Taxation of Foreign Pensions

How will your pension be taxed in Cyprus?

If you’re receiving a pension in Cyprus, you have a choice of two taxation systems: your pension can be taxed at standard income tax rates, i.e. with the first €3,400 tax-free or it can be taxed at 5 per cent when exceeding that sum.

If you’re a pensioner planning to retire to Cyprus, you must obtain professional advice on your financial and tax position both in your home country and in Cyprus. In the UK, the Inland Revenue publishes several free leaflets which provide all the necessary information. They’re part of the ‘International Series’ and have the following titles: Residents and Non-residents. Liability to Tax in the UK (IR20); Living or Retiring Abroad? A Guide to UK tax on your UK income and pension (IR138); and a Help Sheet (IR304), which explains tax relief under double-taxation agreeements. They can all be obtained from any UK tax office or the Inland Revenue’s orderline (Tel. UK 0845-900 0404) or website (www.inlandrevenue.gov.uk/leaflets ).

Some countries, e.g. Canada and the UK, have an agreement with Cyprus that allows state pensions to remain index-linked when pensioners are resident in Cyprus. UK retirees should contact the Inland Revenue’s International Centre for Non-Residents (Tel. UK 0151-210 2222, www.inlandrevenue.gov.uk ) or the International Pensions Service (Tel. UK 0191-218 7777, www.dwp.gov.uk ).

This article is an extract from Buying a Home in Cyprus. Click here to get a copy now!

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