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Cyprus Considers Raising Family Income Limit for Tax Deductions to €90 000
The government of the Republic of Cyprus is actively considering raising the annual family-income ceiling for eligibility of tax-deduction benefits from the initially proposed 80,000 to around 90,000. The move was signalled by Makis Keravnos, the Finance Minister, in recent remarks that the cost of widening the eligibility is “not prohibitive”.
Under the proposed reform:
The basic tax-free personal income threshold would increase (from around 19,500 to 20,500 for individuals) and families would receive additional reliefs (for children, students, energy upgrades, property/housing loan interest) provided their income falls below the ceiling.
On the business side, corporate tax is set to increase from 12.5 % to 15 %. Meanwhile, the “deemed dividend distribution” mechanism is to be abolished for profits generated from January 1, 2026, and the special defence contribution on actual dividend distributions will fall from 17 % to 5 %. Rental-income tax burdens will also be eased (abolishment of the SDC on rental income), the carry-forward period for losses will extend from 5 to 7 years, and new favourable regimes will apply for gains on crypto assets via an 8 % rate.
The impetus behind these changes is two-fold: to provide relief to middle-income households and families, and to improve Cyprus’s attractiveness for business investment and retain talent in a competitive European environment.
This reform signals an important balancing act for Cyprus: on one hand, it wants to cushion households (especially families) facing cost-of-living pressures and an uncertain global economy; on the other, it seeks to maintain competitiveness and fiscal stability. Raising the ceiling from 80 k to 90 k for deduction eligibility suggests the government is somewhat responsive to feedback that the initial threshold would leave out many middle-income earners. In that sense, the change can be seen as politically astute and socially sensitive.
However, the increase in corporate tax from 12.5 % to 15 % may raise eyebrows among businesses currently drawn to Cyprus because of its favourable corporate-tax regime. The abolition of the deemed dividend distribution and the lowering of the SDC on actual dividends do offset some burden, but the net effect could be mixed depending on company structure. From a policy perspective, this reflects a shift: Cyprus is allowing more micre-relief for individuals while nudging companies to contribute more , likely to protect revenue base.
A key risk is implementation and signalling. If businesses view the changes as eroding the country’s tax-friendly proposition without commensurate benefits (such as improved infrastructure, stable regulation, and skilled workforce), then investment may slow. Similarly, households may view thresholds and deduction eligibility rules as complex or uncertain. Therefore, communication and administrative clarity will be vital to avoid undermining confidence.
Overall, this tax-reform package seems to reflect Cyprus’s adaptation to a changing European fiscal and competitive environment: where tax incentives are no longer as uncompetitive as they once were, and where households are increasingly demanding tangible benefit. If executed well, it could strengthen the country’s social contract and business ecosystem; if not, it risks creating wobbles in both.
Market Cyprus - News Service
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