About Cyprus - Income tax information

Arriving in Cyprus can be a daunting thing when it comes to red tape and regulations. When on a fixed income it is important to minimize the tax you pay.

The Cyprus tax system allows you to pay low tax under Double taxation treaties with many countries including the UK. Flat rate tax starts from 5%.

A visit to the Tax office of your town will answer all your queries. They are extremely helpful and will help you file for a tax rebate from the UK.

Residency
Taxation is based on residency. If you are resident in Cyprus for more than 183 days in a tax year (January to December) then you will be subject to Cypriot taxation. You will NOT have the option to be taxed in the UK (with certain exceptions such as income from UK property) so your UK allowances WILL NOT apply.

Worldwide Income
Taxation will be on your worldwide income. So interest on offshore bank / building society accounts, UK pensions, bank accounts and investments will all be subject to a Cypriot tax of one form or another. The old system of only paying tax on income remitted into Cyprus will no longer apply.

NEW TAX RATES AS FROM 1st January 2003
Income (including pensions)
1. Flat Rate for the first CYP £2000 is exempt and a rate of 5% on the remainder. For Expatriate pensioners only.
Or
2. Normal Rates for the first CYP £10000 is exempt and then tax at the following rates:

Personal tax rates
Tax year 2004:
Taxable income Rate

Up to £10,000 Nil
£10,001 - £15,000 20%
£15,000 - £20,000 25%
Over £20,000 30%
• All other personal allowances are withdrawn such as spouse, children and age allowances

Taxation of resident individuals
Resident individuals are taxed on the following income:
• Profits from a business activity, which includes trading, manufacturing, industrial, mining, agricultural, professional or vocation
• Rentals from immovable property and royalties
• Profit from sale of goodwill
• Employment income, including benefits
• Pensions
• Dividends (subject only to Defence Tax)
• Interest (subject only to Defence Tax)

Taxation of non-resident individual
• Profits from a business activity which is carried out through a permanent establishment in Cyprus
• Rentals from immovable property located in Cyprus
• Profit from sale of goodwill
• Pensions in respect of employment exercised in Cyprus, with the exception of pension paid from a fund established by the government or any local authority
• Emoluments received for employment exercised in Cyprus

Allowances granted to individuals
• Contributions to various funds
• Social security contributions
• Life assurance premiums
• Contributions to approved provident funds or pension schemes

For an employee who was resident outside Cyprus and who moves to Cyprus to be employed by a Cypriot employer, during the first three years he can claim an exception of 20% of his salaried income up to a maximum annual amount of £5000. This exception can be first claimed in the year following the year of his move to Cyprus.

How are expatriates taxed
• If employed outside Cyprus no taxation is payable
• If employed in Cyprus for 183 days then he is taxed in Cyprus on the salary attributable to the employment in Cyprus

Effective date of new law
The law came into effect 1st January 2003

You can save;
• Hundred’s of pounds in income tax
• Reclaim thousand’s of pounds from the UK
• Avoid tens of thousands in inheritance tax.