Taxation of Foreign Pensions
How will your pension be taxed in Cyprus?
If you’re receiving a pension in Cyprus, you have a choice of two taxation systems: your pension can be taxed at standard income tax rates, i.e. with the first CY£10,000 tax-free or it can be taxed at 5 per cent after an initial CY£2,000 exemption.
This means in effect that, if you earn less than around CY£12,760 per year from a pension, you’re better off choosing the standard rate and that, if you earn more than this, the 5 per cent option is preferable.
If you’re a pensioner planning to retire to Cyprus, you must obtain professional advice on your financial and tax position both in your home country and in Cyprus. In the UK, the Inland Revenue publishes several free leaflets which provide all the necessary information. They’re part of the ‘International Series’ and have the following titles: Residents and Non-residents. Liability to Tax in the UK (IR20); Living or Retiring Abroad? A Guide to UK tax on your UK income and pension (IR138); and a Help Sheet (IR304), which explains tax relief under double-taxation agreeements. They can all be obtained from any UK tax office or the Inland Revenue’s orderline (Tel. UK 0845-900 0404) or website (www.inlandrevenue.gov.uk/leaflets).
Some countries, e.g. Canada and the UK, have an agreement with Cyprus that allows state pensions to remain index-linked when pensioners are resident in Cyprus. UK retirees should contact the Inland Revenue’s International Centre for Non-Residents (Tel. UK 0151-210 2222, www.inlandrevenue.gov.uk) or the International Pensions Service (Tel. UK 0191-218 7777, www.dwp.gov.uk).
Article by www.justlanded.com. Click to read more articles about Cyprus and many other destinations.