Tax reform proposed in Cyprus: up to 60% of taxpayers may not pay tax from January 1, 2026

The Government of Cyprus presented a draft tax reform set to take effect on January 1, 2026, Finance Minister Makis Keravnos said. According to him, the share of taxpayers exempt from paying tax will increase from 45% to 60%.

Main changes presented by the minister: raising the tax-free threshold from €19,500 to €20,500; new tax deductions — €1,000 per child and student (for each spouse), mortgage deductions for the first residence, and €1,500 for home renovations provided they include “greening” measures. Keravnos stated that total tax-free income may exceed €30,000 and warned that the draft will be withdrawn if Parliament seriously alters its purpose.

Economists and the opposition note that the benefits largely favor high-income earners, and raising the threshold does not affect those already earning below the current minimum; this raises questions about advantages for the middle class amid high inflation and rising rates. At the same time, discussions of the reform are accompanied by conflict over automatic wage indexation (ATA): trade unions are preparing protests, while the minister called strikes an obstacle to dialogue, citing the current low inflation rate (0.5%).

The draft also involves budgetary risks: the minister pointed to the Vasiliko terminal as a major financial challenge and expects conclusions from French experts. For Cypriot residents, this could mean a reduced tax burden for families with children, mortgage holders, and those investing in “green” renovations, but also risks of political disputes and social tension if the package is modified in Parliament.