For retirees in Cyprus
Cyprus joined the EU in 2004 and since then has established it self as a special haven for retirees with a wide range of incomes and this favourable treatment of pensioners is not age related. It applies to anyone in receipt of pension income, including those taking early retirement. A double taxation treaty with Britain allows retirees to pay tax in Cyprus at a fixed rate of 5% on their pensions whether state, company or personal.
Justin Rix, international tax director at Grant Thornton, says; “an expatriate pensioner can elect to pay tax at 5% on any pension income above a threshold of €3,417. But if they wish, they can choose to be taxed under the normal tiered rules which apply to all Cyprus residents, in which case the first €19,500 is untaxed”.
The following sliding scale is applicable to residents electing to pay tax under the normal tiered rules system:
€19,501 - €28,000 at 20%
€28,001 - €36,300 at 25%
Over €36,300 at 30%
As an additional benefit the UK government will pay the annual inflation increase on state pensions to expatriates resident in Cyprus.
Pension lump sums are not taxable in Cyprus, even if taken after becoming resident in Cyprus whilst investment income is subject to fixed rates of tax (called defence contributions) of 10% (bank interest) and 15% (dividends). However there are provisions to mitigate this tax for higher earners through off-shore pension schemes and a competent tax advisor should be able to advise on these.
There is no inheritance tax payable in Cyprus whilst capital gains tax generally only arises on the sale of a Cyprus property at a profit.
Non-UK residents can sell their UK assets free of UK capital gains tax provided they dispose of them in a complete UK tax year of non-residence and do not resume UK residence within 5 complete consecutive UK tax years after departure. Non - UK residents can visit the UK for up to 90 days each UK tax year (on average - calculated over up to 4 UK tax years) although it may be advisable not to push the number of days to the limit.
We work with a number of tax and financial specialists in advising people who are considering moving from the UK to Cyprus and would be pleased to arrange for an initial consultation either in Cyprus or the UK.
