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Cyprus bailout may hit British expats with tax increases
| Published: | 30 Oct at 6 PM |
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Cash-strapped Cyprus is negotiating an EU bailout package to finance its debts, with austerity measures likely to focus on tax hikes rather then cuts in spending.
The island is a popular destination for British expats, many of whom are retirees on UK pensions or investments and many more as small business owners, attracted by Cyprus’s low-tax regime. According to specialist international tax advisers Blevins Franks, it’s possible that the government will decide to earn more income by raising taxes on earnings and investment returns.
The top rate of tax on the island is 35 per cent, and the tax-free threshold is high in comparison with other EU countries and the UK at £15,660. In addition, Cyprus does no operate a wealth tax and its tax regime for overseas pension income is favourable.
One unnamed expat stated that a possible change could be that all expat workers on the island would need to make tax returns even if their income was below the tax-free threshold. He believes the government is looking at various ways to raise its tax income without upsetting too many people.
The country has been badly affected financially by its exposure to debt-ridden Greece, with medical fees being introduced, VAT expected to rise to 18 per cent and higher taxes on alcohol and tobacco. Its government is also debating the introduction of a property tax on homes worth more than £401,580.
The island is a popular destination for British expats, many of whom are retirees on UK pensions or investments and many more as small business owners, attracted by Cyprus’s low-tax regime. According to specialist international tax advisers Blevins Franks, it’s possible that the government will decide to earn more income by raising taxes on earnings and investment returns.
The top rate of tax on the island is 35 per cent, and the tax-free threshold is high in comparison with other EU countries and the UK at £15,660. In addition, Cyprus does no operate a wealth tax and its tax regime for overseas pension income is favourable.
One unnamed expat stated that a possible change could be that all expat workers on the island would need to make tax returns even if their income was below the tax-free threshold. He believes the government is looking at various ways to raise its tax income without upsetting too many people.
The country has been badly affected financially by its exposure to debt-ridden Greece, with medical fees being introduced, VAT expected to rise to 18 per cent and higher taxes on alcohol and tobacco. Its government is also debating the introduction of a property tax on homes worth more than £401,580.
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