Cyprus Tax Changes for UK Nationals

The Cyprus tax system is due to change for many UK nationals living on the island after the updated UK-Cyprus Double Taxation Agreement (DTA) signed in March this year.

The new DTA will tax all government pensions at source (in the UK) and affected individuals will pay UK standard tax rates rather than Cyprus tax.

However, this will only affect publicly funded pensions – such as those received by former members of the British armed forces – paid by the government and not private pensions. Nor does it apply to the statutory state pension.

Until now the previous DTA allowed for UK government pensions to be taxed in Cyprus at a rate of 5 per cent.

The new DTA, expected to be in place for the 2019-20 tax year will see those affected paying the standard 20 per cent tax at source, though they will be eligible for the relevant tax-free allowance currently set at £11,850.

It is estimated that around 70,000 British citizens are resident in Cyprus, though it is unclear how many will be affected by the new DTA changes.

The British High Commission, in conjunction with the Institute of Certified Public Accountants of Cyprus (ICPAC) and HMRC, organised a seminar last week to inform the Cypriot accounting community about the new UK Corporate Tax Law and forthcoming changes in UK tax legislation.

The seminar informed of the new ‘Requirement to Correct’, that requires all UK taxpayers to declare to HMRC, before September 30, 2018 all their foreign income and assets, where there might be tax to pay.’

It was stated that as of October 1, 2018 new, substantially higher penalties will apply to UK taxpayers who have failed to pay all the tax due on foreign income and assets.

Overseas property investors who have made their home in Cyprus may wish to speak with their tax advisor to check if they are affected by the changes coming into force.