Cyprus - The Last Tax Haven in Europe

Few investors look at their exit strategy when purchasing property – this is a big mistake.

You should always have an exit strategy whatever investment you are looking at. Don't just look at the cost of getting into the deal. Instead look at the cost of staying in and the cost of getting out. Immediately you will see that Cyprus offers the best opportunity in Europe.

From a lifestyle point of view and from a tax point of view Cyprus offers the investor several major advantages:

• There is no inheritance tax for overseas investors.
• There is no wealth tax.
• Corporation tax can be as low as 10 per cent.
• Income tax is 20/25/30 per cent.
• Foreign pensions are taxed much lower than in the U.K. In fact this can be as low as 5% if you spend sufficient time on the island.

* Make sure you take professional tax advice to ensure you optimise all of these benefits as the rules vary depending on your residency and domicile.

Cyprus has in fact positioned itself to be probably the best “onshore” tax haven that is currently available. There is, as you would expect, a double taxation treaty with the UK and members will need to take independent financial advice as to what is the best route for minimising their tax, but clearly the opportunities to make Cyprus part of your “exit strategy” are immense.

Ultimately your tax bill is decided by where you are domiciled and where you are resident but here's just a few of the benefits that Cyprus has to offer.

CORPORATE TAX RATE

Cyprus has the lowest Corporate Rate Tax in the EU at only 10%,
(Only one other country can match it and that is fellow EU newcomer Bulgaria).

INHERITANCE TAX

Cyprus Inheritance Tax is ZERO.

WEALTH TAX

Cyprus does not charge wealth tax.

STAMP DUTY

Stamp duty is fixed at 1.5%.

TAX ON PENSIONS FROM ABROAD

If you retire and draw your pension in Cyprus you will pay only 5% tax (compared with typically 22% - 40% here in the UK). If the numbers look a little strange it is as a result of the change from Cyprus Pounds to Euros. One Cyprus pound equals 1.7086014 Euros which throws up some odd numbers.

If you see anything quoted in Cyprus pounds you can convert it to Euros by dividing by 0.585274.

INCOME TAX

UP TO CYP 17,086	NIL
17,087 – 25,629	20%
25,630 – 34,172	25%
Above 34,173	30%

 

CAPITAL GAINS TAX

C.G.T. is charged at the rate of 20% on gains arising from the disposal of immovable property (or the disposal of shares of companies that own immovable property in Cyprus).
Gains from the sale of shares listed on the stock exchange are EXCLUDED from C.G.T.
Any taxable gain can be adjusted for inflation (Alistair Darling will remove this indexation in the UK when/if he brings in a flat rate of 18% C.G.T. in the U.K).
Disposals between relatives as a gift or through death is EXEMPT from C.G.T.
The first 85,430 of a gain, per individual, on disposal of a personal property is exempt from tax (Once only – plus you must own it for 5 years).

REAL ESTATE TAX/IMMOVABLE PROPERTY TAX

This is an annual tax based on the market value of the property.
What you need to know is that it is not the value today that counts but what it would have been worth in 1980 .

Up to 170,860 CYP	NIL
170,861 – 427,150	2.5%
427,150 – 854,300	3.5%
Above 854,301	4%

 

Which basically means that you can own a 1m property and still pay no Immovable Property Tax because of its value in 1980.

PROPERTY TRANSFER TAX

This is another area where you need to know all the facts.
It only applies AFTER the Transfer Deeds are produced, which is not less than 4 years after completion OF THE WHOLE DEVELOPMENT.

That is typically 6 years after you pay your deposit (and hence fix the price) on an off-plan development. If the development takes a long time to complete then it will take even longer.

Up to 85,430	3%
85,430 – 170,860	5%
Over 170,860	8%

85,430 @ 3%	2,562.90
85,430 @ 5%	4,271.50
17,140 @ 8%	1,371.20
TOTAL	8,205.60

 

But if you put the property in two names instead of one the allowances are doubled:

170,860@3%	5,125
17,140@5%	857
TOTAL	5,982

So a property costing 188,000 would cost 5,982 in Transfer Tax (or roughly 3%), and this would only be payable 6 years after deposit on an off- plan purchase. If you flip the property before then you would pay no Transfer Tax – although I suspect the continuing gains would mean you would rather keep it and pay the tax bill.

From a lifestyle point of view, Cyprus ticks all the boxes; glorious weather, low cost of living, low crime rates, affordable property, beautiful beaches, stunning views, English speaking nationals and a UK based legal system, good schools and hospitals – the perfect place to work from or retire to.