Taxpayers will be able to benefit from deductions of up to €3,000 per year from income tax under the tax reform framework.
These are additional tax deductions for housing loan interest rates, rent, energy upgrades to primary residences and electric vehicle purchases, which each taxpayer will be entitled to, provided they meet the specified income criteria.
Those eligible are households with an annual family income up to €100,000 for families without children or with one or two children, annual gross family income up to €150,000 for families with three or four children, and up to €200,000 for families with five or more children.
The tax deduction can be claimed by each spouse or partner, with or without a cohabitation agreement with a common child, as well as single persons.
Housing interest and rent deductions
The €2,000 deduction covers interest on a serviced housing loan for the purchase or construction of a primary residence in Cyprus.
According to the Tax Department’s explanatory guide, a serviced loan includes a restructured loan, provided that instalments are paid without interruption until 31 December of the tax year.
It is worth noting that, in cases where the housing loan was restructured, it is considered serviced provided instalments are paid without interruption. The deduction also covers rent paid for use of a primary residence in Cyprus.
However, if the amount of interest or payable rent is greater or less than €2,000, the actual amount of interest or rent paid is granted.
Conditions
The conditions for granting the tax deduction are as follows:
For the interest deduction, the residence must be owned by at least one of the two spouses or partners or a single person.
For the interest deduction, the serviced loan must be in the name of at least one of the two spouses or partners or a single person.
The deduction amount granted to both spouses or partners or to the single person does not exceed the actual expenditure for payment of interest or rent.
Any state grants or subsidies for housing loan interest or rent reduce the expenditure amount for which the deduction is granted.
Rent must be paid to the property owner by bank transfer, card or recognised electronic payment method.
Green deductions
The personal deduction for capital expenditure on energy upgrades to primary residences and electric vehicle purchases reaches €1,000 per taxpayer. Essentially, a deduction is granted for the actual expenditure amount per spouse or partner or single person.
These deductions are also based on income criteria, depending on the number of children.
The deduction covers improvement of the energy performance of the primary residence in Cyprus, energy performance technical systems, renewable energy systems, as well as electricity storage batteries in the primary residence, and electric vehicles registered with the Road Transport Department.
If expenditure exceeds the €2,000 deduction granted to both spouses/partners or exceeds €1,000 granted to the single person in the year the expenditure is made, the remaining expenditure can be carried forward and granted up to €1,000 per spouse/partner or single person for the next four years, subject to meeting income criteria in each tax year.
It is noted that if the deduction cannot be granted in the year the expenditure is made because income criteria are not met, this deduction cannot be carried forward and granted in subsequent years.
Conditions for energy upgrade allowances
The further conditions for securing the deduction for energy upgrade expenditure are as follows:
Any state grant or subsidy from public funds (for example, the “Photovoltaics for All” scheme) reduces the expenditure amount for which the deduction is granted.
The primary residence undergoing an energy upgrade must be owned by at least one of the two spouses/partners or the single person.
The deduction amount granted to both spouses or partners or to the single person does not exceed the total actual expenditure for the residence’s energy upgrade or the electric vehicle purchase.
Read more: