Despite the fact that Cyprus is now in the EU and also in the eurozone as well, it is one of the most advantageously taxed countries in the whole of Europe for many an expatriate. For those moving to the island expatriate tax in Cyprus can be a pleasant surprise. For example, for those who qualify, pension income can be taxed at a rate as low as 5% and higher rate tax is only 30% compared to 40% in the UK.
Expatriate tax in Cyprus will be covered in this article – however, this article does not constitute advice and because the information supplied herein is subject to change and based on an average scenario, you are strongly advised to seek personal advice about your own tax situation in Cyprus if you are an expat.
You will become tax resident in Cyprus if you spend more than 183 days there in the Cypriot tax year. Note, these days to not have to run consecutively and what’s more, once you become tax resident in Cyprus the bad news is that you are liable for tax on your worldwide income. The good news is that tax is lower in Cyprus than in the UK in many instances, and that the UK has a double taxation agreement in place so in theory, you should never pay tax twice!
If you have any tax free saving policies in the UK like PEPs and ISAs for example, these are not considered tax saving qualifying investments in Cyprus, and each is assessed on its own merits depending on the type of investment contract it is as considered for tax purposes in Cyprus.
Any other offshore savings and investments you have, have to be declared to the Cypriot authorities because as stated, worldwide income is taxable in Cyprus for all residents. If you receive some investment income or other income in the UK net – i.e., after tax has been deducted in the UK, you can use this tax paid as a form of credit against your liability in Cyprus so that you don’t pay twice.
In terms of your pension – if you’re retiring to Cyprus who can blame you – not only is the weather amazing and the lifestyle fantastic, tax paid on pension income can be as low as 0%! Depending on the amount of income you get from your pension you either pay a flat 5% on all of it, or you can elect to be taxed under the usual income tax scale which is 0% up to EUR 19,500, 20% on income earned between EUR 19,501 and EUR 28,000, 25% on everything between EUR 28,001 and EUR 36,300 and finally it’s 30% on anything over EUR 36,301. (Correct at time of writing, subject to change).
If your pension income fluctuates don’t worry, you can change the way you pay each year.
If in doubt, always take advice.