Pafilia on Cyprus Inheritance Tax
Pafilia on Inheritance Tax in Cyprus
According to Evangelia Eliadou, executive director of Pafilia Property Developers in Cyprus:
Cyprus has been a favoured destination for those seeking a medium haul holiday in the sun for many years, but the government of Cyprus has been actively working to diversify its economic dependence on the tourism industry since it joined the EU back in 2004 and has been luring growing numbers of British and European retirees with the promise of a low tax lifestyle.
Despite being a fully signed up member of the European Union, Cyprus has managed to retain strong control over the rates of tax it charges to those who retire to Cyprus. Inheritance tax has been abolished in Cyprus, capital gains tax is only 20% on profit with the first €17,086 free. Additionally, residents enjoy a tax free income of €19,500 with a maximum 30% tax for income over €36,300, meaning that you really can move to Cyprus for a low tax lifestyle.
For anyone retiring, currently they need only pay a 5% tax for the amount exceeding €3,417 of their pension income whether that is from a state pension, a private or company pension. Furthermore, those with a British pension are still entitled to take a certain percentage of their final sum tax free and any state pension that they are entitled to will benefit from annual inflation increases, unlike countries such as Australia, Canada, New Zealand and South Africa. As a general rule, British state pensions which are paid to people who emigrate outside the EU remain frozen at the rate in force when they leave Britain.
Other benefits that those retiring to Cyprus may profit from include the fact that inheritance tax has been abolished since 2000 and therefore those who are successful in changing their domicile to Cyprus can avoid this. To benefit from this, expatriates will have to prove they have completely severed all links with the UK to HM Revenue & Customs. This is not a simple process. It can take more than five years and involves closing down all accounts and selling all UK property, and cancelling your registration with your UK doctor and dentist, among other things.
The reason is that HMRC assesses inheritance tax liabilities on a UK citizen’s worldwide assets and so you have to demonstrate that you are no longer domiciled in Britain. Unlike residence for tax purposes, which is based on the facts of where you live, domicile is based on subjective tests of which country you regard as home. So, for example, you could remain domiciled in Britain and liable to inheritance tax many years after becoming resident overseas.
As with any move out of the UK, emigrating to Cyprus means you will be tied to the local currency and subject to exchange rate fluctuations. In January, the local currency became the euro. This recent announcement confirms the island’s economic maturity and the promise of a share in the spoils of the recently improved EU-wide growth story which has increased the island’s popularity.
Cyprus offers other advantages to Britons retiring outside the UK. The rate of capital gains tax is far lower in Cyprus than it is elsewhere in Europe and those who wait until they are fully eligible for Cypriot CGT before cashing in their assets will potentially make massive taxation savings.
