Overseas Tax Exile in Cyprus

Government incentives and tax breaks for overseas investors are encouraging property buyers to live in Cyprus and save on future capital gains tax bills according to the Wall Street Journal.

In 2015 the Cypriot government brought in legislation meaning that anyone spending more than 183 days per year in Cyprus can become a tax resident of the country.

For example, Kelvin Kingsley from Norwich moved to just outside Paphos in Cyprus last year buying a four bedroom, four bathroom property for less than £400,000.

Kelvin is a buy to let investor and owns 75 rental properties in the UK. As he is now a Cypriot resident he need pay no capital gains tax in Cyprus on those buy to let properties when they are sold.

More importantly, he will only pay UK capital gains tax on any profits accrued after April 2015 when the rules were changed in the UK for owners of British property living abroad, meaning that any gains before that will be effectively tax free.

The Cypriot government also cut the cost of title deed transfers in half last year on a temporary basis, but this is set to be made permanent.

A spokesman for the Ministry of Finance has also said that a new law passed this summer will cut title deed transfer costs by 75 per cent this year and down to zero in 2017.

These measures along with strong interest from foreign buyers has stabilised the property market with the latest data from the Royal Institute of Chartered Surveyors (RICS) showing property prices up by 1.5 per cent over the last year. A sign that the market has turned the corner from the financial crisis of 2008.

The western side of Cyprus, including Paphos, where British expats tend to buy still has a surplus of available property however, meaning large discounts can be negotiated and luxury property prices are within reach.

Average property prices in Cyprus are still below £100,000 which is less than half of the UK average.

There is a lot going for Cyprus with both the year round climate and the welcome for British subjects always warm. So with the tax advantages now available it is well worth considering.

Property investors should always seek professional advice on all tax matters.