With thanks to Lee Hinton of FM Group International.
UK and Cyprus Double Taxation Agreement 2018
On the 22nd March 2018 the British High Commissioner, Matthew Kidd on behalf of the
UK Government and Mr Harris Georgiades, on behalf of the Government of the
Republic of Cyprus signed a new Double Taxation Agreement. This new agreement
was to update and modernise the current agreement that has existed between the
UK and Cyprus, whilst bringing the agreement into line with other UK and EU
double taxation agreements. This
new agreement has not yet entered into force. This will happen when both
countries have completed their parliamentary procedures and exchanged
diplomatic notes. An announcement will be made when these procedures have been
completed.
The new agreement
covers the full range of corporate and business taxation and in many respects
is similar to the present UK and Cyprus Double Taxation Agreement that was last
updated in 2002.
This document covers only five of the 30 articles
included in the agreement.
Income derived
from employment
In general,
salaries, wages and other similar remuneration in respect of employment in the
country in which an individual is tax resident shall normally be taxable only
in that country. The exception to this is where an individual works in the
other country, (either in Cyprus or the UK) in which case any remuneration may
be taxed in that other country. For example, if an individual who is tax
resident in Cyprus is working in Cyprus their salary is taxable in Cyprus. If
the same individual works in the UK, then their salary (earnt in the UK) can be
taxed in the UK.
The main exception to this rule is for Government
employees (of any kind) including HMF, Civil Servants, NHS, Teachers etc,
whether directly or indirectly employed, who will be taxed in the Country of
the Government that is funding their remuneration. For example members of UK
HMF will be subject to UK income taxes on their salary.
Pensions
This must be
considered in three parts.
1. For all NON-UK
government funded pension schemes paid to individual’s tax resident in
Cyprus; Cyprus taxation will apply. Currently, this is either normal rates of
Cyprus income tax or the special rate of 5% for foreign sourced pensions.
2. UK State funded Pension schemes (OAP pension) paid to
individual’s tax resident in Cyprus; Cyprus taxation will apply. Currently,
this is either normal rates of Cyprus income tax or the special rate of 5% for
foreign sourced pensions.
3. For ALL UK government funded pensions, paid to
individual’s tax resident in Cyprus; UK Income tax will apply at source. This
includes, for example, retired members of HMF, NHS Civil Servants, local
authority employees, teachers, police and other emergency services as well as
government agency employees.
The exception to
paragraph 3 above is that if an individual, who is in receipt of a UK
government funded pension, is
(a) tax resident in
Cyprus and
(b) a National
(Citizen) of Cyprus,
the UK
government-funded pension can be taxed in Cyprus.
Income from
immovable property (Rental income)
Income such as
rental income from any property can be taxed in the country where the property
is situated. This means that if an individual is tax resident in Cyprus and
receives rental income from a UK property, the rental income can be taxed in
the UK as “income”. In addition, such income must be declared in Cyprus and is
subject to Income tax (albeit after allowing for tax already paid) and Defence
tax, which is currently 3%.
Capital Gains
from immovable property (profits upon sale of an immovable property)
Gains made by a tax
resident of Cyprus, from the sale of UK immovable property, can, subject to the
overriding current provisions of UK Capital Gains Tax regulations, be taxed in
the UK.
Interest from
deposits
Interest paid on UK
deposit bearing bank, building society and National Savings, to a Cyprus tax
resident shall be subject to tax in Cyprus.
Currently, the tax
payable is the special contribution for defence, taxed at a rate of 30%.
Non-Cypriot
domiciled individuals, who have been tax resident in Cyprus for less than 17
out of the last 20 years, are currently exempted from the payment of the
special contribution for defence tax.
Source HM
Government
22 March 2018
What is my income tax rate 2017/18?
Earnings (if you live in England, Wales or Northern Ireland)
|
2017/18 rate
|
Between PA and
PA+£33,500 (basic rate) For most, £11,500 to £45,000
|
20%
|
Between PA+£33,500
and £150,000 (higher rate) For most, £45,000 to £150,000
|
40%
|
Over £150,000
(additional rate)
|
45%
|
