Who actually pays income tax

Income tax is the tax people talk about most, and far fewer people pay it than pay VAT or social insurance. The first €22,000 of taxable income a year is free of it, and a large share of the country earns less than that.

What the numbers say

The Tax Department publishes one set of tables on this, and only for three years. For 2022, the latest, 299,421 people filed a return. Of them 129,580, or 43%, had taxable income of €19,500 or less, which was the tax-free amount at the time. Only 10,951 people, under 4%, had taxable income above €60,000 and reached the top rate.

The share inside the tax-free band has been falling: it was 56% in 2017 and 47% in 2021. The likely reason is that wages rose while the threshold stayed where it was. That is the background to the reform.

From January 2026 the threshold is €22,000. No official count of the effect had been published by October 2026. The closest thing is a working paper by three researchers at the Central Bank, published in June 2026, which runs the new rules through a model of household incomes. It finds 485,000 people with an income. On their incomes of 2024, 245,000 of them would pay income tax under the old rules and 191,000 under the new ones. So the share paying nothing goes from about 50% to about 61%. On incomes projected for 2026, which are higher, it goes from 45% to 57%.

Paying no income tax is not the same as paying no tax. Everyone with a salary still pays social insurance and GESY from the first euro, and everyone pays VAT. A quarter of your pay shows how those add up.

What it means for you

A single employee with no other income or allowances starts to pay income tax at a gross salary of about €24,800 a year, or roughly €2,070 a month counted over twelve months. Half of all employees earned less than €1,968 a month in 2025.

If you earn less than about €1,835 a month, the reform changed nothing in your payslip: you paid no income tax before and pay none now. Between that and about €2,070 you used to pay some and now pay none. Above it you gained, and the more you earn the more you gained in euro, up to a point. The 2026 tax reform: what changed in January shows the saving at each salary.

The same paper puts the average gain at about €5 a year for a household in the poorest tenth and about €1,057 in the richest. Measured against income the picture is different: the largest gain, 2.9% of income, goes to the ninth tenth, and the richest tenth gains 2.0%.

One more thing changed. From the tax year 2026, every resident aged 25 to 70 must file a return, whatever their income.

What people argue

Is it right that most people pay none? The Finance Minister was reported in September 2025 as saying the share paying no tax would rise from 45% to 60%, and presented that as a benefit of the reform; he was speaking about an earlier version of the plan, with a €20,500 threshold. The argument on the other side is about the tax base: a tax paid by four in ten leaves the state leaning on fewer people and on other revenue, such as VAT and company tax.

Did it help the people who needed help? The opposition party AKEL and the unions said the reform gave most to high earners and nothing to people who already paid no income tax. The Fiscal Council, the independent body that reviews the public finances, wrote in its 2026 interim report that the redistributive effect of the reform "appears limited", because much of the relief reaches middle and higher incomes. The limit of any such reform is arithmetic: a cut in income tax can only reach people who pay income tax.

What did it cost? The estimates are of different things. The Ministry of Finance puts the income tax part at 0.6% of the economy a year. The university centre that prepared the study behind the reform puts it at €221 million, and the Central Bank paper at about €240 million without one of the allowances. The Ministry's figure of €284 million is the net cost of the whole reform, including the changes to company tax.

How we know

The bands come from the Tax Department's "distribution of taxpayers" tables for the tax years 2017, 2021 and 2022. They count people who filed a return, by taxable income. The department does not publish how much tax each band pays, so the share of income tax paid by the top earners cannot be worked out from anything it publishes. That is the largest gap in this story.

The before-and-after figures and the gains by tenth are from Central Bank of Cyprus Working Paper 2026-2. They are a model estimate built on a household survey, and the paper says it does not represent the Bank's official view. The shares paying no tax are our arithmetic on its Table 4; the headline uses its figures for 2024 incomes.

The salary at which income tax starts is our calculation from the 2026 rules. Median earnings are from the Statistical Service. The minister's statement is as reported by the press; we did not read the original interview.