[Video & Podcast] How Double Taxation (DT) Changes UK-CY Affect Expat Pensions and Income for 2019
ProACT Sam Orgill discusses the new tax regime between UK and Cyprus coming into force with EU Brexit.
More change for Expats Living and Working Abroad in Cyprus.
How will the new DT treaty changes between the UK and Cyprus affect Expats in 2019.
Happy New Tax Year - 2019
Due to a change in the DT Treaty between UK and Cyprus, signed in the spring of 2018, Expats Living and Working Abroad in Cyprus and the UK will be tax assessed in a different way from April 2019.
How will this affect your family or business?
How Will tax on pensions you receive change when you now pay low Cyprus tax on Expats pensions 5%?
Do you have pension income and additional income as you are still working abroad?
Are you working abroad , or running a business overseas, and wonder how your tax will change with different type of dividend, interest, pension, rental and royalty income?
Do you have a pension fund, but are not drawing it yet and plan to be living abroad in Cyprus when you do?
Winners and Losers
There are always winners and losers with any changes to tax rules. The new DT agreement based upon a standard OECD treaty and is designed to achieve a fairer tax system between individuals, business and the governments of UK and Cyprus. That means of course the government get more tax income.
Who will be the winners and losers, how will you be affected?
Pension Changes
Potentially, with the right mix of pensions, Retired Expats Living and Working in Cyprus could enjoy pension and earned income of around £29000 and pay ZERO tax on the income.
The winners are anyone with UK Public Service pension income below £11850 – they will pay no tax in UK or Cyprus on this income as it stands.
The losers are those with large public service pensions that will pay 20% UK tax up to £46350 and then 40%. High rates could apply, and personal allowance is gradually lost for those with incomes over £100,000pa.
Expats Winning - Pay Less Tax
Generally all Expat Pensioners are winners under the UK- Cyprus DT treaty.
Your state pension will remain taxed in Cyprus, with no tax under £17000 pa income.
Total pensions over £17000 pa will still only attract a maximum 5% tax.
Expat Investors areceiving interest or dividends will pay zero tax on unlimited income in cyprus.
Pension freedom allows those with pension funds to take control of how you manage your pension savings, with the option to remove from a taxable income environment. Taxing action as a Cyprus tax resident will mean less tax in the UK or Cyprus in later years.
Expats Working Abroad through a Services company can earn tax free income up to £17,000 as a Cyprus tax resident,
PLUS they can receive unlimited dividends at ZERO 0% tax as a Cyprus Tax resident.
Expats Working around the world can also benefit under new rules that allows them to earn Cyprus tax residency for a year with only 60 days on island.
Technically Speaking
Any Private or Personal Pension arrangements will continue to be taxed in your country of tax residence.
To qualify for Cyprus tax residency you must have a residence there and be in Cyprus for 60 days or more each Cyprus tax year,
Any Public Service pension will be taxed at source in the UK from April 6th 2019, the start of the new UK tax year.
Currently the means that Expats Living and Working Abroad as a Cyprus Tax Resident will enjoy a full UK personal allowance (£11850 in 2018-19) and full Cyprus Personal allowance ( €19500, around £17000 in 2018 exchange rates)
There will still be a requirement for online cyprus tax returns while UK pension tax is taken under PAYE, so will not require a return unless you have additional income in the UK such as property rental income.
Key Points
Double Taxation (DT) Changes UK-CY Affect Expat Pensions and Income for 2019
- The will be winners and losers under this ‘fairer’ DT treaty
- Expats receiving the right mix of pensions could receive up to £30,000 per year with no income tax
- Expats Working Abroad using a service company could receive unlimited Dividend income tax free as Cyprus resident
- Public Service pensions paid from the UK for Expats Living and Working Abroad in Cyprus will be taxed at source at UK rates from 6/4/2109 but with UK personal allowance added and the amount of Cyprus tax due will fall
- ZERO 0% tax at UK source interest, dividends and royalties is confirmed. Cyprus Tax rate on these incomes for Expats is 0%
- Pension freedoms could allow some Expats to convert taxable Pension Funds to Tax free investment funds
- The new DT UK- Cyprus DT agreement comes into force from 1/1/2019 and by 6/4/19 - depending upon the type of income
- Cyprus Remains a low tax environment for Expats with maximum 5% tax on pensions, 0% tax on Investments and Dividends, 12% Corporation tax and no Inheritance tax.
