ProACT Sam examines why a Cyprus summer of tax work is worth the sweat for expats to bring tears of joy for some, and tax free inheritance to others.

For Expats Cyprus is a sunshine tax residency location.

Business & Working Abroad

For UK business that needs an EU base Cyprus offers a professional modern location with excellent internet connectivity for online workers.

Contractors “Living and Working Abroad” can use Cyprus as a way of not falling into IR35 assessment from UK based contracting companies. IR35 effectively puts contractors onto a UK PAYE tax at source system even if working abroad through a contracting company or as a sole trader. 

The UK taxman changed the rules and from April 2021 the contracting company has the tax liability and if in doubt must take tax at source. This leaves the contractor with a negative cashflow impact from work this year, before they can submit a year end UK return to claim any rebates.

Working from a base outside the UK is one way of distancing your income and business from IR35 tax at source rules.

Cyprus requires only a minimum 60 day residence in Cyprus a year to remain tax resident. Nomads or overseas contractors can work in tax efficient 3rd countries or online and retain Cyprus tax residency during their break time relaxing on Cyprus sandy shores letting the waves wash over them.

This enables expat business to enjoy flat corporation tax at 12.5% and 0% dividend and interest tax.

Pension Income

Pension income for expats is a flat rate 5%. This means Cyprus could be a low tax base for retired expats whose sole income is pensions around the world.

If receiving pension income the flat rate is still applied separately to business or employed income. So the contractor can pay 5% tax on a £50k pension and still receive £100k dividend with 0% tax.

The personal tax allowance in Cyprus for individual earned income is around £17k or EUR19,500. This means a sole trader could earn net EUR19500 per year and pay no income tax, while paying a flat rate 5% on pensions.

If a retired pensioner has property rental income the net earnings of up to EUR19,500 can be used against the personal allowance for tax free property rental income.

The business contractor drawing income by dividends in cyprus with 0% tax, can also use separately the personal tax allowance to receive EURO 19,500 property rental income.

Capital Sums

Expats who are financial investors can benefit from no capital gains tax on financial investments.

UK expats as Cyprus tax residents can realise financial investments including shares and crypto currency and bitcoin. While UK tax residents could be charged 20% Capital gains tax in the UK, as an expat with tax residence in Cyprus that liability is deferred until it falls away after 5 years.

Inheritance tax is 0% for gifts to family. So family & business using a Cyprus tax residency base can plan ahead to ensure that their family property and business inheritance goes to their family and not the taxman.

Exchange of Information

All change on exchange. Well for 5 years now. Technology allows tax authorities to exchange information meaning that family and business cannot simply ‘not declare’ income and capital gains.

Exchange of information means the information is out there submitted by employers, banks, property agents and conveyancing agents. The taxman can find out about your income and capital movements.

ProACT believe in declaring correctly your income, property and savings, organising your family & business assets to ensure you don’t get caught with a tax penalty down the line following an exchange of information.

Tax Return Summer 2021

View all 2021 Cyprus tax deadlines

Cyprus tax returns have gone fully online during the covid period.

The release of full year online 2020 online returns was delayed but can now be submitted by the end of November 2021.

Only after submitting the full 2020 return online can you then pay any balancing tax payments online.

In 2021 the Cyprus return sees for the first time a link to the tax payer and the information the tax office has collected online through exchange of information. This can be added automatically or self declared with the tax returned then in need assessment and reconciliation of any balancing tax payments. If the Cyprus tax assessment (typically up to 5 years later) finds a balance to pay that can only be paid then, and potentially with penalty and interest.

At ProACT we have found much confusion over tax returns and payments. In Cyprus there are at least 2 tax returns due a year. 

So in the summer of 2021 a self assessment of 2021 income tax and return is due with 2021 tax payable online in July and December.

This is a self assessment and estimate.

The balance of any tax for 2021 is then paid after the full year tax return is submitted (in 2022).

So the 2020 full year tax returns due now in the summer of 2021 should be recording self assessed 2020 tax paid in 2020. Any balance of tax due for 2020 can only be paid after the full return has been submitted, which is due online by the end of November 2021.

Confused? No Sweat!

If you have concerns or need help and assistance contact us for help to master the latest online tax returns, ensure your returns are fully compliant with tax rules, ensure you have maximum tax savings, and that your family property and business passes to your family and not he taxman, the ProACT Team can help and assist every step of the way.

We offer a free review online to discuss your situation and ensure you can breeze through summer on the crest of a wave without sweating about any outstanding tax that may be due or discovered.

Contact us online with your questions by email, live chat or via the contact form here. We have the ProACT Client Service Team online during the workdays to answer your questions live.

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