The total cost of Cyprus’s upcoming tax reform is projected to reach €151 million, covering measures aimed at reducing the tax burden on households and workers. These costs will be offset by additional state revenue generated through the modernization of the tax system.

During the third meeting of the University of Cyprus’s Centre for Economic Research with key stakeholders, the preliminary tax reform framework was presented at the Presidential Palace, in the presence of President Nikos Christodoulides, who reaffirmed the government's commitment to tax relief.

The tax reform introduces targeted fiscal incentives to support middle-class families, homeownership, and employment, including:

• Raising the tax-free income threshold from €19,500 to €20,500.

• New tax brackets:

  • €20,501 - €30,000 taxed at 20%

  • €30,001 - €40,000 taxed at 25%

  • €40,001 - €80,000 taxed at 30%

  • €80,001 and above taxed at 35%

Additional tax deductions include:

• €1,000 tax relief per parent per child (under 19 years old) or per university student (up to 23 years old) for households earning up to €80,000 annually.

• Up to €1,500 per parent in tax relief for mortgage or rent payments on a first home.

• Up to €1,000 per parent for green home upgrades.

• Single-parent families will be taxed under the most favorable scenario, potentially qualifying for a zero-tax rate.

The proposed reform significantly lowers the effective tax rate for families based on the number of children:

• 1 child: €800 tax reduction (-37%)

• 2 children: €1,200 tax reduction (-56%)

• 3 children: €1,454 tax reduction (-68%)

• 4 children: €1,654 tax reduction (-77%)

For a household with two working parents and an annual gross income of €56,184, the new tax system will result in a 63% reduction in taxation, even for those without children.

The estimated cost of key tax relief measures includes:

• €65 million for increasing the tax-free income threshold and adjusting tax brackets.

• €27 million for child and student tax deductions.

• €30 million for mortgage and rent tax relief.

• €29 million for green home upgrade tax credits.

The final tax reform plan will undergo further legislative review before submission to Parliament for approval.