Last Updated on 11th October 2024
Preparing for a well-deserved retirement in Cyprus is an incredibly exciting time. You’ll have the opportunity to relax in a warm, sunny climate, enjoy miles of pristine beaches and coastlines, explore fascinating architectural ruins, and take advantage of the low living costs on offer.
Dreaming of an overseas retirement is one thing, but implementing the practical steps, financial decision-making, and contingencies is often another—a checklist and methodical approach are key to ensuring your retirement is everything you have aspired to.
Our wealth managers and financial advisers in Cyprus, based in Paphos, have collated a few pointers to ensure you are well-prepared for your retirement years and have considered all of the relevant factors before you pack your bags, choose a property or transfer your pension fund.
Selecting a Qualifying Retirement Visa to Relocate to Cyprus
Step one is to ensure you understand the visas or residency permits you are eligible for and can tick off every requirement – whether that means evidencing robust private medical insurance, having a local bank account, offering proof of accommodation, or showing that you have the means to cover your ongoing living costs.
There isn’t a specific retirement visa in Cyprus, although many third-country nationals initially apply for a renewable temporary residence permit. This permit is available to non-EU citizens looking to stay longer than the 90-day non-visa limit.
Another potential route to consider is the Cyprus Permanent Residence Program – an option open to new applicants while noting that the previous citizenship ‘golden visa scheme’ has been suspended indefinitely.
To qualify for residency, depending on other conditions, UK retirees can:
- Purchase an approved property for at least €300,000 plus VAT where applicable.
- Invest in non-residential real estate of the same value.
- Invest in share capital or authorised investment funds with a €300,000 minimum investment threshold.
- Provide evidence of a secure annual income of at least €50,000 from outside Cyprus, plus €15,000 per dependent spouse and a further €10,000 for any children.
Expat retirees with stable pension income, investment assets, dividend dispersals, or other income sources from outside Cyprus can qualify regardless of whether they wish to purchase a home on the island. Residency status isn’t immediate, but permit holders can apply for full residency after seven years.
Considering the Cost of Living and Financing Your Move
Many retirees compare the average living costs in Cyprus, which are roughly 13.8% lower than those in the UK, and assume that a healthy income will more than cover all of their outgoings.
Our advice is to ensure you have budgeted for the cost of your move, private health insurance, contingency planning, and property costs, as well as everyday expenditures like groceries and utilities.
The cost of your relocation should include aspects such as shipping belongings and furniture, immunisations and travel certifications for pets, flights and transfers, and any other outgoings such as selling a UK home or settling your affairs.
Insurance coverage is typically a mandatory visa requirement for all non-EU citizens moving to Cyprus, and many expats opt for the most comprehensive insurance available to ensure they are covered for all eventualities, including repatriation, in the unlikely event this is necessary.
You will need to think about opening a local bank account, and can refer to the Central Bank of Cyprus, which offers a database of foreign and domestic financial institutions that provide approved banking services.
When you have a local account, you can make decisions about other areas such as:
- Whether to receive your State Pension into your Cypriot account, acknowledging that this will always be remitted in GBP and converted to Euros, so may fluctuate in value.
- Whether you’d like to retain a UK account to collect payments and incomes arising in Britain, especially if you have remaining assets or revenue streams back home, and the costs of transferring those incomes to Cyprus.
Deciding whether to purchase or rent a home in Cyprus should also be something you decide on in the early stages of your relocation planning since this is one of the largest items of expenditure associated with an international move.
Renting vs Buying a Cypriot Retirement Property
City centre property acquisition prices in Cyprus are approximately 49.5% more affordable than in the UK, with more rural real estate being over 53% less expensive, which means UK expats can commonly afford larger and more luxurious properties than in Britain.
In contrast, rental prices vary from 16.3% to 26.4% lower depending on the areas you’d like to live in, the style of property you choose, and where you live now.
Renting allows you to explore different areas and select a place you’d love to settle down, whereas buying ensures you won’t have any ongoing rental obligations following your move and can potentially qualify for a residency visa if this is the best solution for you.
Reviewing Your Tax Liabilities as an Expat Retiree in Cyprus
There are multiple ways to structure your investments, assets, pension funds, and income streams, all of which our wealth managers can assist with.
Your tax residency, the location of your assets and income, and overall wealth can also influence your taxation declaration and payment obligations.
Transferring a pension can be complicated, and much may depend on the nature and value of your retirement funds, the level to which you rely on this income to finance your living costs, and whether you would benefit from more flexibility when accessing lump-sums, perhaps as part of the financing of your relocation.
In addition, you’ll also need to make informed decisions about how to manage and declare your pension and other income, with some specific factors relevant to the taxation systems within Cyprus:
- The Cypriot government provides the option to tax foreign-sourced pension income at a low flat rate of 5%, applied to all amounts above €3,420. Tax residents may also choose to have their pension taxed against the standard income tax bands if this is advantageous.
- Personal income tax rates start at 20%, with an initial personal allowance of €19,500 for tax residents—below which no income tax is payable.
- Dividends, interest income, gifts, and inheritances are not subject to taxation, and there is no form of succession tax in Cyprus. However, defence contributions could be payable.
Special Defence Contributions (SDC) are payable against rental, interest and dividend income but only for tax residents who are also domiciled. Domiciliary status is a complex area, and while most British nationals will remain UK domiciles – which also raises the conversation about liability for future inheritance taxes – this is worth bearing in mind.
Retiring in Cyprus, while a fantastic way to spend retirement in this beautiful destination, is more involved than simply buying a property or applying for a visa.
We hope this guide clarifies some of the essential considerations that will help ensure your move and life overseas run smoothly.
For more information and tailored guidance about your planned retirement, you can contact the local Chase Buchanan Cypriot team.
*Information correct as at September 2024