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Useful Cyprus Information Cyprus Government Websites Currency Converter Cyprus Property News Limassol Marina CyprusNewsReport.comCyprus Income Tax 2010
Scale Tax Rates:
| EURO | 2010 | Tax on band € | Cumulative tax € |
| Up to €19,500 | 0% | Nil | Nil |
| €19,501 - €28,000 | 20% | 1,700 | 1,700 |
| €28,001 - €36,300 | 25% | 2,075 | 3,775 |
| Over €36,300 | 30% |
Pension Income
● Domestic pension income is taxed at the normal scale rates.
● Foreign pension income is taxed in one of two ways:
- At a flat rate of 5% on the excess of €3,420 (this sum being exempt).
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or 2. At the normal scale rates above.
For example: If your sole income was UK source pension income of, say, €20,000 in 2010, the tax would be €829 (5% of (€20,000 – 3,420 = 16,580)) under method 1 or €100 (20% on (20,000 less 19,500 = 500)) under method 2.
The election is made on a year-by-year basis.
Under the terms of the UK/Cyprus Double Tax Treaty, all forms of pension arising in the UK (including UK government service pensions) are taxable only in Cyprus for a Cyprus tax resident, and not in the UK.
Pension lump sums are not taxable in Cyprus, even if taken while a Cyprus resident. This is under the domestic ‘exempt income’ rules.
Receiving UK pension income or annuity without UK tax
In order to ensure that you receive your pension and annuity income gross to avoid double taxation, you would need to submit Form DT/INDIVIDUAL to the local Cypriot tax authorities. Not only does this form ensures that UK tax is not levied on the income, but also allows for a reimbursement of all tax wrongly levied in the period while the form was being filed. The form can be downloaded from HM Revenue & Customs website at: http://www.hmrc.gov.uk/cnr/dtindividual.pdf
Bank Interest
Bank interest earned in the ordinary course of an individual’s business or in close connection to the business is subject only to income tax.
All other worldwide bank interest is not subject to income tax, but to Defence Contributions (another form of income tax) at 10%.
If a taxpayer’s total income (including interest) is less than €12,000, the rate of Defence Contributions on interest is reduced to 3%.
UK dividends
Dividends are also subject to Defence Contributions in Cyprus, and not to income tax, at the rate of 15%. The Defence Contributions are payable on the gross amount (i.e. dividend plus UK tax credit), although the 10% UK tax credit treated as being attached to the dividend, whilst not refundable in the UK, is deductible from the amount payable in Cyprus.
Rental income
Worldwide rental income is taxed in Cyprus at the scale rates above. No actual deductions are permitted in calculating the net taxable income, although the following deductions are allowed:
- 20% of gross rents
- 3% depreciation on building cost (not land); and
- interest on any loan to acquire a property for rental purposes.
In addition to this, Defence Contributions are levied on 75% of the gross rental income at a rate of 3%.
UK rental income also remains taxable in the UK, as that is where the property is situated. For UK tax purposes, UK rules will be applied in calculating the taxable income, so the amounts taxable in the UK and in Cyprus are unlikely to be the same. Nevertheless, in order to avoid being taxed twice on the same income, you can offset any UK tax paid against the Cyprus tax and Defence Contributions on the same income.
A non-resident with rental income from a Cyprus property would not be subject to Defence Contributions.
Employment income
Employment income is taxed at the progressive scale rates in Cyprus, except in the following circumstances:
- For new Cyprus residents taking up employment in Cyprus, there is a special tax exemption of the lower of 20% of income earned or €8,550 per annum for the first three years of employment.
- Where the employment is rendered abroad, for more than 90 days overseas in a tax year, and the employer is not a tax resident in Cyprus and has no permanent establishment in Cyprus, the entire salary is tax free in Cyprus (it might be taxable elsewhere, however).
Self-employment income
Income from self-employment, less deductions for expenses, is taxed at the scale rates as above.
Losses from both the current and previous years may be set against general income, including those arising from businesses carried on outside Cyprus (calculated according to Cyprus rules).
Profits from a permanent establishment abroad (outside Cyprus) are not taxable in Cyprus except in certain circumstances.
Businesses with a turnover of €15,600 during the preceding 12 months, or with an expected turnover of €15,600 within the next 30 days are required to register for VAT.
The level and bases of, and reliefs from taxation may change. Any statements based on taxation are based upon current taxation laws and practices which are subject to change.
This information is for guidance purposes only. You should seek professional advice relating to your personal circumstances and objectives.
© Blevins Franks
Blevins Franks – Integrated Tax Planning and Wealth Management since 1975
Cyprus office:
Lou Cunningham
lou.cunningham@blevinsfranks.com
Tel: 26 912 315
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