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Comprehensive Guide To 2026 Tax Reform And Income Tax Deductions

The Tax Directorate has unveiled a comprehensive guide detailing the 2026 Tax Reform, income tax provisions, and entitlements to tax deductions. Published on Friday, the guide is available on the official website of the Tax Directorate under a dedicated section for Tax Reform 2026. Access the information directly via the Tax Reform 2026 page on the Ministry of Finance website at www.mof.gov.cy/tax.

Key Elements Of The Guide

The publication offers detailed insights and resources, including:

  • An editable PDF version of the Tax Deductions Claim Form (Τ.Φ.59) for the 2026 fiscal year;
  • An explanatory manual outlining the application of the tax reform for individual taxpayers residing in Cyprus starting from 2026;
  • A section featuring Frequently Asked Questions and corresponding answers, with updates to be provided as needed;
  • Practical examples demonstrating the application of the tax reform for individual taxpayers, with additional scenarios to be added over time.

Expert Insight And Upcoming Tools

Tax Officer Sotiris Markidis, in an interview with the publication “F,” underscored the guide’s role in helping taxpayers navigate the new legal framework set to take effect on January 1. Mr. Markidis also announced the imminent launch of an Income Tax Calculation Tool. This innovative tool will allow users to enter their income across various categories as well as applicable deductions (including allowances and exemptions). Based on one’s personal status—whether single, part of a family, or a single-parent household—the tool will display the income tax amounts before and after the reform, clearly highlighting the tax benefits inherited from the new structure.

Action Required From Employers

Markidis advised employers, particularly those whose employees are impacted by the revised tax policies and new personal deductions, to review the manual, FAQs, and provided examples carefully. He recommended that they complete the Tax Deductions Claim Form (Τ.Φ.59) for the 2026 fiscal year at the earliest opportunity and deliver it to their employers to ensure the prompt implementation of the updated income tax withholding parameters.

Bank of Cyprus Upgrade Signals Fresh Optimism For Greek And Cypriot Banks

Regional Banks Enter A More Favorable Cycle

Bank of Cyprus and Eurobank are well positioned to benefit from a renewed re-rating of Greek and Cypriot bank stocks, according to Cyprus-based investment firm Roemer Capital, which upgraded Bank of Cyprus to a buy rating and reaffirmed its positive view on Eurobank.

The firm cited easing geopolitical tensions, resilient economic growth in Greece and Cyprus, lower funding costs and Greece’s expected transition to developed-market status as the main factors supporting the sector.

Roemer Capital also lowered its cost of equity assumptions, updated its forecasts following first-quarter 2026 results and extended its valuation horizon to the end of 2027, raising target prices across its banking coverage.

Bank Of Cyprus Gets The Largest Upgrade

Bank of Cyprus received the biggest revision, with Roemer Capital upgrading the stock from hold to buy and setting a target price of €11.10, implying potential total upside of 27%.

The firm highlighted the bank’s strong capital generation, profitability and projected 100% dividend payout, describing it as the strongest capital-return story among the banks under coverage. Roemer Capital maintained its buy rating on Eurobank, assigning a target price of €4.90 and forecasting potential upside of 28%. The report said the bank is well placed to benefit from loan growth, improving operating performance and merger-and-acquisition synergies.

National Bank of Greece and Piraeus Bank also retained buy ratings, with expected returns ranging from 25% to 36%. Optima Bank was upgraded to buy, while Alpha Bank remained at hold on valuation grounds.

Why Growth Still Sets The Region Apart

According to Roemer Capital, Greek and Cypriot banks continue to benefit from stronger economic fundamentals than many western European peers. The report pointed to faster economic growth, healthier balance sheets, low levels of non-performing exposures, capital ratios approaching 20% and strong customer deposit bases.

Analysts expect performing loans across the sector to grow at a compound annual rate of 6% to 8% through 2028, supported by private investment, digitalisation, green manufacturing, supply-chain expansion and a gradual recovery in household lending.

The report also said the conclusion of lending under the EU Recovery and Resilience Facility is unlikely to materially affect credit growth, as banks have already shifted back towards traditional commercial lending. Roemer Capital expects Euribor to remain between 2.2% and 2.5%, a level it believes should support both lending activity and net interest margins.

Geopolitics, Valuation And Market Structure Support The Case

The report said improving geopolitical conditions have strengthened the investment outlook, noting that Brent crude prices have largely returned to pre-war levels while Greek government bond yields have stabilised at around 3.5%. Although geopolitical risks remain, Roemer Capital believes the likelihood of a major inflationary shock or significant pressure on bank profitability has eased.

Another important catalyst identified by the firm is Greece’s expected promotion to developed-market status by FTSE Russell, STOXX and MSCI over the coming months.

According to the report, the reclassification should improve liquidity and attract a broader base of international investors. Roemer Capital also said Euronext’s acquisition of the Athens Exchange is expected to strengthen market infrastructure and increase international visibility, particularly for Bank of Cyprus and Optima Bank.

The firm noted that Bank of Cyprus has already benefited from its Athens listing, with average daily trading value increasing from less than €400,000 before its September 2024 move to nearly €6 million afterwards.

Economic Momentum Remains A Core Tailwind

Roemer Capital said both Greece and Cyprus have moved beyond post-crisis recovery and are now supported by private-sector-led growth. For Cyprus, the report highlighted recent tax reform and efforts to simplify the legal and regulatory framework, while also noting that limited foreign banking competition continues to support domestic lenders.

Overall, Roemer Capital expects Greek and Cypriot banks to remain well-positioned for profitable loan growth over the coming years.

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