Political parties are rushing to amend Cyprus’s tax reform that was voted in last month, to address complications in how deductions are granted, particularly for different family structures.
The Tax Department has prepared multiple scenarios to cover all family types and calculate annual incomes for tax deduction purposes since the reform took effect. Beyond addressing complexity, the changes will strengthen provisions not included in the original tax reform legislation.
Parties plan to submit more than seven to eight amendments via private member bills, aiming for approval before Parliament dissolves in April for parliamentary elections.
Current deduction framework
Taxpayers currently receive €1,000 for their first child, €1,250 for their second child, and €1,500 for families with more than three children. Additional deductions of €2,000 apply for housing loan interest on primary residences and rent, whilst €1,000 deductions cover green investments for primary residences and electric vehicle purchases.
Eligibility depends on family income thresholds: €100,000 annually for families with one to two children, €150,000 for three to four children, and €200,000 for families with five or more children.
Planned amendments
The changes under preparation include extending tax deductions to renovation loan interest for primary residences, with considerations for €2,000 deductions per taxpayer to help young couples manage high housing costs.
Families will qualify for deductions if at least one child remains dependent, with all children counted once this condition is met. Income earned by working children living with parents will not count towards family income thresholds for deduction purposes.
The gross annual family income calculation will include alimony payments from divorced spouses and state benefits, excluding child allowances, student grants, and benefits for the needy.
The income threshold for single taxpayers will increase from €40,000 to €50,000. Under current rules for single-parent families, the custodial parent receives double deductions whilst the other parent qualifies for single deductions per child if their income falls below €40,000.
From 1 July, landlords must collect rent exclusively through bank transfers, debit or credit cards, or other recognised electronic payment methods, regardless of amount. Those failing to comply will face administrative fines.
Taxpayers who installed solar panels on primary residences will receive deductions for the billing period, whilst cash payments for electric vehicle purchases will count as eligible expenses.
Implementation briefing
Tax Commissioner Sotiris Markides briefed the House Finance Committee yesterday on the reform’s progress.
Taxpayers will declare their entitled deductions via Form TF 59, submitted to company accounts departments. Markides assured that January salaries will be somewhat higher due to the increased tax-free threshold of €22,000 and more favourable tax brackets, regardless of whether employees submit forms on time. Any missing deductions will be adjusted in subsequent months.
Markides urged taxpayers to read the explanatory guide posted on the Tax Department’s website before completing forms. More than 10,000 people will attend seminars the department is organising for the Cyprus Employers and Industrialists Federation, the Cyprus Chamber of Commerce and Industry, the Cyprus Workers Confederation, and trade union organisations.
Significant discussion centred on single-parent families. “Benefits for single-parent families are given where the child resides. If a court decision states the child spends equal time with both parents, this doesn’t create a single-parent family—incomes are counted jointly and single-parent provisions don’t apply,” Markides said.
He added that a divorced non-custodial parent who remarries and starts another family qualifies for an income threshold of €100,000 and remains entitled to deductions for children from the previous marriage, even though they live elsewhere.
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