The Who What How Where & When of the Cyprus Health System Tax Scheme
ProACT Sam sets out the small print for all those who must pay the new Health Insurance Tax.
Whether you qualify for health care or not, as a Cyprus tax resident every one pays on any income from March 2019.
There are no exemptions in place for Expats Living and Working Abroad in Cyprus with the scheme due to launch on 1/6/19.
We examine the liability of Expat Business, Employers, and those living abroad on investment and pension income.
Cyprus National Health Insurance Tax (NHIT):-
Employees pay NHIT by dedcution of Salary at source by employers to pay monthly with Social Insurance. The employee is liable and the employer can take by reduction in net pay
Employers have their own NHIT to pay based upon payroll monthly with their Social Insurance obligations against their payroll and for employees
Self Employed pay based upon their insurable income category as confirmed by the Social Inusrance Department, but NHIT is a seperate tax and funs to Social insurance
Pensioners receiving any form of pension income as defined in Cyprus income tax law are liable to pay NHIT on this income
Any Government or Civil Service or local authority Income of any source is liable to NHIT
Any income paid from Cyprus state fund eg pensions, fees, remuneration, interest is liable to NHIT
All Income Earners in any format, not covered by the above category are liable for NHIT on all income
WHAT IS TAXED ON NHIT?
EARNINGS declared to Social Insurance as an employee or self employed insurable income
PENSION as income paid as pension income from any source as defined by the Cyprus Income Tax law
INCOME of savings or any other form including dividends, rental income, bank interest, loan interest received, royalty or any other format
PAYMENTS any other Benefits or remunerations received of any type for services including payments to Provident Funds by employers
HOW MUCH IS NHIT?
We have produced a detailed handout on the rates due that can be downloaded at our website www.proactpartnership.com
Generally the NHIT rate payable is 1.7% in 2019 rising to 2.65% from 2020
Except for Self employed who pay a rate of 2.55% in 2019 rising to 4.0% from 2020
HOW IS TAX PAID NHIT?
NHIT is paid primarily as a WITHHOLDING TAX in Cyprus
SOCIAL insurance payments will collect NHIT as an additional payment from employers and self employed
PAYE INCOME tax payments will now include additional NHIT due at that time
Any Cyprus STATE Treasury payments out as income will have a deduction of NHIT as a Withholding Tax
TEMPORARY Tax payable against Income in June and December must now include NHIT tax for the period. This is estimated income not subject to a withholding tax NHIT, including earnings from abroad or in Cyprus, including INCOME of savings
SELF ASSESSMENT of taxable income, including one off income received and declared by the recipient
INCOME TAX RETURNS for Cyprus Tax residents should declare worldwide income and NHIT is assessed against all income. Any balance of NHIT not paid at source will be calculated and assessed in this return.
WHEN IS NHIT PAID?
NHIT is payable from 1/3/2019
All those obligated to pay tax in Cyprus are liable to make returns on time including individuals, employers, treasury.
Late Penalities Interest and Fines apply to NHIT as they do for Income Tax or Social Insurance - the penalites are the same as the method of payment.
EXPAT FAMILY BUSINESS AND THE RETIRED
The new Cyprus health system is a universal healthcare system and any Expat registered to live in Cyprus as a tax resident is entitle to register and enter the scheme.
The amount of NHIT you pay depends upon your level of Earnings or Investment and Savings income.
Currently this includes worldwide earnings and pensions.
There is no exemption in place for Expats for any part of NHIT tax.
The Non-Dom rules still apply to allow Expats a 0% Special Defence Savings tax against Dividend, Saving and Rental Income - offering a expat tax saving up to 30%.
However NHIT tax at 1.7% in 2019 is still due against this savings income in the annual and temporary tax return.
This is the same situation as with Rental Income, where expats can be exempt from the Special Defence Tax element but have an income tax liability to this income.
Overseas Earnings and Pensions and Savings all fall under the NHIT net for 2019 - even with an S1 at this time.
There is no exemption in the Cyprus Income Tax law or Health System Rules for Expats with an S1.
The Cyprus Health Service is a universal free at point of use service for GP and treatment.
Exemptions for S1 holders would have to treat all EU Retired Expats with an S1 Living and Working Abroad in Cyprus equally.
Cyprus pensioners are already paying NHIT at source as a withholding tax.
If the UK leaves the EU without a Withdrawal Treaty and Transistion period, the UK and Cyprus could make a new Bilateral Agreement - similar to the one that existed before Cyprus joined the EU in 2004.
We are pressing to get clarification and confirmation of the Tax status of S1 holders.
ProACT Know How
ProACT Expat Experts are here to help, if you need any help and assistance on how to qualify for and register in the Cyprus Health Service, contact us.