On Wednesday 26 February, Cypriot President Nicos Christodoulidis presented a new tax reform that will raise the threshold for non-taxable income in Cyprus from €19,500 to €20,500.
According to him, this initiative is just one part of the comprehensive changes aimed at creating a fairer tax system, supporting the middle class and reducing the financial burden on Cypriot families. Incidentally, local media had previously reported on a possible increase in the maximum threshold to 24.5 thousand euros, but the authorities decided to limit the increase to one thousand euros.
The new income tax scale is as follows:
- Up to 20,500 euros - 0%.
- From 25,501 euros to 30,000 euros - 20%.
- From 30,001 to 40,000 euros - 25%.
- From 40,001 to 80,000 euros - 30%.
- Over 80,000 euros - 35%.
It should be noted that Cypriot households with an income of up to €80,000 per year, where both spouses work, receive tax deductions:
- One thousand euros for each parent for a child under the age of 19 (girls) or 21 (boys).
- One thousand euros for a student up to the age of 23 (girls) or 24 (boys).
- A tax deduction of 1.500 euros for mortgage or rental property for each spouse.
In addition, corporate tax will be increased from 12.5% to 15%, which is in line with EU standards. Economists estimate that the tax burden on the average household will be reduced by 63-82%.
For example, a person earning €28,356 a year will pay just €422 in tax, while a parent with two children will pay just €22. The reform must be approved by the Cabinet of Ministers and Parliament before it can be implemented.