There are substantial tax advantages for U.K. citizens retiring to Cyprus.

The U.K./Cyprus double taxation treaty, which is unique in this respect enables United Kingdom pensioners to remit both government as well as private sector occupational pensions to Cyprus free of withholding taxes in the United Kingdom.

In practically all other United Kingdom double taxation treaties government pensions are almost always subject to withholding taxes at source. Hence the relief offered to British government pensioners resident in Cyprus is unique to Cyprus and generally not available elsewhere under the terms of other U.K. double taxation treaties.

Similarly foreign retirees living in Cyprus are taxed at only 1/10th of the local rate, foreign retirees pay income tax at the rate of 5% per annum on all imported pensions, with an annual exemption of the first Cyprus Pounds 2,000.

Estimated Savings

Tax Benefits

The United Kingdom also maintains a reciprocal agreement with Cyprus in respect of National Insurance pensions benefits which in the hands of foreign retirees living in Cyprus remain index linked.

Cyprus levies taxation only on a remittance basis, that is, it taxes only assets that are brought into Cyprus, rather than the more punitive system of taxation on world-arising income that is practiced in may other countries including the U.K. and U.S.A. as well as Spain and Portugal. Residents of Cyprus can thus legally hold assets tax free in banks in tax havens such as the Isle of Man and Jersey, and suffer no taxation on bank interest or dividend income remaining outside Cyprus. No capital gains tax is charged on the remittance of capital assets to Cyprus such as money needed for the purchase of property and other similar capital assets such as motor vehicles.

Increasingly, Cyprus is used as a residential base for former residents of the U.K. Who wish to restructure their personal assets in a favourable tax jurisdiction, where U.K. capital gains tax and income tax exposure can be effectively and legally minimized. The potential tax advantages for retirees are thus truly substantial and the use of Cyprus as a fiscal base for retirees of all nationalities should not be ignored.