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Important financial & tax issues for British Expats either moving to Cyprus or living in Cyprus

If you are a British expat living in Cyprus, or considering moving to Cyprus, this article explains the various tax requirements and financial opportunities that exist for you.

Written on 5 February 2022

Cyprus is a beautiful historic island, lying in the eastern Mediterranean Sea, that’s blessed with so many delightful aspects, it’s difficult to resist its appeal. This is a land of mythology, history, and the Goddess of Love, secluded sandy coves, crystal blue waters, Greek cuisine, and delicious wines.

When you consider the enticing lifestyle and the financial benefits the country offers, it’s not hard to understand why British expatriates are moving to or already living in Cyprus.

If you are an expat residing in Cyprus, it won’t of course be necessary to explain to you why this island is the perfect place to live. Blessed with great weather, beautiful beaches, a fascinating culture, and a very welcoming local population, it’s a surprise that not more British people want to relocate here.

Cyprus also has a significant appeal for C-level business executives and people of high net worth as its government provides financial incentives to help attract wealthy individuals to the region. Is Cyprus a tax haven? No, however, there are many tax advantages available here that definitely make Cyprus residency a desirable option for British nationals. 

Personal taxation

Cyprus offers important tax benefits for affluent British expats when they move to Cyprus from UK. They can benefit from a low tax rate on pension income of 5%, an absence of inheritance and capital gains taxes, and some exemptions from paying tax on interest or dividends. There are also generous income tax exemptions of up to 50% for expatriates who undertake a high-level executive job opportunity in Cyprus.

For affluent professionals and retirees, Cyprus offers a generous tax environment that provides an opportunity for individuals to move abroad, enjoy a wonderful lifestyle, whilst continuing to grow their wealth.

Personal income tax rates

Personal income tax is charged on the worldwide income of individuals who are tax residents in Cyprus, and the first €19,500 of taxable income received is tax-free.

Taxable income

Rate of tax (%)

From € 0 to € 19,500

0

From € 19,501 to € 28,000

20%

From € 28,001 to € 36,300

25%

From € 36,301 to € 60,000

30%

From € 60,001 and above

35%

Speak to a financial advisor about tax deductions available in Cyprus because as previously outlined, there are very generous tax exemptions available for most sources of income. With careful financial planning, British expats living in Cyprus can end up paying minimal tax.

Income tax exemptions for high earners in Cyprus

If your income in Cyprus exceeds € 100,000, and you were previously not a tax resident in the country, you might be eligible to gain exemption from income tax for 50% of the first ten years of employment income.

If approved, the deduction will remain irrespective of whether your income falls below € 100,000 in any year and the Cyprus tax authorities are satisfied that the claim is authentic.

Positive tax benefits for British expats in Cyprus

Despite Cyprus being a member of the European Union, it still offers a very attractive fiscal regime for expats wanting to live and enjoy their retirement in Cyprus. Once a British expatriate has spent 183 consecutive days in Cyprus, they are considered to be a tax resident and will be charged tax on their worldwide income.

Due to a special tax treaty between the UK and Cyprus, expats are not required to pay tax on a property or private income in both territories. This tax exemption is a particular benefit to British expatriates of a high net worth residing in Cyprus.

Capital gains tax in Cyprus

A significant tax benefit that an expat relocating to Cyprus will receive is the exemption from paying capital gains relating to death tax, income from investments and shares, and assets transferred between family members.

If you are a first-time seller you will also not be charged capital gains tax on most property sales - unless they are larger than one donum (14,400 sq ft). For subsequent property sales, you will be charged capital gains tax at 3.5% but it is always advisable, no matter what the situation, to consult an expert in Cyprus property tax on this issue.

Retirement & inheritance planning for expats in Cyprus

There are also amenable tax regulations relating to inheritance and gift tax in Cyprus that will highly benefit British expatriates of high net worth.

With no tax charges levied on inheritance or gifts in Cyprus individuals can live here and feel safe in the knowledge that you can pass on assets tax free to family and friends. Despite having no inheritance tax, Cyprus has similar domicile rules to the UK; which means you remain UK domiciled for UK IHT purposes until you have been a tax resident on the Island for more than 17 years. The good news is that as an expat, opportunities exist, to legitimately remove financial assets from your UK estate to reduce or perhaps even eliminate your tax liability.

However good advice from a financial expert in this field is essential as your domicile status is such an important and complicated matter. If you remain UK domiciled you are likely to incur British ‘death taxes’ no matter how long you have been resident in Cyprus.

Important pension tax issues for British expatriates in Cyprus

There are two options for paying tax on your pension if you are a retired expatriate and living in Cyprus, whether you are drawing a private or a public pension.

Option 1: is to pay a fixed tax rate of 5% a year on pension income for amounts exceeding €3,420

Option 2: to pay according to a tiered income tax system as follows:

Amount

Rate of tax

up to €19,500

tax-free

between €19500 and €28,000

taxed at 20%

between €28,000 and €36,300

taxed at 25%

between €36,300 and 60,000

taxed at 30%

above €60,000

taxed at 35%

Of importance is the ability for a retired person to switch between both options on an annual basis depending on their current financial situation. 

Sound financial advice for British expats living in or moving to Cyprus

The island of Cyprus is an ideal place to live for wealthy British retirees, senior executives, and entrepreneurs. If you are a British expatriate living in or moving to Cyprus you may require sound advice about your personal finances and how you can benefit from the tax laws and regulations on the island.

When considering Cyprus as your long-term home it is particularly important to establish the right tax residency post-retirement, so that you can maximize your financial opportunities whilst enjoying a wonderful lifestyle.

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