Living In Cyprus – The Expat’s Guide
A detailed expat guide to living in Cyprus: everything you need to know to understand whether Cyprus is a good value-for-money retirement destination for you
South Cyprus’ sunny weather and lenient fiscal policy towards expats and businesses make it a very attractive destination to move to. For foreign retirees Cyprus is especially attractive because of its low taxes on the expats’ pensions.
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The island is renowned for its fabulous beaches, but it also draws people from all over the world with its stunning mountains and little valleys full of vineyards, orange orchards and olive groves. Cyprus’s 650 km long splendid coastline has 57 Blue Flag beaches (as awarded by the International Jury in 2014/2015).
Greek is the official language in South Cyprus, but English is spoken widely.
The crime rate is very low, and the lifestyle is typically Mediterranean with its slow laidback pace and “enjoy the moment” attitude. Fruit, veg, fish and various seafood can be bought fresh all year round. Colourful and inexpensive fruit & veg markets are dotted everywhere.
The island enjoys the warmest climate in the European Union, with some 320 days of sunshine per year. Cyprus is also ranked among the regions with the healthiest climate worldwide.
The island is home to two countries – the Republic of Cyprus and the Turkish Republic of Northern Cyprus (TRNC). There is also a buffer zone, the so-called Green Line, between the two countries, which was created by the UN.
Both republics are stable countries with relatively low crime rates. Both the northern and southern areas welcome expats and have quite large expat communities.
The cost of living in the North is lower. However, the Southern economy is more stable, and regulations are more transparent and EU compliant. Also, if you wish to set up a business or use the advantage of lenient tax policies in a white-listed reputable jurisdiction, the Republic of Cyprus is an optimal choice.
The Republic is an officially recognized state, a member of the EU, and therefore has a more dynamic economy, more sophisticated facilities, and multiple double taxation treaties with a wide range of countries across the globe (including the UK). All of this makes tax matters much simpler for private persons and businesses.
EU citizens are free to cross the border between the countries, but only at designated points, with the most convenient ones being in Nicosia – the capital of both republics.
Nicosia is a divided city, with part of it belonging to TRNC and part to the Republic of Cyprus.
Crossing the border is not a big deal, although you might have to queue sometimes, especially if you do it by car. If you are a resident of the Republic of Cyprus, when crossing to TRNC you will have to get entry clearance at the checkpoint and insure your car (if your car is registered in the Republic of Cyprus). The clearance is free of charge and can be valid for up to 90 days; short-term car insurance is available on the spot as well.
Expats on both sides frequently go to and fro and think nothing of it. Once you’ve done it once you’ll realise it’s very easy. Shopping and entertainment options are more abundant and sophisticated in the South, while nature and major historic sites are more impressive in the North.
Foreign nationals can purchase real estate in southern Cyprus without any restrictions; however, you have to apply to the Council of Ministers for permission to purchase a property. As a rule, most applications get approved, but the paperwork can take a long time.
To apply, you will need to submit property details, information about the current owner and contract, the buyer’s personal history, current residence, and your means of income.
It is highly recommended to employ a lawyer experienced in dealing with all the complexities of paperwork and, most importantly, tracking down the property’s title deed before proceeding to buy.
Very often developers take out mortgages on land or property. If you sign a contract with such a developer, and they go bankrupt, you are likely to become liable for that mortgage. This has affected many buyers in southern Cyprus and is a very traumatic experience for those affected.
Have your lawyer conduct checks for mortgages placed on the land. Remember that if you sign a contract for a property with any financial claim or a mortgage on it, you will not obtain the deeds in your name until the mortgage is paid off, so tread very carefully indeed.
Make sure your lawyer does not represent the selling side (private vendor or developer) as well because this can be common practice and is very dangerous in terms of ensuring your best interests are looked after. If you are buying a property that needs renovation, check access to utilities and services and that you will be able to develop/improve the property according to local planning laws.
When you find the property you wish to buy, make an offer to the current owner through your agent.
If both sides are happy to proceed, a formal contract of sale is drawn up in writing and translated into all the languages necessary. It should then be deposited with the relevant District Lands Office within two months of being signed by both parties.
The buyer usually puts down a deposit of about 10% of the sale price.
The title deed can only legally be transferred, however, once the government has given the appropriate permissions and the imported funds have been certified. The estate agent or lawyer will then register the property in the name of its new owner.
You should allow for at least an extra 15% on top of the buying price to pay for transfer fees, stamp duties and legal fees. The vendor usually pays the agent’s fees.
Transfer fees depend on a property’s value and range from 3% to 8%.
Stamp duty is also determined by a property’s price. It can vary from 0.15% to 0.20%, but shouldn’t exceed 20,000 EUR.
In an attempt to boost the economy and attract well-off international individuals and businesses, the Republic of Cyprus has been implementing a very clever taxation policy. On the one hand, it gives expats and businesses the opportunity to optimise their taxes, and on the other it lets the Republic build its reputation as a transparent and well-regulated jurisdiction.
In addition, Cyprus has Double Taxation Treaties (DTT) with over 60 countries across the world, including the UK.
If you are an expat resident in Cyprus, and your home country has a DTT with Cyprus, you will never be double-taxed on the same income. Rather you will be taxed on certain incomes in either your country of domicile or your country of residence, depending on the DTT between the two countries.
The DTT between the Republic of Cyprus and the UK makes it extremely attractive for British citizens to retire, set up a business and invest in Cyprus.
The policies that the government has introduced are having a great positive impact on Cyprus’ image as an excellent destination for expats and business relocation.
The final touch was an introduction by the government in 2015 called “The Non-Domicile Programme”.
The programme is specially designed for international entrepreneurs planning to move their residence to Cyprus. They are the biggest winners and for them, the Cyprus Non-Dom Programme offers immense fiscal advantages.
The main goal of the Cyprus Non-Dom Programme is to let more international entrepreneurs and wealthy private individuals reside in Cyprus. This step is supposed to help revive the economic situation of the country and to secure Cyprus’ position as an international business hub.
The programme offers far-reaching benefits for entrepreneurs and wealthy individuals from abroad.
The term “resident but not domiciled”, also called Non-Dom Cyprus, was passed as a law in July 2015. Any individual relocating to Cyprus and taking up Cyprus tax residency can generally qualify as a Cyprus non-domiciled resident and stay as such for 17 years of residence in Cyprus.
To be considered non-domiciled in Cyprus, an individual must have a domicile of choice outside of Cyprus and mustn’t have been a Cyprus tax resident in the last 20 years prior to the relevant tax year.
Cyprus non-domiciled tax residents are completely exempt from Special Contribution for Defence (SDC) on dividends, interest and rental income no matter where they originate from and where they have been paid to.
The total tax exemption makes the holding of investments in dividends and/or interest-earning financial assets, including shares and bonds, in Cyprus and anywhere in the world extremely attractive for non-Cyprus domiciled individuals.
Cyprus non-doms are also exempt from capital gains tax and are eligible for a 50% reduction in land transfer fees on properties acquired before December 31, 2016. They can also enjoy exemption from wealth, gift or inheritance taxes in Cyprus.
If you have been a tax resident of Cyprus for at least 17 years out of the last 20 years prior to the tax year you will be considered to be “domiciled in Cyprus”, and your tax position will change.
Personal income in Cyprus is taxed on a tiered basis, with quite a substantial tax-free allowance of €19,500.
The maximum income tax rate on personal income in Cyprus is presently set at 35% for income in excess of €60,000.
Individuals taking up employment in the Republic, who were non-resident prior to employment, are entitled to an allowance of 20% remuneration up to a maximum of EUR 8,543 for a period of three years.
Individuals with annual remuneration in excess of EUR 100,000 are entitled to an increased allowance of up to 50% for a period of five years.
There is a 2.5% tax on royalties received in connection with intellectual property rights held in Cyprus. The regular corporate tax is 12.5% on profits.
Any British pensioner retiring to Cyprus, be they in receipt of private or public sector pensions, has two options:
In addition, a retired person can switch between Option 1 and Option 2 on a yearly basis. The advantage of using this switch lies in the amount of money you can have tax-free in Cyprus before your income becomes taxable if you opt for tiered taxation.
At present, Cyprus residents can earn up to €19500 tax-free. The next €8,500 (between €19500 and €28,000) is taxed at 20%. Income between €28,000 and €36,300 is taxed at 25%, an income of €36,300 – 60,000 is taxed at 30%, and everything above €60,000 will give you a tax bill of 35%.
So, if you are intending to draw a relatively small annual income, it makes sense to opt for a tiered system.
The following table illustrates how it works:
|Income (€)||Tiered tax rates||Flat tax rate of 5% for the amount above €3,420 (€)|
|25,000||€19,500 – tax-free|
€5,500 @ 20% – €1,100
|26,000||€19,500 – tax-free|
€6,500 @ 20% – €1,300
|27,000||€19,500 – tax-free|
€7,500 @ 20% – €1,500
|30,000||€19,500 – tax-free|
€8,500 @ 20% – €1,700
€2,000 @ 25% – €500
|40,000||€19,500 – tax-free|
€8,500 @ 20% – €1,700
€8,300 @ 25% – €2,075
€3,700 @ 30% – €1,110
|65,000||€19,500 – tax-free|
€8,500 @ 20% – €1,700
€8,300 @ 25% – €2,075
€23,700 @ 30% – €7,110
€5,000 @ 35% – €1,750
As you can see, the year your retirement income exceeds €25,000 you will start saving money on tax by switching over to the flat tax rate of 5%. The bigger the income you draw, the more money you save on your tax bill.
After you stay in the Republic of Cyprus for more than 183 days in one year, you will be regarded as a non-domiciled tax resident, and from now on bank interest and share dividends become tax-free too.
Cyprus’ healthcare is undergoing a major change right now, with a new National Health Scheme (Gesy) being introduced in 2019-2020.
Gesy is a universal healthcare system based on contributions from the residents, which is free to users (with small co-payments for certain services), subject to an annual cap. It will be fully operational in June 2020, when both in-patient and out-patient care will be covered.
In Cyprus, retirees pay 1.7 percent in 2019 (transitional rates) in National Health Insurance System (NHIS) contributions on pensions, with tax capped on incomes above €180,000 (£161,440). From March 2020, the percentage rises to the full rate of 2.65 percent.
Healthcare benefits will cover a standardised basket of medical services, including hospitalisation, surgery, pharmaceuticals, general and specialist medical care and laboratory services.
Cyprus is a business-friendly country and has been successfully building its reputation as an international business hub and a business gateway into the EU for some years already.
IT innovators, FinTech companies, entrepreneurs, creative people, traders, etc., have been attracted to the island not just by the tax incentives, but by the ease of doing business there and by additional opportunities the country offers.
Following the rise of the expat companies and individuals, a whole host of professional services has sprung up in the country, offering businesses great expertise in different types of consulting, from company formation to bank accounts to accountancy and general management.
That’s why establishing a company in Cyprus and doing business there can be advantageous for many types of different companies.
Cyprus is a wonderful place. It’s sunny, friendly and represents a good value-for-money retirement location. It also ranks high in Expatra’s Best Places To Retire Abroad index as the best retirement destination for financial benefits: its tax rates and cost of living is softer on your bank account compared to the UK.
However, just like with any other retirement destinations, to find out whether Cyprus is a good fit for you, you need to try living there. So, rent a property and spend some time in summer and in winter in one of popular Cyprus’ locations to see whether you can call it home.