Moving Can be Hard but it Doesn’t Have to be Hard if You Keep Your Finances in Order

If you live in Cyprus for six months or more during the tax year, your worldwide income is taxable in Cyprus. However, if you live in Cyprus for less than six months, tax is only paid on income earned within the country.

When you move to Cyprus, it is important that your finances stay in check. We can teach you how to keep the finances straight after relocating your home to Cyprus. 

Find out more in the article below!

The importance of tax planning

The good news is that Cyprus has a reputation for having an economy with low taxes.

Taxes in Cyprus are much more beneficial for retired people. This is because the country has no inheritance tax. Furthermore, it has a higher income threshold than the UK. 

The first €19,500 of your income is tax-free. The percentage of your salary that you pay in taxes is not always the same. The rate changes based on how much money you earn and where you live.

There are many ways to avoid taxes in Cyprus and you can claim various deductions. For your convenience, hire an accountant who has experience with income derived abroad. He could help you save money in the future.

 If you are living in Cyprus for more than six months, your worldwide income will be taxed. However, it is different if you are living in Cyprus for less than six months. Tax will only be paid on income that was earned within the country.

How inheritance tax works in Cyprus

Inheritance tax in Cyprus doesn’t exist. That shouldn’t prevent you from making a will. Whether you have to pay inheritance tax is dependent on where your permanent home is.

The government of the UK considers you to be living in Great Britain if, for 17 out of 20 years, you have lived there. It also includes that you have a permanent home there within the last 3 years.

This information might surprise you, but the government still charges inheritance tax on any property you own in the UK. 

Your Cypriot inheritance law applies to all your immovable property. It applies only if you had your domicile in Cyprus at the time of death. Bear in mind that double taxation treaties are an important part of international tax planning. They can be a bit tricky to understand. Luckily, there are professionals that can help you.

Cyprus has a highly regulated inheritance system. It can make it tough for you to distribute your estate. The estate can be divided into two parts: 

1. A disposable portion.

2. The statutory portion.

The part of your real estate that goes to your potential children is called “the statutory portion.” It’s a set percentage determined by law. It varies depending on how many kids you have. The statutory portion is half if it’s just a spouse or parent.

A property can also be given to another person for example a different family member or a friend. However, there are often taxes imposed on these gifts.

The benefits of claiming your pension in Cyprus

Your pension paid in Cyprus will be increased each year in line with EU pensions. This means an increase of at least 2.5% each year. 

However, you will no longer be eligible for the winter fuel payment. The cost of living in Cyprus is between a quarter and a third cheaper than in the UK. This means basically that you can live better on your UK pension in Cyprus than in the UK.

However, it is risky to leave your income in the hands of currency changes. For many people, knowing how much they will receive per month is essential. It helps them to make effective and safe plans for future expenditures.

One option is to draw your UK pension with Smart Currency Exchange. It’s the one of the safest ways because there are no hidden fees. All you will have to do is set up a standing order. It automatically sends your funds at the pre-agreed exchange rate and interval of choice.

Paying into a pension

Cyprus is a popular retirement destination for British expats who want to keep living in Europe after Brexit. You may be surprised, but it is perfectly possible to keep receiving your state benefits from abroad.

You can leave your UK pension plan in place and not worry about the taxes. Furthermore, you aren’t limited by how much you pay. 

You could transfer your retirement fund into an overseas pension. Funds can be transferred as a part of an Overseas Pension Scheme.

The cost of living in Cyprus

Wages are much lower than in the UK and other EU countries. But also, the cost of living is around 25% cheaper than in Europe. It is an ideal place for those who are looking to save money and keep their living standard.

Many British people continue their career from the warmth and comfort of their terrace in Cyprus. Rent and property prices are 60-65% less than in the UK. You will make significant savings on “fixed” living costs such as electricity, water, and rubbish disposal. Public transport is generally cheaper as well. 

The best thing is, in Cyprus the healthiest things are free (e.g., the beach) or much cheaper than anywhere else in the EU or the UK. You can spend 50% less on fresh fruit and vegetables at the market than you would in the UK. Unfortunately, imported foods may be more expensive than the UK. The same goes for clothes from big-name brands because big businesses in Cyprus have to charge more due to the smaller market size.

Conclusion: It is important to be aware of the financial implications when moving abroad

Cyprus is a beautiful country that offers many opportunities. It’s very important for you to know what to expect when moving there. This article hopefully helped to explain how the financial system in Cyprus works. You will also gain better insight into why taking charge of your money matters.