How the tax on a Cyprus salary is worked out: formulas and an example

You need this if

• You want to know where the figure on your payslip comes from.
• You are weighing a job offer and want to turn gross into net yourself.
• You have the 20%, 25% or 50% exemption and want to see exactly where it cuts the tax.

You do not need this if

• You are self-employed: your social insurance runs on a deemed income and GESY is 4% — that is a guide of its own.
• You need the year’s result with rents, dividends and foreign income — the tax return works that out, not the salary formula.

• Your gross monthly salary and the number of payments a year — 12 or 13.
• Bonuses and benefits from the employer for the year: a company car, housing.
• Which relocation exemption you have, if any.
• Dependent children, rent or mortgage interest, and the household’s gross income — for the 2026 deductions.
• A payslip or the IR63 certificate, to check the result against.

1. 1

   Income for the year

   Everything is worked out for the year. Annual income is the gross monthly salary × 12, or × 13 where a thirteenth salary is paid, plus bonuses and benefits. The example on this page: €5,000 × 12 = €60,000.

2. 2

   Social insurance: 8.8% up to a ceiling

   The employee pays 8.8% of each payment, but only up to the insurable earnings ceiling: in 2026 that is €5,742 a month, €68,904 a year. Social insurance never comes to more than €6,063.55 a year. In the example: €60,000 × 8.8% = €5,280.

3. 3

   GESY: 2.65% up to €180,000

   The GESY contribution is 2.65% of all income — salary, pension, rents, dividends and interest — but only on the first €180,000 a year of all of it together. It never comes to more than €4,770. In the example: €60,000 × 2.65% = €1,590. On a salary of €20,000 a month GESY is €4,770, not €6,360.

4. 4

   A relocation exemption comes off first

   If one of the three exemptions applies, it reduces income before anything else — line B2 of form T.D.59. 20% under article 8(21A) is capped at €8,550 a year; 25% under article 8(21B) at €25,000, with income above €30,000; 50% under article 8(23A) has no cap, with a salary above €55,000. Only one in any year. With the 25% exemption in the example: €60,000 × 25% = €15,000.

5. 5

   The one-fifth cap

   Social insurance, GESY, contributions to pension, provident and medical funds and life insurance premiums come off together, but no more than a fifth of the income left after the exemption. Usually the cap does not bite. With the 50% exemption it can, on salaries from €55,000 up to about €82,500: €60,000 − €30,000 = €30,000, a fifth of that is €6,000, while social insurance and GESY come to €6,870. €6,000 comes off.

6. 6

   The 2026 deductions

   Children — €1,000 for the first, €1,250 for the second, €1,500 for the third and each one after, doubled for a single parent; rent or mortgage interest on the main home — up to €2,000; energy upgrades or an electric car — up to €1,000; home insurance against natural disasters — up to €500. The first three only if the household’s gross income is no more than €100,000 with 0–2 children, €150,000 with 3–4, €200,000 with five or more, or €40,000 for a single person. They sit outside the one-fifth cap. Example: two children and €2,400 a year in rent give €2,250 + €2,000 = €4,250.

7. 7

   Taxable income

   Income − exemption − social insurance, GESY and funds within the one-fifth cap − deductions. In the example with no exemption and no deductions: €60,000 − €5,280 − €1,590 = €53,130. The €22,000 tax-free amount applies to this figure, not to the salary: tax starts at about €2,070 a month gross, which is €24,845 a year.

8. 8

   The bands: each at its own rate

   Up to €22,000 — 0%; €22,001 to €32,000 — 20%, so up to €2,000; €32,001 to €42,000 — 25%, up to €2,500; €42,001 to €72,000 — 30%, up to €9,000; above €72,000 — 35%. For €53,130: €0 + €2,000 + €2,500 + (€53,130 − €42,000) × 30% = €3,339, €7,839 in all. The marginal rate is 30%, while the tax is 13.1% of the salary.

9. 9

   Withholding each month

   The employer splits the annual tax evenly: by 12, or by 13 where a thirteenth salary is paid — line C3 of form T.D.59. In the example €7,839 ÷ 12 = €653.25 in every month, January to December. Tax on a bonus is withheld in the month the bonus is paid.

   PracticeThe Cyprus form has no cumulative method, where the first months carry no tax and it climbs towards December. A payslip that looks like that is not being worked out from T.D.59.

10. 10

    Take-home pay

    Income − social insurance − GESY − tax. €60,000 − €5,280 − €1,590 − €7,839 = €45,291 a year, €3,774.25 a month. In 2025 the same salary gave €3,692.17: under the old bands with €19,500 tax-free the tax was €8,824.

11. 11

    The tax return settles it

    Monthly withholding is a forecast. After the year ends, the tax return works the tax out again on the actual income and every deduction: an overpayment is refunded, an underpayment is paid. The 2026 return is due by 31 July 2027.

2026 bands

0 / 20 / 25 / 30 / 35%Band limits: €22,000, €32,000, €42,000, €72,000.

Employee social insurance

8.8%Up to €5,742 a month; no more than €6,063.55 a year.

Employee GESY

2.65%On all income up to €180,000; no more than €4,770 a year.

One-fifth cap

1/5 of income after the exemptionSocial insurance, GESY, funds and life insurance together.

Tax starts at

≈ €2,070 a month12 payments, no exemption or deductions; €24,845 a year.

€5,000 a month

€3,774.25 take-homeMonthly: tax €653.25, social insurance €440, GESY €132.50.

The same with the 25% exemption

€4,133.13 take-homeExemption €15,000, tax €3,532.50 a year.

The same with the 50% exemption

€4,394.17 take-homeExemption €30,000, the one-fifth cap applies, tax €400 a year.

The same, two children and rent

€3,880.50 take-homeDeductions €4,250, tax €6,564 a year.

• Taking 30% of the whole salary. A band’s rate applies only to the part of income inside it: on €60,000 the tax is €7,839, which is 13.1%.
• Comparing €22,000 with the salary. The tax-free amount is taxable income, after social insurance and GESY, so tax starts at €24,845 gross, not at €22,000.
• Leaving the ceiling off GESY. Nothing is charged on income above €180,000, and a calculation without the ceiling understates take-home pay for everyone earning more than €15,000 a month.
• Deducting social insurance and GESY in full with the 50% exemption. Between €55,000 and about €82,500 of salary, together with the funds and life insurance, they hit a fifth of the income left after the exemption.
• Expecting no tax in January and more in December. Under form T.D.59 the same amount is withheld every month.
• Adding exemptions together. 20%, 25% and 50% do not stack: one applies in any year.
• Assuming the 20% exemption closed when the 25% arrived. It still covers a first employment in Cyprus that starts by the end of 2027; what changed in March 2026 is only that a year with the 25% cannot also have the 20%.

Anything marked “practice” is what the department does in the office, not a rule you can hold it to. Rules carry a source.

• Form T.D.59 on the department’s forms pageSearch for “59”. Part C of the form is the same withholding formula as on this page.
• The department’s 2026 reform sectionThe bands, the deductions with their income criteria and sixteen official worked examples.
• Social insurance ceilings by yearThe Basic Insurable Earnings table: the 2026 ceiling per week, month and year.

• Income Tax Law 118(I)/2002, consolidated text: the bands of the first schedule, the exemptions of articles 8(21A), 8(21B) and 8(23A), the deductions of the 2026 reform
• Form T.D.59 for the 2026 tax year: note 10 — the one-fifth cap, note 11 — 7% of the sum insured, part C — withholding ÷ 12 or ÷ 13 and the end of GESY withholding at €180,0002026
• Tax Department, FAQ on the 2026 tax reform for individuals: the bands, the size and income criteria of the new deductions11.05.2026
• General Healthcare System Law 89(I)/2001, article 19: the 2.65% contribution and the €180,000 annual ceiling
• Social Insurance Services, Basic Insurable Earnings 1981–2026: the insurable earnings ceiling for 2026