The current situation is as follows.
The UK government has agreed with the government of Cyprus
to amend the 2018 Double Taxation treaty in respect of government service
pensions.
The amendment allows individuals to choose which basis of
taxation they want to apply to their government service pensions.
This choice can be made from 1 January 2019 and will expire
on 31 December 2024.
This election is only available to pensioners who were
- Tax resident in Cyprus
before 1st January 2019
- And in receipt of a UK Government pension eg HMF, before 1st January 2019.
Please note that, if the individual is a resident of Cyprus and also a Cypriot national, the government service pension will be taxable only in Cyprus.
NB A state pension is not a government service pension.
State pensions will continue to be taxable only in the country in which the
recipient is resident for tax purposes.
Looking forward
Representation has been made to HMRC to extend the current
arrangement beyond 2024 as a “lifetime benefit” for those individuals who were:
1.
Tax resident in Cyprus before 1st January 2019
2.
And in receipt of a UK Government pension eg HMF.
3.
And elected to pay
tax in Cyprus under the amendment.
Such representation must be approved by HMRC, HM Treasury,
the UK Government, Cypriot Inland Revenue and Cypriot Government, so there is a
little way to go yet!
