Cyprus Lowers Taxes for Families with Children: What Will Change in 2026

The government of Cyprus has presented a draft tax reform that is expected to bring Cypriot families a total benefit of about €150 million annually. The initiative aims to support families with children and increase the fairness of the tax system.

According to the planned changes, the individual tax-free threshold will increase from €19,500 to €20,500, and the maximum income tax rate of 35% will apply only to income exceeding €80,000, whereas the current threshold starts at €60,001. This means that middle- and lower-income households will experience a noticeable reduction in their tax burden.

Significant deductions are provided for families. Each parent will be able to reduce their taxable income by €1,000, as well as receive an additional deduction of €1,000 for each child — for daughters up to 19 years old and sons up to 21. If the child is studying, deductions will continue: for daughters up to 23 and sons up to 24.

According to the Ministry of Finance, a family with an income of €56,000 and four children currently pays about €2,150 in taxes. After the reform comes into effect, their tax burden will decrease by approximately €1,650. For families with three children, the savings will be around €1,450, for two children — €1,200, and for one child — about €800.

Single-parent families with an annual income not exceeding €40,000 will benefit the most — this category will receive the greatest relief.

The authorities emphasize that the reform is aimed not only at supporting families but also at simplifying tax administration. At the same time, measures will be strengthened to combat tax evasion and to improve transparency for the corporate sector.

The package of bills is expected to be submitted to parliament by the end of November. If approved, the new tax rules will come into force on January 1, 2026.

Economists note that the proposed measures create additional incentives for families but may raise concerns among businesses, as a parallel increase in corporate rates and stricter tax oversight are also expected.