Gorgeous beaches, friendly tourist resorts and charming local villages, what more could you want? But it’s not just the lifestyle that makes Cyprus so appealing.
Taxation on the sunny Mediterranean island is kind to foreigners who move there, especially retirees. We highlight the key facts.
Foreign income pension options
Expat retirees are royally looked after in Cyprus thanks to foreign pension income getting special treatment. Anyone in receipt of an overseas pension can choose one of two ways for how that income is taxed. The first option is to pay a flat rate of 5% on pension income with a €3,420 tax-free allowance.
Alternatively, you can choose for your pension to be taxed according to Cyprus’s normal income tax rates, which means paying no tax on your first €19,500 income, before the following tax bands kick in.
- 20% for income between €19,501-€28,000,
- 35% for €28,001-€36,300,
- 30% for €36,301-€60,000
- 35% for €60,001+
You’ll need to do some sums or speak to an IFA to find out which option would work best for you!
Find homes in Cyprus via our property portal.
Double tax treaty
Cyprus has a double-tax treaty with the UK, enabling pensions to be taxable in Cyprus without being taxed again in the UK. One exception are government service pensions, which must be taxed in the UK. Pension lump sums can be taken tax-free too.
Capital gains tax
Capital Gains Tax (CGT) is virtually non-existent in Cyprus. Gains arising from the sale of shares, bonds, a property outside of Cyprus or other financial instruments are exempt of CGT in Cyprus.
This means it is possible to sell your home in the UK completely free of CGT so long as you are already living and qualify as a tax resident in Cyprus. The same applies if you plan to sell a UK-based company – in most cases, it’s better to wait until you have moved over. Income from dividends and interest is also free of CGT tax.
Should you have any questions, queries or concerns about taxes in Cyprus, speak to our trusted partner Chase Buchanan. They are here to help UK expats with tax advice and we are often asked about the double taxation treaty. Plus, they have the forms to guide clients through the process to obtain the NT from HMRC.
Moving to Cyprus to work
The Cypriot government is kind to foreigners who move to the island to work, thanks to its First Employment Exemption incentive. Under this scheme, which was updated in 2022, non-Cypriots who move to the island and start a new job get tax relief on their gross salary.
Those arriving in Cyprus on or after 26th July 2022, who gains employment paying an annual salary less than €55,000, is eligible for a 20% tax exemption or €8,550 (whichever is lower). This benefit lasts for a maximum of seven years.
Learn how to obtain residency in Cyprus
But for anyone whose salary exceeds €55,000, the tax exemption rises to a generous 50% and is available for up to 17 years. There are rules of course, key ones being that this is a once-in-a-lifetime benefit and applicants for the 20% exemption must not have been a tax resident of Cyprus for a period of at least three consecutive years prior to the commencement of their employment, or 10 consecutive years for the 50 per cent exemption.
A report by accountancy firm KPMG said: “The new incentives are expected to attract to Cyprus highly-skilled and high-earning individuals, either as employees of a Cypriot entity or as employees of a non-Cypriot entity through a remote working arrangement (e.g., digital nomads). Employers and foreign nationals will want to consider eligibility for the incentives.”