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QROPS Cyprus | UK Pension Transfer for British Expats


QROPS Cyprus | UK Pension Transfers to Cyprus

QROPS Cyprus – Brits and Cypriots living in Cyprus can now transfer their UK pensions to a Recognised Overseas Pension Scheme in Malta or NZ and pay only 5% income tax in Cyprus and no death tax as long as they remain a tax resident in Cyprus.

British expats living in Cyprus or wanting to retire in Cyprus can now transfer their pension into a QROPS in Malta or NZ if they are looking to minimise taxes upon drawdown. Cypriots who have worked in the UK and built up a final salary scheme or private pension plan can also transfer their UK pensions offshore to get their pensions out of the UK tax net to avoid up to 45% tax on death after 75 years of age and up to 45% income tax.

Cyprus is know for encouraging both British pensioners, Russian oligarchs and German holiday makers as well as Greeks to come to live in Cyprus. British expats living or working in Cyprus can take advantage of their offshore status and transfer their UK pension offshore to somewhere secure like New Zealand or Malta and will no longer have to pay UK taxes on their pension if they stay offshore.

You used to be able to transfer directly to Cyprus, but HMRC closed transfers to QROPS in Cyprus itself. Now, the choice is to move to either NZ or Malta or Hong Kong to reduce your tax bill.

Malta has a Double Taxation Agreement with Cyprus. This taxation treaty with the UK means that British pensioners can elect to pay a fixed 5% rate on state or private pensions above their personal allowance of €3,417 a year or they can opt into Cyprus’s tiered system, which has a top rate of 30% and the first €19,500 per year is tax-free. This may be much less than the average tax rates in the UK of 20% – 45%.

Furthermore, because Cyprus is a member of the EU, your British state pensions will rise every year in line with British inflation and your winter fuel allowance will come rolling in, even though Cyprus has the warmest winter climate of any country in the EU.

In fact, Cypriots who have worked in the UK can also avoid up to 45% tax upon death and have the possibility of reducing their income tax bill by transferring their UK pension offshore.

When pensioners are registered in Cyprus as tax residents after a stay of 183 days, bank interest and share dividends become tax-free too, whilst the only asset liable to capital gains tax is property. UK inheritance tax is harder to avoid, but not impossible via a QNUPS. A QNUPS is Qualifying Non-UK Pension Scheme. You can wrap property, bank accounts, shares and other assets into a QNUPS. A QNUPS avoids tax on death as long as you remain tax resident outside the UK. Please contact us for more info on QROPS / QNUPS if you are a resident of Cyprus and hold British pensions and assets.

qrops cyprus

Why live or retire in Cyprus as a British expat?

Cyprus is an extremely popular choice for a retirement destination, especially for Brits. Property is cheap compared to the UK, it has a glorious sunny climate, more than three quarters of the population speak English and pensions are taxed at low rates. The first EUR 3,417 p.a. is taxed at 0% and above this amount it is taxed at a fixed of 5%. That is the equivalent of paying only 5% on any pension income above roughly £2,000. It’s no wonder so many Brits decide to come and retire in sunnier climates in Cyprus.

Husband and wife can also be taxed under different schemes for taxes on pensions should this be more advantageous. The situation is particularly favourable for those British expats employed in Cyprus, rather than retired, who also enjoy an overseas pension. They can enjoy the 5% rate on their pension yet receive the full £10,000 personal allowance before paying tax on any of their earned income in the UK.

Over 65,000 British expats live in Cyprus. Most British expats live in the Republic of Cyprus, which is the Greek Cypriot half of the island on the Western side of the island. As a foreign national, you can visit the Turkish-owned part of Northern Cyprus, which the Republic of Cyprus still consider as rightfully theirs.

uk pension transfer cyprus

Transferring a UK Pension to a QROPS in Malta for a Resident in Cyprus

QROPS Cyprus: Anyone moving to Cyprus or living in Cyprus can move their UK pensions to a Recognised Overseas Pension Scheme or ROPS in Malta for tax optimisation. Your pension trust is set up in Malta, but your pension is paid directly into your bank account in Cyprus with only 5% income tax deducted in Cyprus. A Malta ROPS allows full pension flexibility similar to the UK. So, you can take your pension whenever you like and you would pay less income tax than the UK.

Malta has a Double Taxation Agreement with Cyprus. Under the Malta-Cyprus DTA, the taxation rights are given to Cyprus under article 18.

ARTICLE 18

Pensions

(1) Subject to the provisions of paragraph (2) of Article 19, pensions and other
similar remuneration paid to a resident of a Contracting State in consideration of past
employment shall be taxable only in that State.
16
(2) Notwithstanding the provisions of paragraph (1), pensions and other payments
made under the social security legislation of a Contracting State or a political subdivision or a
local authority thereof shall be taxable only in that State

The Benefits of a Malta ROPS for a Resident in Cyprus

  • Income tax in Cyprus is only 5% compared to 20% – 45% in the UK
  • 25% tax-free cash lump sum available at age 55
  • Full flexible drawdown access to your pension allowed; similar to UK rules on DC pensions
  • There is no tax on growth or death of your pension pot
  • If you ever return to the UK, any tax on death will likely be a lot lower
  • You can choose the currency of your pension: GBP, EUR, USD, etc
  • You can choose the investments
  • 100% gets paid out  as a tax-free cash lump sum to whomever you choose upon death
  • You could also set up a family trust to pay out an income if you wanted
  • Malta has strong pension regulations and is a member of the EU
  • Malta has Double Taxation Agreements with over 65 countries, so if you retire abroad outside of Cyprus at a later date, this may help reduce taxation

Transferring a UK Pension to a QROPS in New Zealand for a Resident in Cyprus

New Zealand is an OECD country with a tax neutral Recognised Overseas Pension Scheme (ROPS). This is a good place to park your pension if you are considering using a ROPS as an inheritance planning tool. This is because there is no upper limit on when you have to start receiving retirement benefits. In Malta, you must start drawing benefits at 70, but in NZ, you can leave the entire pension pot to grow. This make a NZ ROPS a very good estate / inheritance tax planning option.

The only drawback is that you cannot self direct your pension. It must be pooled along with other NZ ROPS members. You can then decide what strategy to take based upon an analysis of your risk tolerance.

The Benefits of a NZ ROPS for a Resident in Cyprus

  • Income tax in Cyprus is only 5% compared to 20% – 45% in the UK
  • There is no tax on growth or death of your pension pot
  • If you ever return to the UK, any tax on death will likely be a lot lower
  • Your pension remains in GBP
  • Investments are pooled and managed on your behalf
  • 100% gets paid out to whomever you choose upon death
  • New Zealand has stringent pension regulations and everybody speaks English
  • New Zealand is tax neutral, so if you move outside of Cyprus, you would never pay any income tax in New
  • Zealand, only in your country of residence.

Tax Reduction for UK Pensions for British Expats in Cyprus

British expats living in Cyprus or wanting to retire in Cyprus can now transfer their pension into a QROPS to maximize pension tax relief. British expats living or working in Cyprus can take advantage of their offshore status and transfer their UK pension offshore to somewhere secure like Malta and will no longer have to pay UK taxes on their pension as long as they remain tax resident outside the UK.

EU citizens who wish to be employed in Cyprus do not need a work permit, but a residence permit is necessary if their stay will exceed three months.

Cyprus is an ex-British colony and the island has served Britain as a key military base in its colonial routes. Nowadays, Brits retire to Cyprus for its proximity to the UK, sterling weather, stunning beaches and European way of life. The physical relief of the island is dominated by two mountain ranges, the Troodos Mountains and the smaller Kyrenia Range, and the central plain they encompass, the Mesaoria. Cyprus is known for its biodiversity and wildlife.

Tennis, skiing, football, rugby and sailing are all popular in Cyprus. Cypriot cuisine is a mixture of Greek and Turkish food.

What is a QROPS Cyprus?

A Qualifying Recognized Overseas Pension Scheme (QROPS Cyprus) allows your UK pension to be transferred offshore to reduce your tax burden. Effectively, you will no longer pay UK tax on your pension whilst you are offshore and after 10 years of living offshore, the reporting requirements to HMRC cease.

If you are living in Cyprus at the moment, you can take advantage of your offshore address in order to move your UK pension into a QROPS Cyprus to avoid further UK taxes down the line. A QROPS Cyprus is an appropriate vehicle to avoid UK taxes if you are considering living or retiring abroad. Please contact us for a free pension transfer analysis.

Tax on a QROPS for British Expats in Cyprus

For British expats in Cyprus, foreign pensions in respect of services rendered abroad are tax free in respect of the first €3.417, thereafter are taxed at a flat rate of just 5 percent (2016). Alternatively, if it is to the recipients benefit, he/she may exercise the option every year to be taxed at the normal rates.

Chargeable Rate of Tax % Cumulative
Income EUR Tax EUR
EUR

Up to – 19,500 Nil

19,501 – 28,000 20 1,700
28,001 – 36,300 25 2,075
36,301 – 60,000 30 7,110
Over 60.001 35

A QROPS can be paid directly into a Cypriot bank account or into an offshore bank account. You can also choose to have your pension in EUR rather than GBP. Considering what happened with the EU taking money from depositors accounts it may be wiser to park your money offshore and bring your pension in as an annual income.

What is the economy like in Cyprus?

Cyprus has been sought as a base for several offshore businesses for its highly developed infrastructure. Economic policy of the Cyprus government has focused on meeting the criteria for admission to the European Union. The Cypriot government adopted the euro as the national currency on 1 January 2008.

Oil has recently been discovered in the seabed between Cyprus, Lebanon, Israel and Egypt and talks are underway between Lebanon and Egypt to reach an agreement regarding the exploration of these resources. The seabed separating Lebanon and Cyprus is believed to hold significant quantities of crude oil and natural gas. However the government of Cyprus states that the Turkish Navy does not allow the exploration of oil in the region.

What is the Best QROPS Jurisdiction for a British Expat in Cyprus

Do I need to move my pension to Cyprus?

QROPS in Cyprus have been closed, so you need to move to a ROPS in NZ or Malta or Hong Kong. Malta has a Double Taxation Agreement with Cyprus which allows your QROPS to be paid gross and grow tax-free outside of the UK tax net. Then there would be a 5% income tax in Cyprus as you receive your pension benefits in Cyprus. New Zealand and Hong Kong are tax neutral jurisdictions where there is no tax at source, you just pay Cyprus income tax at 5% on any income remitted into Cyprus.

What happens if I leave Cyprus?

As long as you are outside the UK, your QROPS will grow tax free. If you ever return to live permanently in the UK, your QROPS / ROPS would be taxed in the UK on any income you remit back into the UK, however, due to time spend abroad as well as any benefits you may have taken, this can severely reduce the tax on death. ask us for a more detailed explanation.

For more information concerning QROPS Cyprus, please contact us.

UK pension transfers for residents in Cyprus, QROPS Cyprus article written by QROPS Specialists.

QROPS Cyprus | UK Pension Transfer for British Expats by

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