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Cyprus: the place where your pension has value!

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Cyprus is considered one of the most secure retirement destinations in the world.

The island, a full member of the EU, is known to be one of the main geographical, cultural and commercial borders between Europe and Asia.

Cyprus is renowned for its warm climate, 300+ sunny days, its high standard of living as well as its rich culture and history.

The cost of living in Cyprus is nearly 25% lower compared to the UK and many other European countries. If you decide to rent an apartment in Cyprus, you will probably spend 60% less than anywhere else in Europe. In regard to the cost of purchasing real estate, without a doubt prices are significantly cheaper compared to the UK and to other European countries.

Citizens who decide to make Cyprus their second home can apply for a temporary residence permit and must provide proof of sufficient income in order to show that they are able to make a decent living in Cyprus. Such a document is valid for 5 consecutive years of residence and does not need to be renewed. Thereafter, an application for permanent residency can be submitted.

Being a tax resident in Cyprus has many benefits and exemptions. For an individual to be considered as a tax resident in Cyprus, and especially a pensioner who does not conduct any other business and has retired, spending more than 183 days in the Republic makes him a tax resident of the Republic of Cyprus.

One of the advantages of obtaining a retirement permit for persons retiring in Cyprus is the low-income taxes on their pensions. Pensioners can also receive a duty-free importation of a car and other personal items into the Republic of Cyprus.

A foreign pension received in Cyprus is taxed either at a 5% flat rate for amounts exceeding €3.420 per annum or at normal personal income tax rates (as set out in the table below).

For example, if your pension annually reaches the amount of €100.000, then you will pay taxes at the flat rate of 5% after deducting the amount of €3.420.

If your annual pension is €19,500 then you may opt to be taxed under the personal income tax scales as follows:

Chargeable income for
the tax year

Tax rate

Accumulated tax

                €

             %

               €

First 19.500

Nil

Nil

From 19.501 - to 28.000

20

1.700

From 28.001 - to 36.300

25

3.775

From 36.301 - to 60.000

30

10.885

Over 60.000

35

 

Further, there is no withholding tax in Cyprus, and non-domiciled tax residents are exempt from the Special Defence Contribution Tax. Moreover, Cyprus has double taxation treaties with more than 60 countries, allowing for less taxation on income for residents of Cyprus.

Another tax benefit in Cyprus is that there is no inheritance tax, making it easy for those retiring in Cyprus to leave wealth for their families in the future.

Cyprus does have a Value Added Tax ranging from 0-19% on many goods. However, many electronics and other specialized goods have duty-free importation.

Overall, Cyprus has a favourable tax system for many expats in Cyprus and allows their money to go further than if they lived in other EU countries.

Due to the favourable income tax policies, Cyprus taxes at a very low rate on pensions transferred to Cypriot banking systems. Some countries, such as the United Kingdom, can pay pensions directly to British expats in Cyprus and offer additional benefits based on personal circumstances such as sickness or bereavement.

In addition, as from 1st March 2019, the General Healthcare System Law of 2001 (GHS), as amended came into effect. The GESY contribution is 2.65% on the gross emoluments of an individual, thus offering the opportunity to pensioners to enjoy the free services of the well-organized health care system of Cyprus. For the purposes of calculating the GHS contributions, gross emoluments are capped to €180,000 per annum. So, if your pension, let’s say, is €300,000 per annum you will be taxed on the amount of €180,000 which is the maximum and it is equivalent to 2,65%.

So, bearing the above in mind, have you ever thought about how to make the most out of your pension in a profitable way by living in a beautiful and safe place with high standards? Have you ever considered Cyprus as one of the options you are given for a place to retire?

Why should you spend your pension paying taxes in your country, when you could rather be enjoying your pension money by living under the sun and next to the beach, at a scenic island like Cyprus?

The content of this article is valid as at the date of its first publication. It is intended to provide a general guide to the subject matter and does not constitute legal advice. We recommend that you seek professional advice on a specific matter before acting on any information provided. For further information, please contact Paola Hadjilambri, Director of Business Development, at Tel +357 26930800 or via email Paola.Hadjilambri@kyprianou.com