Financial Advice for Expats in Cyprus

Cyprus’s tax system is widely considered advantageous for expats, but tax management still requires careful planning and strategic decision-making, especially during your relocation. Our local Cypriot financial advisers are always available to guide you through and outline the liabilities you need to budget for.
If you become a Cypriot tax resident, normally because you spend 183 days a year or more in the country, you’ll usually need to pay the following:

• Personal Income Tax: Progressive rates from 20% up to 35% on your worldwide earnings
• Savings Income Tax: Levied at a 17% rate on interest and most dividend income
• Capital Gains Tax: 20% on gains from immovable property and certain securities after allowances and lifetime exemptions on primary homes
• Social Security Contributions: Deductions of 8.8% on employment income, subject to a cap

Non-residents also need to ensure they manage their tax exposure correctly, and our wealth management and tax advisory experts are on hand to ensure you meet your obligations. Our financial services cover the full spectrum of tax planning and declarations, avoiding any potential for unexpected liabilities.

Expats relocating to Cyprus can opt to transfer, restructure, or retain their pension assets, and there are varied considerations that may influence their decision-making. These include potential transfer taxes, ongoing income tax against pension incomes, and the ability to make tax-free lump sum withdrawals. 

We strongly recommend you seek independent guidance before moving ahead, since selecting a less beneficial pension transfer process could carry significant and avoidable tax burdens.

Our retirement planning specialists can assist with:

• Comparing Cyprus Pension Transfer Options: Assessing the pros and cons of transfers to ROPS, SIPPs and other alternative retirement or investment funds.
• Forecasting Pension Tax Liabilities: Ensuring you know how your pension income and lump sum drawdowns will be taxed, including your eligibility for a 5% flat rate pension taxation available for Cypriot residents in receipt of a foreign-sourced pension.
• Managing Pension Transfers or Restructures: Dealing with the permissions, declarations and logistics of transferring and reporting your pension assets.
• Advice on Currency Exchange Rates and Timings: Reviewing the optimal time to restructure or transfer pension funds to take advantage of beneficial exchange rates.

Pension transfer planning can be perceived as complex, but with the right advice and clarity over all of the options, and the tax obligations linked with each, we’ll ensure you make informed, confident decisions to protect your retirement wealth. 

Cyprus inheritance law differs significantly from that in the UK, and it is essential that expats know how their estates will be distributed and taxed, to ensure they have made the right provisions for their intended beneficiaries. Some of the regulations to be aware of include: 

• No Cypriot Inheritance Tax: Inheritance tax was abolished in 2000, but other levies may need to be budgeted for, such as transfer fees for inherited property assets.
• Exposure to UK Inheritance Tax: Following reforms to the domicile-based system, expats must ensure they understand their potential UK-based obligations should their estate be deemed liable for UK IHT, or where they have some assets that remain in the UK.
• Intestate Succession: The rules that determine how your estate will be distributed if you were to pass away without having a legally recognised will. In most scenarios, this means that 50% of your assets will be transferred to a spouse, and the remainder among any children.
• Trust and Will Solutions: Ensuring expats have drafted and registered wills that are recognised in Cyprus, and clearly set out their wishes to distribute their assets to their selected heirs. 

Chase Buchanan’s Cypriot team can offer more detailed advice around estate planning, with bespoke and strategic solutions, including wills, trusts and other structures, to manage every aspect of estate and succession planning.

Cyprus has long been an appealing destination for international expats, which means there are numerous potential visas and work permits that may be appropriate for you and your family. Much may depend on whether you are relocating as a professional, to retire, or to set up a business.

Our expat advisory specialists can discuss the most relevant visas and routes based on your circumstances, with some of the most in-demand visa categories including the following: 

• Cyprus Permanent Residence Program: A visa that enables expats to secure residency status in return for investments in real estate or Cypriot shares, with evidence of a minimum annual income arising from overseas.
• Self-Employment and Business Visas: Visas that enable investors, self-employed professionals and business owners to relocate, provided they have evidence of a business plan, a secured job offer or proof of income.
• Digital Nomad Visa: A visa category that enables professionals working remotely with a minimum proportion of non-Cypriot employment to live and work in Cyprus for up to three years, subject to a minimum foreign-derived monthly income. 

Selecting the right visa route is highly individual, and we can provide support when comparing permits or routes or making investments to qualify for a visa category.

Expats considering buying a home in Cyprus, who already own real estate on the island, or who are reviewing the impacts of property ownership on their tax residency position, should ensure they are well-versed in all payable property taxes, including:

• Transfer Fees: Charged on a sliding scale from 3% to 8% depending on the purchase price, although transfer fees are exempted if the sale is subject to VAT.
• Stamp Duty: Calculated against the sale value, with rates of between 0.15% and 0.2%.
• VAT: Levied only against new-build properties and developments at a standard rate of 19%, reduced to 5% in some circumstances.

Whether you are looking to purchase a permanent residence or invest in a rental asset, we’ll run through all the applicable taxes and ensure you continue to manage your property portfolio tax efficiently. 

There are no laws that prohibit foreign nationals, including non-residents, from owning Cypriot properties. However, you will need to obtain formal permission from the Council of Ministers before your transaction can be completed.

As with real estate ownership for tax residents, you will need to budget for property-related taxes as follows:

• Non-Resident Income Tax: Tax against any rental income earned, based on 20% of gross revenues.
• Capital Gains Tax: May be payable against gains made from the sale of a property, with a standard 20% rate. Varied exemptions apply, including where the gains are reinvested in another Cypriot property.

If you are considering investing in a holiday home or second residence in Cyprus and wish to remain a non-resident, we can discuss these and other considerations in greater detail.

Products that are tax-free or tax-deferred in the UK, such as ISAs and Premium Bonds, do not have the same status in Cyprus, which means they may be subject to tax on the same basis as other savings income. Considerations include:

• Loss of UK Tax Reliefs: Keeping ISAs as-is following a relocation to Cyprus will mean you lose access to UK-specific allowances.
• Cypriot Tax Obligations: You may become subject to savings, income and/or capital gains tax.
• Inability to Make Contributions: Expats who are no longer UK residents are not permitted to make any further contributions to ISAs, and there are rules that limit your ability to purchase further Premium Bonds as a non-resident.

It is always preferable to restructure assets with tax advantages that apply only within the UK before your move. We can advise on the best strategies to preserve the value of your savings without creating an unnecessary tax burden.

Many expats decide to sell their UK real estate assets, but others may wish to retain properties as part of a rental portfolio or for the use of family members who remain in the UK. In either case, there are tax implications because the taxes arising from a sale or a continued rental income will change once you relocate.

Some of the many potential areas to think through before deciding when or if to sell, or how to manage existing property portfolios during your relocation to Cyprus, include:

• UK Capital Gains Reliefs: Selling a primary home while you remain a UK resident will ensure you take advantage of Private Residence Relief – this will not apply if you sell the property after becoming an overseas resident.
• Cypriot Capital Gains Tax: Your sale may be subject to CGT in Cyprus if you sell post-relocation, since tax residents are exposed to Cypriot taxes against their worldwide income and assets.
• Impacts on Your Residency Status: While owning a UK property as a Cypriot tax resident isn’t unusual, there may be elements to consider if there is any ambiguity about your tax position, or if you wish to coordinate timings to ensure you are treated and taxed as a tax resident in Cyprus sooner rather than later.

Our local teams provide comprehensive assistance with every aspect of asset sales, transfers, and taxation, ensuring you have all the necessary information to make informed decisions about the strategies most suited to you.

The contrasts between the Cypriot and UK tax regimes mean that the reliefs and allowances you qualify for will differ once you move, which also means the timings of any incomes, including dividends, investment returns, and savings interest, will affect your tax obligations.

We recommend reviewing:

• Unused UK Exemptions: Claiming all available allowances and tax reliefs as a UK resident in advance of your move to Cyprus.
• Cypriot Tax Rules: Options to enrol in the Cyprus Non-Domiciled tax regime, with exemptions from Special Defence Contributions and against some dividend and royalty incomes.
• Double Tax Treaties: Checking how double tax treaties apply, and ensuring these are claimed correctly to eliminate duplicate taxation on the same income.

Evaluating your savings products, investment portfolio, and asset holdings is a key aspect of an international relocation. We recommend that any prospective expat unsure how best to utilise allowances, either in the UK or in Cyprus, get in touch.

The Cyprus authorities abolished inheritance tax in 2000, which means most asset transfers to heirs are tax-free. However, that does not mean that succession planning is not applicable, or that expats do not need to take action to ensure their estates are distributed tax-efficiently and according to their wishes.

• Probate Process: In Cyprus, probate involves legal action to obtain a court grant, which validates a will, followed by the probate procedure that includes asset inventories and tax clearance. This process can take several months to a year or more, depending on the size and complexity of the estate.
• Legal Fees: Costs associated with court orders, asset distributions, asset searches, and estate administration apply.

Our advisers work closely with each individual and family to ensure they have compliant, legally enforceable wills recognised in Cyprus, and provide them with all the necessary information to make decisions about the right structures, such as trusts, to manage the distribution of their estates.

The Cypriot General Healthcare System (GESY) offers high-quality services and care, although many expatriates opt to hold private health insurance to ensure they have access to a broader range of services or can select private care tailored to their needs.

Expats also need to consider whether they are likely to become eligible for low-cost or public healthcare services, and whether comprehensive private coverage is a condition of their visa—a common criterion.

• Public Health System (GESY): Expats living in Cyprus may qualify for the GESY after a minimum period of residency, depending on the type of residency permit they hold.
• UK S1 Form: UK pensioners can apply for an S1 form via NHS Overseas Healthcare Services to access the Cypriot public system at no charge, provided they receive the UK State Pension.
• Private Insurance: Most expats purchase private health insurance, either from a Cypriot or an international provider, ensuring they have access to high-quality care and emergency treatments, irrespective of whether they are eligible for public healthcare services. 

Our expat advisers can help you compare the costs and coverage available through private health insurance, advise on your eligibility for the public healthcare system, and ensure that you have included the costs of care within your relocation budget.

Double tax treaties ensure expats aren’t expected to pay duplicate taxation on the same income or event in two locations. This could, for example, apply if you have rental income arising in the UK, but are a Cypriot tax resident, which means there could technically be a tax liability payable in both countries.

Although the UK-Cyprus double tax treaties apply to a wide scope of transactions and incomes, it’s also important to use the treaties correctly, and to make the necessary declarations to ensure you aren’t inadvertently under or over-paying. 

Tax treaties may be relevant to your tax planning regarding:

• Dividend and Interest Income: In most cases, the double tax treaty removes the need to pay withholding taxes on dividends and interest payments arising from the other country.
• Pension Benefits: Most pensions are taxable only in the country of residency, with options for Cypriot tax residents to choose between paying tax at the progressive income tax rates or on a flat 5% rate, subject to a tax-free allowance. 
• Taxable Gains: Earnings subject to capital gains tax are typically taxable only in the country where the asset is located, with tax credits claimable for taxes paid on the same income in the other jurisdiction.

As always, we can advise on how the double tax treaties affect your tax planning, and clarify your status based on the qualification criteria and tie-breaker rules used to determine where you are a tax resident.

Expats living in Cyprus who wish to transfer funds back to the UK or another country, or who want to liquidate assets held in Cyprus, must seek tailored guidance, since any transactions that involve moving money across borders will have taxation implications – and potentially affect your position as a tax or non-tax resident.

While there are no specific foreign exchange controls applicable to these transfers, banks on either side will require detailed documentation to ensure that larger fund transfers are legitimate and comply with reporting regulations.

Other areas to consider include capital gains tax, with a standard 20% rate applicable in Cyprus, the importance of managing currency exchange risks, and ensuring that all transfer and administration fees have been factored in. 

The Chase Buchanan Cyprus team is on hand to discuss these factors with you, should you be interested in finding the best ways to repatriate funds or restructure your asset portfolio in Cyprus efficiently and compliantly.

US citizens and American green card holders must manage the complexities of mandatory IRS reporting, even when they become overseas tax residents, which means many rely on specialist advice to meet their reporting and compliance obligations. 

• Foreign Account Tax Compliance Act Reporting: Ensuring expats complete the required disclosures of all financial assets – including those without a US tax obligation. 
• US Connected Persons: Tailored advice for Cypriot residents with US-linked income, trusts or corporate structures.
• Withholding Requirements: Helping expats navigate rules on withholding taxes and deductions owing either in Cyprus or in the US against foreign-sourced income or earnings. 

Our US Connected Persons experts provide end-to-end support, guiding you through the requirements, liaising with our tax advisers and US consultants, and ensuring your tax affairs are well-managed.

Professional financial and legal guidance is always essential when setting up trust or foundation structures to manage your wealth or assets. Still, there are several potential vehicles within Cyprus that can prove advantageous for expats in terms of estate planning and protecting their assets.

The most relevant types and trust structures will depend on multiple variables, but may include:

• Cypriot Purpose Trusts: International trusts that hold assets for specific purposes, such as for use within a business enterprise or charitable cause.
• Discretionary Trusts: Created to hold assets that are managed by the trustee who has the power to handle distributions to beneficiaries based on the instructions of the settlor, or the person who created the trust.
• Foundations: While Cyprus doesn’t have standalone legislation governing private foundations, they can be created to hold assets within a separate legal entity. In most cases, a corporate entity retains ownership of the assets, with company shares owned by the foundation, as foundations are not permitted to engage in commercial activities.

Expats keen to explore options for protecting generational wealth or preserving assets for future inheritors are welcome to contact our wealth management consultants for further information about trusts, foundations, and other structures that may form an integral part of their cross-border tax strategy.