Act I · YouStory 3 of 31
The 2026 tax reform: what changed in January
The 2026 tax reform raised the tax-free amount from €19,500 to €22,000 and moved every band up. In euro it helped high earners most; well over a third of employees gained nothing from it.
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On 1 January 2026 a broad reform of Cyprus's taxes took effect. The part every employee felt was simple: the first €22,000 of taxable income a year is now free of income tax, up from €19,500, and every band above it moved up.
| Rate | 2025 | 2026 |
|---|---|---|
| 0% | up to €19,500 | up to €22,000 |
| 20% | €19,501 to €28,000 | €22,001 to €32,000 |
| 25% | €28,001 to €36,300 | €32,001 to €42,000 |
| 30% | €36,301 to €60,000 | €42,001 to €72,000 |
| 35% | above €60,000 | above €72,000 |
The chart turns that table into euro. For each gross salary it shows how much less income tax an employee pays in 2026 than the same salary paid in 2025.
Income tax saved in a year by one employee under the 2026 bands, compared with 2025, by gross salary. The new family, rent and green deductions would add to this and are not included.
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Foroi calculation from the Income Tax Law bands for 2025 and 2026 (Law 244(I)/2025), social insurance at 8.8% up to the annual ceiling (€66,612 in 2025, €68,904 in 2026) and GESY at 2.65%. Median and average pay: Statistical Service of Cyprus, 2025, monthly figure × 12.
What the numbers say
The line climbs in steps, and each step is one band moving.
A person on median pay, €23,616, paid €282 of income tax in 2025 and pays nothing in 2026. From about €25,000 to €31,000 the saving is flat at €500 a year. It rises to €700, then to about €1,000 for salaries between roughly €47,000 and €67,000, and tops out near €1,650 for anyone earning more than about €80,000.
Below about €22,000 of gross salary the line sits on zero. Those employees paid no income tax before the reform, so a higher threshold gives them nothing. That is not a small group. The Statistical Service reports that 35% of employees earned less than €1,500 a month in 2025, and the saving only begins at about €1,835 a month. So well over a third of employees gained nothing, and fewer than half.
What it means for you
How much you gained depends on how you count. In euro, the gain grows with salary and is largest at the top. As a share of pay it is about 2% at several points between €25,000 and €80,000, and it falls only above that: 1.7% at €100,000 and under 1% at €200,000.
The bands are not the whole reform. Households below an income ceiling can now deduct €1,000 for a first child, €1,250 for a second and €1,500 for each further child, up to €2,000 for rent or mortgage interest on a main home, and up to €1,000 for green upgrades or an electric car. Each parent claims separately. The ceiling is €100,000 of family income for a family with up to two children, and €40,000 for a single person. These are not in the chart, because they depend on the household and not on the salary.
Nothing changed in the contributions. Social insurance stayed at 8.8% and GESY at 2.65%, and those are what most employees mainly pay.
What people argue
Who was it for? The government and the employers' organisations presented the reform as relief for middle-class families. The trade unions and the opposition party AKEL answered that the largest gains go to the highest salaries and that the lowest paid gain nothing. Both statements are true, and the chart shows both. The family deductions lean the other way: they are capped by income and worth most to households with children.
What did it cost, and who paid? The same package raised the corporation tax rate from 12.5% to 15% and cut the defence contribution on dividends from 17% to 5%. Whether the reform as a whole shifted the burden toward companies or away from them is still argued, and it cannot be settled until a full year of receipts is in.
How we know
The bands are in the Income Tax Law as amended by Law 244(I)/2025. The calculation subtracts social insurance and GESY before applying them, as the law does, and uses the contribution ceiling for each year (€66,612 in 2025, €68,904 in 2026). The share of employees below €1,500 a month and the median and average salaries are from the Statistical Service's earnings data for 2025. The positions of the government, the employers' organisations, the unions and AKEL are as reported in the press between June and December 2025, among others by Brief and, for AKEL, by Dialogos.
The chart covers one employee with no other income and no family deductions. A real tax bill also depends on deductions this page does not know about.