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Personal Taxation
Double taxation treaties
Cypriot personal income taxation
Taxation for personal rental income from Cyprus
Taxation for pension income in Cyprus
Property taxation in Cyprus
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Personal Taxation
Whatever your taxation planning needs, Pafilia Property Developers can refer you independent financial advisers either in Cyprus or in the UK who can answer your local and international taxation queries. In general terms, your taxation liability is determined by your tax domicile, your tax residence and how you hold and structure your income sources and streams. Generally, if you spend more than 183 days per year in Cyprus, you can become a tax resident of Cyprus, and are taxed on your global income according to Cypriot taxation regulations.
Double taxation treaties
Cyprus has concluded 40 bilateral double taxation treaties between states, including the UK, Germany and Russia, to avoid the double taxation of income earned in various countries. Where various different national taxation rates apply, the taxpayer will not need to pay twice, but can deduct tax already paid abroad from that due in the home jurisdiction of tax liability.
Cypriot personal income taxation
The tax year in Cyprus is the calendar year, i.e. from 1st January to 31st December. Permanent residents with their tax domicile in Cyprus are treated as Cypriot citizens. In Cyprus, €17,086.01 (CYP 10,000) p.a. per person is the tax-free personal allowance, compared to the personal income tax threshold of GBP 4,895 p.a. per person in the UK. After the tax free allowance has been made for the first €17,086.01 (CYP 10,000) earned, the following tax rates apply: €17,087.72-€25,629.02 (CYP 10,001-15,000) 20%; €25,630.73-€34,172.03 (CYP 15,001-20,000) 25%; over €34,172.03 (CYP 20,000) 30%. The following can be deducted in calculating the tax liability: There will be a deduction of 20% for the first 3 years in Cyprus, limited to €8,543.01 (CYP 5,000); Life assurance premiums; Contributions to the state social security and welfare fund and pension funds. Contributions to the social security fund are currently payable by both employers and employees at 6.3%.Personal income tax returns are due for submission annually by 30th April. Pafilia can refer you to accountants and tax advisers who will respond to your individual queries.
Taxation for personal rental income from Cyprus
For investors who are not generally tax residents of Cyprus, but of the UK, rental income from Cypriot property is basically taxable in Cyprus, however amounts can be offset against your income tax due in the UK to the extent foreseen by the double taxation treaty between the UK and Cyprus. In Cyprus, 20% of rental income can be deducted for expenses assumed to be required for the upkeep of your rented property. If you are a Cypriot tax resident, rental income incurs a very small further defence levy calculated as 3% of 75% of the total annual amount of your rental income. For example, for €4,271.50 (CYP 2,500) rental income p.a., this levy totals €96.11 (CYP 56.25).
Taxation for pension income in Cyprus
Pensions drawn from outside Cyprus and transferred to Cyprus enjoy very low taxation. Pensions are either taxed at normal income tax rates or at the option of the tax payer, at the flat rate of 5% on the excess of €3,417.20 (CYP 2,000).
Property taxation in Cyprus
Transaction costs of property purchase are very low compared to the UK.
Stamp duty is due on contracts up to the value of €170,860.14 (CYP 100,000) at 0.15% and over €170,861.85 (CYP 100,001) at 0.2%.
Immovable property tax is a very small annual tax imposed by the municipality, calculated on the property value as at 01.01.1980. For property up to the value of €170,860.14 (CYP 100,000), the tax is nil. For property values in the band €170.860.14 (CYP 100,000) & €427,150.36 (CYP 250,000), the rate is 0.25%, in the band €427,152.07 (CYP 250,001) & €854,300.72 (CYP 500,000) the rate is 0.35% and in the band over €854,300,72 (CYP 500,000) the rate is 0.4%. Multiple owners benefit, as the property value is split between them. On a property value of €205,032.17 (CYP 120,000) as at 01.01.1980, the annual tax payable in the case of joint ownership is nil.
Capital gains tax is paid on gains arising from the sale of immovable property. Tax due is at the flat rate of 20%. Transaction costs of the purchase are allowable deductions, including agency fees, as are various investments made in any improvements to the property and an indexation allowance. Total deductions allowed are €17,086.01 (CYP 10,000) per owner on disposal of any property and €85,430.07 (CYP 50,000) on disposal of residence, provided that this has been your place of residence for at least 5 years prior to sale.
Inheritance tax
his was abolished as of 1st January 2000.
Professional legal advice is recommended for inheritance tax mitigation, since you may be able to look at implementing legal tax-planning vehicles, such as trusts to the advantage of yourself and your heirs. Pafilia can help you to find lawyers and accountants able to provide detailed individual advice.
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