keith prydderch

Hi, I have been tax registered in Cyprus for almost 6 years now. Next year sees my 60th birthday and as such I will get a pension and lump sum payment from the uk. As a birthday treat, I plan to take a months holiday outside of Cyprus and the UK and then tour England, Scotland and Ireland visiting friends and relatives, and of course seeing the many beautiful sites. I expect to be out of Cyprus for at least 7 months.

Question - Will I have to pay tax, either here or the UK, on my lump sum payment and do nI need to inform the tax office of my intended departure.

Many thanks in advance

britishbull

Alas, you have to be resident in either UK or Cyprus and the latter is more benign on pension taxation (I believe you can get the tax paid on pensions in the UK back and just pay the lower rate in Cyprus). Not sure how the 25 percent payment will be treated, though.

You could move to somewhere like Thailand or KL prior to the beginning of the tax year in the UK and stay out of Cyprus for a year - these countries will not tax overseas monies unless brought into the country but then the UK revenue would tax your pension without giving a refund unless you became tax registered in KL or Thailand or somewhere similar.

However, the best route is not to take your UK pension yet and move it offshore to somewhere like Gibralter via a QROPS, which would then take it out of the UK's tax system and be treated as either pension or offshore income in Cyprus. You can still get your 25 percent tax free and get then go non-resident with regards to Cyprus for a year to avoid any taxation of the 25 percent if necessary but I suspect the amount of tax you would pay on it is so minimal as to not be worth the hassle (as long as you don't become resident in the UK). Gibralter does not tax pensions of non-residents.If you decide to move from Cyprus in the future you can choose a country where pensions are not taxed.

Mitzyboy

I've got to ask to be sure .... Is it a government pension, or an ex services pension?

dorsetfam

Hi Keith,

Moving the scheme to a QROPS as mentioned is a possible plan, before you start taking an income.

It is worth taking your time over this. It may be that your pension has very high Guaranteed Annuity Rates which may make it not advisable to move.

There are a number of reasons why you should or shouldn't move your pension.
If its a final salary scheme pension then there are other considerations.

(SNIP)

I would rather you make an informed decision that rush and make the wrong one which results in the loss of pension income that you have worked hard to accumulate.

zygiman

If you receive a pension from outside Cyprus, then you pay just 5%, with an allowance of €3420 for 2011.