Tax Shocker: Property Owners

[Proactive]

Hiya, heres my view Cyprus tax on property to, hopfully, take the shock factor out for investors/ property buyers

The tax implications of buying property in Cyprus has always been an issue. Expats, Expatriates and Non Cypriots often make the mistake of ignoring the long term taxes that apply to overseas property owners in Cyprus when they apply for immigration to Cyprus for tax benefits. This is because tax residence and domicile are different but relavent factors.


Capital Gains

At time of purchase you quickly become aware of the stamp duty, immovable property tax, VAT and Property Transfer Taxes due to the Cyprus government. Often people over look Capital Gains tax due at 20% of the gain when you sell. Once you have brought the property the capital gains tax will apply on sale of your overseas property investment.

Inheritance Tax

A shocking decision by the UK Inland Revenue Special Commissionaires has opened up joint ownership of properties by British married couples to inheritance tax at 40%. This is a stealth tax that ignores the whole legal framework of equality law between married couples including precedents set in divorce cases. This follows recent budget changes to trusts.

In summary when buying property villas or aprtments in Cyprus consider and take advice on how to purchase the property to avoid future inheritance or capital gains taxes. Trusts or Investment companies may be the answer. Once you have purchased these are hard to avoid and further specialist advice is required.


Sam Orgill

ProACT Partnership

 

[scozzy]

Okay, to clear things up a bit:

There is NO INHERITANCE TAX IN CYPRUS, it was abolished in 2004. The last time I checked there was a double tax treaty between Cyprus and the UK- meaning you choose where to be taxed. You will not pay inheritance tax on a property in Cyprus.
Tax Not Applicable


Capital Gains tax- 20% leveied on the profit- not strictly true.
Every name on the contract of sale (you can include everyone in your family if you wish) has a £10,000CYP untaxable profit. If you are a Cypriot resident of 5 years or more, that moves to £50,000 each. So if I invest with my wife, and I add our two kids, and my sister and her husband to the contract I can make £60,000CYP untaxed profit.
Tax Avoided


Immovable property tax- You will have to own a palace to be liable for this. Immovable property tax is an annual tax levied on property worth over £100,000CYP in 1981. The equates to £Millions in todays market; so chances are you won't pay a penny.
Tax Not Applicable

Stamp duty- you won't notice it, the solicitors fee will be more! Stamp duty is 0.15% up to £100,000 value, 0.25 on anything over. £100,000 CYP property will costs you £150CYP in stamp fees. Not much really is it?
Tax negliable

Property transfer Tax- Again, avoidable. You will be given the choice to pay this tax once your title deeds are ready from the land registry- which will be 3-5 years. You can seel before this time and incurr no fee. If you choose not to buy the title deeds you can add the price of purchasing them to the sale price of your property. On average it will be around £3000CYP, quite hefty but you will never pay it.
Tax avoided.


IF you want to know more, email me on:

s.cozzolino @pafilia.c om (Yes I do work for a developer, yes I do own property in Cyprus)

 

[spike]

Hi,
Double tax treaty does not mean that you choose which country you pay tax in, it means that the tax you pay in Cypus will offset any tax liability you have in the UK.

 

[scozzy]

Hi,
Double tax treaty does not mean that you choose which country you pay tax in, it means that the tax you pay in Cypus will offset any tax liability you have in the UK.

It doesn't just offset your tax liability pound for pound, it offsets you liability fot that particular tax.

I.E.

Many of my clients have their Pensions paid into bank accounts in Cyprus, taxed at a 5% flat rate. They do not owe the UK Inland revenue the surplus percentage that they would have paid in the UK- rather, they pay nothing at all. Obviously for Pension tax they have to prove their cypriot residency.

 

[grumpy001]

That scozzy is because they choose to be classed as resident in Cyprus. Double taxation treaties ensure the taxes are not paid twice, instead you can pay income tax in one country on earnings if classed as domicile and a top slice in another country if it is higher than the domicile country.

A full description of this system can be found in the GAAP guidelines book, which I will check for a link when I have time.

 

[scozzy]

instead you can pay income tax in one country on earnings if classed as domicile and a top slice in another country if it is higher than the domicile country.

Sorry if my answer was a bit broad and simple-

From my understanding from a Blevins Frank manual-
For UK residents who become domiciled in Cyprus, they need only pay the Cypriot flat rate of Pension tax. However, if the expat spends more than 90 days p.a. (throughout one calendar year, not successive) in the UK, then they will be liable for the top slice.

I am unaware of other countries policies on this one- thanks for the correction Grumpy

 

[grumpy001]

A client should be looked at as domicile in either one country or another for tax purposes and top slicing (or not, mmm nice) would depend on the relevant Double Taxation treaty (which can change and will evolve further as the EU get the grips in).
Check out the GAAP manual if possible.