Spring Changes - Tax Saving in Cyprus & UK for Expats
Sam Orgill of ProACT Partnership with Tax Saving Tips March Budget to Pensions Property & Investment 1/3/16
Spring is here and along with it a new broom brings more tax changes and tax saving opportunities for Expats. The UK has the annual tax budget on March 16th, while Cyprus has introduced more changes to Permanent Residency Rules for Cyprus Property Owners. Meanwhile Property Transfer Tax remains discounted for 2016 offer large tax saving for expats with Cyprus property contracts of sale – but no title deeds yet.
UK Budget Pension Changes
Pension Freedom came in 2015 and further changes are planned after consultation of the last year by the Treasury. This could affect the tax saving when adding into a pension, but should not affect the rules taking money out.
Under Pension Freedom you can still draw a 25% tax free lump sum; this may go in this budget? In addition, a new freedom to draw the whole pension fund is available to anyone over 55. The catch is you pay income tax in the year of drawing pension up to 40% on lump sums over £43,000.
Pension Tax Saving for Expats
If a Cyprus Tax Resident, you can pay just 5% on this pension freedom lump sum. – a tax saving of 15-35% for Expats who register to pay Cyprus Tax. This is the case even if the whole fund is paid into a UK bank account. You can also reduce the tax payable by timing pension withdrawals over a period of time to maximise allowances.
Tax Saving Tip: Consider drawing your pension lump sum as a Cyprus Tax resident. Review your options with ProACT Tax Saving Experts.
Permanent Residency For Expats
Cyprus Rules for Non-Europeans to obtain permanent residency in Cyprus, and hence the EU, changed in February 2016. Added to the tax saving changes in 2015 to defence tax on savings, this makes Cyprus the leading investment centre for Expats looking for a European base.
First of all a new property investment more than €300k must be made in residential and or business property in Cyprus. A couple must also show €30,000 or more annual income plus additional sums for dependent children or parents.
If they then become tax residents they will pay 0% tax on Bank Interest, Dividends or Inheritance tax. No Capital Gains is paid on Cyprus property purchased in 2016 and the property purchase has 50% tax saving on property transfer tax.
Cyprus Tax Returns Due Now
Full Cyprus tax returns are now due for 2015. Key factors in the full return are the big swing in exchange rates used to assess Cyprus tax for the year end. Plus the reduction of Defence Savings Tax to 0% on Bank Interest and Dividends in mid-year means that many people will need to reclaim Savings tax paid at source in the UK and Cyprus in 2015.
Also it is important to ensure your bank in Cyprus stops charging you defence tax on bank interest. This is a new procedure and not automatically applied by all banks.
Because the new rate is 0%, it is possible to reclaim tax at source at 20% in the UK bank interest. You can only do this if you record the bank interest on your full Cyprus return.
Finally it is worthy to note from April 2016 UK investors will pay no UK tax on the first £5000 of dividends and bank interest. This is a radical change and should prompt a rethink by you of UK savings after the Budget changes are finalised.
Tax Saving Tip: Declare all savings in your Full year Cyprus tax return to reclaim 2015 savings taxed at source.
Make a Will Changes for Inheritance in Cyprus
The Cyprus changes to Succession mean Expats must make written changes to their Will to avoid forced heirship and retain financial control of their affairs on first death.
This can be done with a simple codicil or with a full inheritance tax planning approach to create a Cyprus Family Property Trust that also avoids the cost and delay of Cyprus Probate, while keeping the family in control. Each family is different, what is best for yours?
Tax Saving Tip: Make written changes to your Cyprus Will. Review you Will to consider saving Inheritance Tax or the cost and delay of Probate in Cyprus.
Free Review – Pensions Property Savings & Will
ProACT offer a Free Review of your Pension, Property, Tax Residence, Wills, Title deeds, property assets including identify inheritance tax savings. Keep up to date with the spring tax changes for expats living and working abroad.
Contact us to book a Free review. REGISTER FOR UPDATES
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Sam Orgill Tel +357 26 819 424 CONTACT US