Invest Abroad In Cyprus
Have you made the decision to invest abroad?
Is Cyprus your chosen destination for purchasing an investment property and enjoying retirement bliss?
It would appear that you have made a wise decision!
I have recently been researching many websites and asking the people in the know about the tax implications for anyone wishing to invest abroad with us here in Paphos.
The subject of tax is invariably dull and usually quite complicated for most of us who either don't understand how it works or who would rather leave it to someone else.
Well, I'm one of these people and it obviously goes without saying that what I am about to impart has been gleaned through some painstaking research on my part and is based on the current tax legislation. However, a word of CAUTION - Always consult an Independent Financial Advisor for the full facts before making any decision because rules change all the time.
What I have found, I will try to put in simple terms as it doesn't hurt any of us to have a little understanding of the situation and to be honest with you I think you will be pleasantly surprised to find what Cyprus can offer to those of you looking to reduce your tax burden and invest abroad!
I have recently read a very unbiased, informed report regarding the tax implications in Cyprus and why it is such a good choice if planning to invest abroad. In this report it states that many people are still considering purchasing property in the North of Cyprus because it is cheaper. This fact is not in dispute but you may wish to consider why. Land disputes and ownership are still very much in question and until this situation is settled the report recommends to steer well clear. After all, why complicate matter by ending up in the middle of an ownership battle. You could find yourself knee deep in a financial wrangle and the money you thought you had saved originally, plus more, being eaten up. Not to mention the worry and stress involved. Well left alone!
The report also points out that Northern Cyprus does not have the advantageous tax regime of the South which has the best tax regime in all of Europe. The reasons why and how this may affect your situation are laid out below.
But first of all, how do you achieve this concept of "non residency" and what are the advantages of becoming a UK 'non-resident'?
Residency, affects income tax and there is very little in the way of statutory guidance on when a person will be non-UK resident for tax purposes. The Inland Revenue has produced the booklet IR20, which in summary says:
Your period of absence from the UK should span an entire tax year from April 6th to April 5th. Provided that you do not enter the UK AT ALL during the year you will be considered non-resident.
You can visit the UK during the tax year but your physical presence in the country must be less than 183 days (and 90 days or less on average over a four year period). In essence this restricts presence in the UK to 90 days in the tax year. This also includes travelling days to and from the UK.
HMRC take the view that an intention to leave the UK for a period of 3 years or more will constitute an intention to permanently reside overseas and you would be seen as being non-UK resident from the date of departure. This will be the case notwithstanding that you may return within the 3 year period but you should not have any intention when you leave of returning within this period.
- WEALTH TAX - NONE in Cyprus. So all your hard earned money is safe from the Government. You can invest abroad in Cyprus and you are allowed to be rich without being penalised for it.
- INCOME TAX is much lower in Cyprus than in the UK.
These were the rates for 2007.
Up to CYP£10,000 - Nil
From CY£10,001 to 15,000 - 20%
From CY£15,001 to 20,000 - 25%
Above CY£20,001 - 30%
- INHERITANCE TAX - NONE in Cyprus.
- CAPITAL GAINS TAX - The first EU€85,000 is exempt, and then Capital Gains Tax is charged at 20% on monies gained from the disposal of immovable property in Cyprus. Roll over relief can be used in certain circumstances if another property is purchased with the gain.
- PENSIONS - In Cyprus you will only pay 5% for amounts in excess of EU€3400, making your pension go a lot further here than in the UK. You gain from the sunshine, the sea and a better standard of living.
It is clear from this report that for any property investor looking to invest abroad and retire to sun drenched shores, Cyprus may be just the place due to the tax advantages on offer.
By becoming UK non-resident and ordinarily non-resident a move to Cyprus could mean that the tax bill on your pension falls from 40 per cent to 5 per cent, your inheritance tax disappears, you pay no wealth tax and your income tax is ten per cent lower.
Then there is the savings from capital gains which can make a huge difference to your retirement wealth. That difference could be anything between 16 and 20 per cent of your total capital gain. Or, put another way, as much as £200,000 on every million you ever make.
Clearly, if you are going to invest abroad you should choose your country VERY carefully but at this time Cyprus looks a good choice.
ALL THE INFORMATION YOU NEED TO KNOW WHEN MOVING TO CYPRUS
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