|
Expatriate
Executive: Cyprus
Summary
of local taxation situation
Residence is defined
as presence in the country for more than
183 days in a calendar year (which is the
tax year), and then applies to the whole
year. Resident individuals are subject to
tax on their world-wide income.
Various deductions are permitted, including
some in respect of share ownership; and
the first EUR19,500 of personal income is
exempt from tax.
Income from EUR19,50-28,000 is taxed at
20%; income from EUR28,001-36,300 at 25%;
and income above EUR36,300 at 30%.
Non-residents of Cyprus are taxed in Cyprus
on employment income (including benefits),
in relation to services rendered in Cyprus,
profits from a business activity which is
carried out through a permanent establishment
in Cyprus, rentals from immoveable property
situated in Cyprus, and pensions in respect
of employment exercised in Cyprus, with
the exception of pensions paid from a fund
established by the Government or local authority.
Foreign citizens, resident or otherwise,
pay 5% on pension income received in Cyprus
above EUR3,417 per annum.
A 'Special Defence Contribution' applies
to certain types of income as follows:
- 3% on: interest
received by provident funds; the profits
of semi-governmental bodies; rental income
received by a Cyprus individual or corporate
resident from immovable property (after
deducting 25%); interest received by an
individual with a yearly income below
EUR11,960 and interest received by individuals
from Government bonds and Government savings
certificates.
- 10% on: interest
received by a legal entity unrelated to
its normal business or by an individual
with income over EUR11,960 pa.
- 15% on: dividends
received by individuals in Cyprus.
Individuals exercising an office or employment in Cyprus, whose
residence was outside Cyprus before the commencement of the employment,
are granted a tax exemption for 20% of their remuneration, or EUR8,000,
whichever is the lower, during a period of three years starting
at the beginning of the year following the year of commencement
of their employment.
Employees pay social security contributions of 6.8% of gross pay
while employers pay 8.5% of an employee's gross pay.
There is no tax on wealth, no inheritance tax and no alternative
minimum tax. There is a capital gains tax of 20% on disposal of
real estate. Property tax is 0% up to EUR170,860 but based
on 1980 values. The following ratio applies thereafter: from EUR170,860
and up to EUR427,150 - 2.5:1,000; from EUR427,150 and up to EUR854,301
- 3.5:1,000; and over EUR854,301 - 4:1,000.
After the EU finally agreed its Tax Directive in June, 2003, Cyprus
announced that it would implement the 'information sharing' provision
of the Directive on entry to the Union in 2004. This means that
information about savings returns received in Cyprus by nationals
of other EU countries is now being passed to the tax authorities
in the individuals' home countries.
NB: Cyprus tax rules are considerably more complicated than the
above simplified summary, and professional advice on the situation
of any particular individual is advisable.
Offshore
Investment Opportunities
It is clear from
the above that an resident expatriate working
in or from Cyprus is in a good position
to acquire and maintain offshore assets,
including assets in Cyprus.
In choosing between various types of offshore
asset for investment purposes, the main
consideration for a Cyprus-based expatriate
will be his or her intended residential
plans following departure from Cyprus. If
the expatriate plans to move on to another
offshore jurisdiction, then investment choices
will not be much constrained, but if the
plan is to return to a high-tax jurisdiction,
then it is vital to study the anti-avoidance
legislation of that jurisdiction before
acquiring offshore assets. Some jurisdictions
tax offshore assets more severely than domestic
assets and 'look through' trust arrangements,
while others accept trust assets as being
outwith the tax net.
This DIY guide can be used to explore high-tax
country tax regimes for residents by specifying
'high-tax country name' and 'high-tax country
resident intending to stay put'.
www.lowtax.net
contains extensive information on the investment,
tax and legal regimes in 35 of the main
offshore jurisdictions. Further information
is available in our Investment
Information Providers Section, and the
four main types of offshore investment are
described in the Guide
to Offshore Investment on this site.
NB: The suggestions given above do not constitute
investment advice. They are intended only
to assist individuals in finding appropriate
professional advice, which is essential for
anyone planning offshore investment.
|
Lowtax Network Portal