ProACT Sam looks at the opportunities and pitfalls for expats, and the actions need to avoid a bigger tax bill

We regularly receive questions from our clients and followers of our blog, vlog and podcast.  

Here are three recent Q&A from clients.

Let us have your questions and next time we could feature your issue in our VLOG, BLOG or Pod cast.

Q1. How is Property Rental Income to be taxed for Expats?

Is there any more news about taxation of property rental income we spoke about a few months ago, is any income  exempt this from tax along with interest, royalties and dividends?

Property rental income remains to be treated as income for income tax in both Cyprus and the UK.

Further the tax can be taxed at source in the country in which it arises.

If a UK resident doesn’t declare the property rental income for tax  in Cyprus, it could be  fully taxed in the UK, with no relief.

An Expat living and working abroad in Cyprus could pay 0% defence levy on certain incomes, including Cyprus Property Rental income.

A world wide tax return in your country of tax residence should be made by all individuals and business.

With exchange of information this puts overseas property owners at risk if not declaring foreign property rental income on their UK tax return.

UK owners of Cyprus property have a unique option to hold the family property in a separate tax entity, controlled by the family, but tax separately in cyprus, and receiving income in a format that would be tax free.

Q2. How is my Public Service Pension affected by the Changes to the UK - Cyprus Double Taxation Treaty for 2019?

I think I will be one of those UK Expats negatively impacted initially by the new Double Taxation Treaty, I receive a UK teacher's pension of £23,000 currently taxed in Cyprus. 

Public Service Pensions are taxed at source in UK from 6/4/2019

The personal allowance in the UK is £12000 and currently will still apply.

Any additional pensions - including the state pension - will remain taxed in Cyprus at a flat rate of 5%.

However if the additional pensions are below £17,000 there is no tax to pay in Cyprus.

Potentially with the right mix of pensions a UK Expat could earn £29,000 pension income without tax.

The same applies to a mix of £12,000 UK Property Rental Income and Cyprus Tax Pensions.

Expats living and working abroad in Cyprus pay 0% zero tax on savings interest and dividends.

Q3. If I am a Cyprus Citizen and tax resident, could my Public Pension be taxed in Cyprus from 2019 following the changes in the UK Cyprus Double Taxation (DT) Treaty?

ProACT have recently helped me submit my application for a Cyprus citizenship by naturalisation to get duel nationality and a Cyprus passport, I understand from what I've read in the Treaty that if you are a "resident and a national" of Cyprus, then you are entitled to still have the pension taxed in Cyprus?

This is an interesting question.  It could be possible as there a way to allow exemption of Public Pensions, under the terms of the double taxation treaty, if the recipient is a tax resident and ‘national’ of another state.

On this basis a UK Expat with Cyprus Citizenship and permanent residence and habitually living in Cyprus, could have his public pension exempt from UK tax at source.

Consider an employee of the UK government though, living and working outside the UK.  

If they are British they still get UK taxed at source.

If they are not a British citizen they are taxed in the local country where work is done.

In this case though, there is a specific provision that this is only for residents and nationals of that state AND did not become a member of that state just to render services.

The treaty doesn’t make decisions or example case study.

The UK Tax authority could interpret an Expat with Cyprus citizenship as changing nationality for the purpose of receiving the pension to be taxed in that state.

Until the the new law is applied we won’t have decisions.

ProACT recommend reviewing your situation and submitting a DT registration application to support your claim for UK Tax relief at source.

ProACT offer a free review of your situation, contact us for more information.