Retire to Cyprus for a Low Tax Lifestyle

Retire to Cyprus for a Low Tax LifestyleThe Republic of (Southern) Cyprus has been a favoured destination for those seeking a medium haul holiday in the sun for many years, but the government of Cyprus has been actively working to diversify its economic dependence on the tourism industry since it joined the EU back in 2004 and has been luring growing numbers of British and European retirees with the promise of a low tax lifestyle ever since.

Despite being a fully signed up member of the European Union, Cyprus has managed to retain strong control over the rates of tax it charges those who retire to Cyprus and what’s even more interesting is that inheritance tax has been abolished in Cyprus and capital gains tax is half what it is in the UK for example, meaning that you really can retire to Cyprus for a low tax lifestyle…but could all that be about to change?

Experts are warning that the success of the Cypriot policy of offering wealthy retirees an almost tax free haven in the sun could be about to explode as record numbers have taken up the open ‘invitation’, bought up all the property, pushed up prices and created an ever widening affordability gap that local buyers cannot bridge.

At the moment anyone retiring to Cyprus need only pay 5% tax on any of their pension income whether that be from a state pension or a private or company pension.  Furthermore, those with a British pension are still entitled to take a certain percentage of their final sum tax free and any state pension that they are entitled to will benefit from annual inflation increases.

Other benefits that those retiring to Cyprus may profit from include the fact that inheritance tax has been abolished and therefore those who are successful in changing their domicile to Cyprus can avoid this unfair taxation, and the rate of capital gains tax is far lower in Cyprus than it is elsewhere in Europe and those who wait until they are fully eligible for Cypriot CGT before cashing in their assets will potentially make massive taxation savings.

But…experts in both the financial services and real estate businesses are warning people that all this could be too good to last because Cyprus is now awash with retirees and has enjoyed a property market that has been so successful that it is now far less affordable. 

If certain actions are not put in place soon Cyprus could find it suffers the same problems as tax havens like Jersey where it is just too expensive to live for 99% of normal people.  There have been no public announcements made by the government relating to action they may take, but advisers are recommending that retirees in Cyprus get a contingency plan in place to protect their future financial position.

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