.
An employee earns €50,000 gross with no other reliefs. Social Insurance of €4,400 (8.8%) and GHS of €1,325 (2.65%) are deducted first, leaving €44,275 of taxable income. The tax is: €0 on the first €22,000; €2,000 on the band to €32,000 (20% × €10,000); €2,500 on the band to €42,000 (25% × €10,000); and €682.50 on the remaining €2,275 (30%). Total income tax is €5,182.50 — an effective income-tax rate of about 10.4% on gross, and an all-in deduction (with contributions) still under 25%. Check the figures with our net salary calculator.
The same logic applies to the self-employed, though they pay Social Insurance at 16.6% and GHS at 4% on their income and have different filing deadlines — see our guide to being self-employed in Cyprus. Social Insurance is capped at the maximum insurable earnings ceiling (€68,904 a year for 2026), so contributions stop rising once income passes that level even though income tax continues up the bands. Because both Social Insurance and GHS reduce the figure on which income tax is charged, the true cost of an extra euro of salary is always lower than the headline marginal rate suggests.
New 2026 household allowances
The 2026 reform introduced a package of household allowances that reduce taxable income, granted per single person or per couple and aimed at families and home-owners. Each is a deduction from taxable income, not a credit against tax. The principal reliefs are:
| Allowance | Maximum deduction | Income-tested? |
|---|---|---|
| Interest on a first-home loan, or rent for a primary residence | €2,000 | Yes |
| Green / energy-efficiency upgrade to the home | €1,000 | Yes |
| Life and medical insurance premiums (in addition to existing relief) | €500 | Yes |
| Property insurance against natural disasters | €500 | No |
| First dependent child | €1,000 | Yes |
| Second dependent child | €1,250 | Yes |
| Third and each further dependent child | €1,500 | Yes |
Most of these reliefs (housing, energy, insurance and children) are subject to family-income ceilings: they are available to a single person up to €40,000 of income and to a family up to €100,000, with the family ceiling rising to €150,000 for families with three or four children and €200,000 for families with five or more. The natural-disaster property insurance deduction, by contrast, carries no income test. Our 2026 allowances calculator shows exactly which reliefs apply at your income level and family size.
A married home-owner earns €60,000 with two children, paying mortgage interest and life insurance. With family income under the €100,000 ceiling, the household can deduct €2,000 (loan interest) + €500 (life and medical insurance) + €1,000 (first child) + €1,250 (second child) = €4,750 from taxable income. After the usual Social Insurance and GHS deductions, that €4,750 falls largely in the 25% band, saving in the region of €1,100–1,200 of income tax — a direct reward for documenting the right reliefs.
The 50% exemption and other reliefs for new residents
The headline relief for relocating professionals is the 50% exemption: an individual taking up their first employment in Cyprus, who was not Cyprus tax resident for the years preceding that employment, can exempt half of their remuneration from tax where it exceeds €55,000 a year, for up to 17 years. On a €120,000 salary, only €60,000 enters the bands — a substantial, long-running saving. Cyprus keeps several other exemptions central to its appeal:
- 50% exemption — for first Cyprus employment with remuneration over €55,000 a year, applying to half of that income for up to 17 years (subject to the prior-non-residence conditions).
- 20% exemption — for first Cyprus employment below the €55,000 threshold, capped per year, where the 50% exemption does not apply.
- Gains on disposal of securities — shares, bonds, units and similar "titles" are exempt from income tax (0%).
- Ex-gratia and termination payments — the first €200,000 is effectively tax-free, with the excess taxed at a flat 20%.
- Lump sums — approved retirement gratuities and certain compensation payments are exempt.
These reliefs interact and the conditions are strict — the 50% exemption, for instance, is tied to a prior-non-residence test, so getting the analysis right at the point of relocation is far easier than unwinding a missed claim later. Our individuals and non-dom service handles exactly this.
Foreign pensions: the 5% election
Pension income from abroad has its own special treatment. A Cyprus tax resident receiving a foreign pension may elect, year by year, to be taxed at a flat 5% on the amount exceeding €5,000 — the first €5,000 of foreign pension is exempt. Alternatively, where the ordinary bands would produce a lower bill (for a small pension that fits inside the €22,000 tax-free band, for example), the pensioner can choose to be taxed under the normal progressive scale instead. The right choice depends on the size of the pension and the individual's other income, so the election is reviewed each year.
In practice the 5% flat rate becomes attractive at higher pension levels: on a €40,000 foreign pension, the flat method taxes €35,000 at 5% (€1,750), whereas pushing the whole pension through the ordinary bands alongside other income would usually cost considerably more. For a modest pension that, with no other income, sits largely within the tax-free band, the ordinary-bands route can be cheaper still. This switchable treatment is one of the features that makes Cyprus attractive to retirees relocating from higher-tax jurisdictions, and it sits alongside the non-dom exemptions on investment income.
GHS, domicile and what is taxed where
Separately from income tax, every Cyprus tax resident contributes to the General Healthcare System (GHS / GeSY) at 2.65% of income, capped so that GHS applies only up to €180,000 of total income a year. GHS is deducted alongside Social Insurance before income tax is calculated, and it applies to most income — employment, pensions, rents and dividends alike — regardless of domicile.
Domicile matters for a different tax. The Special Defence Contribution (SDC) falls only on individuals who are both resident and domiciled (or deemed domiciled — broadly, Cyprus tax resident for at least 17 of the last 20 years). A non-domiciled resident is exempt from SDC. This is why dividends and most interest do not appear in the income-tax bands above: they are outside personal income tax and instead fall under SDC, which a non-dom does not pay. To avoid double-counting, treat investment income separately — see our guides to Cyprus dividends 2026 and the non-dom regime.
"Resident" and "domiciled" are different tests. You can be a Cyprus tax resident — for example under the 60-day rule — while remaining non-domiciled, which keeps you outside SDC on dividends and interest. After 17 of the last 20 years as a resident, you become "deemed domiciled" and SDC begins to apply.
Filing, deadlines and mandatory returns
Filing a personal income tax return is mandatory from the year you reach age 25 (income-based exemptions otherwise apply below the filing threshold for younger taxpayers). Employees and pensioners file their return for a year by 31 July of the following year, electronically through the Tax For All (TFA) portal. The self-employed have different, later deadlines, covered in our self-employed guide and the tax reform overview.
For most employees the income tax due is already withheld through PAYE across the year, so the annual return is largely a confirmation rather than a big balancing payment. Keep the documentation for every allowance you claim — loan-interest certificates, rent agreements, insurance premiums and energy-upgrade invoices — because the new household allowances are documentation-driven and may be reviewed.
Paying the right amount — and not a euro more
Cyprus personal tax rewards people who plan. The €22,000 tax-free band, the new household allowances, the 50% exemption, the foreign-pension election and the non-dom SDC exemption can combine to produce a strikingly low effective rate — but only if each relief is claimed correctly and its conditions are met. The ordering of contributions and allowances before the bands matters too, and getting it wrong on a return is easy.
If you are relocating to Cyprus, drawing a salary from your own company, retiring here on a foreign pension, or simply want to be sure you are claiming everything you are entitled to, get in touch. Our tax compliance service prepares and files your return accurately and on time, and flags the planning opportunities before the year closes.