Paphos People

Tax return question from an ex-military friend
I know what I 'think' but sure he would appreciate any advice from anyone else in the same circumstances

Q
I have a small Private pension + a UK State Pension
+
UK Government Pension (Military) which I elected to have taxed at source under the new 2018 ‘double taxation’ protocol. It’s not a huge pension and is under the UK tax allowance so I don’t actually pay tax on it.

The question is, “do I still need to declare the military pension’ on my Cyprus tax return?
If I do, it will take my income to over the Cyprus allowance €19,500

The person I used to complete my return last year said I do but that would 'technically' mean paying tax twice...I would like a ‘second opinion’

I am asking because he doesn't 'do' tech

_________________
Dave
Moira And Dave

“I know that you believe you understand what you think I said, but I'm not sure you realize that what you heard is not what I meant.”

You need to get yourself out of the UK tax system if you are now a permanent resident in Cyprus. When I first came out here I wrote to my last UK Tax office, address on your last payslip or UK Tax Coding form, informing them I was now Domiciled in Cyprus and wanted out of the UK system and pay Cyprus Income Tax.

I took the UK tax office reply to the Paphos tax office and in a short while I was given a tax code number, a TIC number and then signed on to the Cyprus Tax Website. This was in 2002, things might be slicker by now.

Then write or Email your UK Pension providers requesting your pension(s) are paid tax free. There's forms to fill in.

I declare my three UK pensions which takes me over the Cyprus tax free allowance. I pay the 5% UK pensioners option which is the best option for me.

Hope this helps.

I don't own any property in the UK to complicate matters.

_________________
Clive of Payia

TQ I will pass it on however he is a resident and already out the UK Tax system hence the question about Cyprus tax return

_________________
Dave
Moira And Dave

“I know that you believe you understand what you think I said, but I'm not sure you realize that what you heard is not what I meant.”

Your friend should confirm it with the Cyprus tax office (try phoning the head office in Nicosia as they tend to be a little more responsive than Paphos), but I believe that it should be declared on the annual tax return as tax paid in the UK. There should be no tax to pay in Cyprus if other earnings do not exceed the threshold.

Cyprus has recently renegotiated its reciprocal tax arrangement with the UK following Brexit. The tax office has a six year backlog so it could take some time before it become an issue. Investigate also the Cyprus tax portal

Thanks KG, that's exactly what happens in my case. I have a letter from HMRC and Paymaster that my service pension is taxed in UK.
My friend was just worried that the person who fills in his forms was wrong and he didn't actually need to enter the amount

_________________
Dave
Moira And Dave

“I know that you believe you understand what you think I said, but I'm not sure you realize that what you heard is not what I meant.”

Dave, Funny you should ask this because I have just gone through this problem, please don't shoot the messenger.

In January I became eligible for my state pension, I also get a full Army pension, I spoke to HRMC and this is what was asked and their reply.

I informed them that I will after the pandemic intend to return to Cyprus as a full time resident, how do I stand with the tax implications.

Ans: I cannot have a foot in each camp, it is either all in or not at all, basically I must decide if I want to pay UK tax or Cypriot Tax, what he did say is the allowances in Cyprus are better than the UK, also there are no benefits in paying UK tax if I am a full time resident in Cyprus.

Today I have just received my Tax Code Notice and I am now paying more tax on my income, personally I will transfer all my income to the Cypriot tax system, the present UK tax code as from 6th April is £12,570 before you pay tax, then you are taxed at 20%

In Euros that is €13,827 (Ex Rate 1.10) where as in Cyprus it €19,500 before you pay tax, in my opinion it is a no brainer

Hope this helps

LV
I have had my feet in both camps since 2019 as has my friend however the person who was doing his return this year didn't take the convention into consideration I suspect

You and your tax man :) might find this interesting

Tax on pensions
Under the provisions of the 1974 agreement the income received by UK nationals resident in Cyprus from their UK pensions and annuities is taxed by the Cypriot authorities and therefore exempted from UK tax.
The changes made to the 2018 convention to conform to the OECD model result in changes to the tax arrangements of some UK nationals resident in Cyprus.
Under the new convention those in receipt of UK state pensions, private pensions and annuities will continue to pay tax on the income they receive to the Cypriot authorities as before.

Government pensions
However, those in receipt of pensions paid by Her Majesty’s Government (HMG), local authorities and ‘political sub-divisions’ will be taxed on the income they receive from those pensions by Her Majesty’s Revenue and Customs (HMRC) in the UK.


Amendment to the 2018 Convention
The UK government has agreed with the government of Cyprus to amend the 2018 treaty in respect of government service pensions. The amendment will allow 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.
What is a government service pension?
Government service pensions include pensions and other similar remuneration paid in respect of services rendered to either the UK or Cyprus which are:
• paid by, or out of funds created by, the UK or Cyprus, or
• a political subdivision of the UK or Cyprus, or
• a local authority of the UK or Cyprus.
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.
What you need to do
If you want your government service pension to be taxed in the country in which you are resident
You must make an election to the tax authority of the country that is paying the pension. So, if your pension is paid by the UK, you must make an election to HMRC.
You can make an election at any time after 1 January 2019. Your election will apply to all pension payments received for the whole of the year in which your election is made, as well as to pension payments received in every year afterwards until 31 December 2024. So, if you make an election on 30 December 2020 it will apply to all pension payments you receive from 1 January 2020 until 31 December 2024.
Your election must be in writing and should state:
“I elect for my government service pension to be taxed in accordance with the 1974 Double Taxation Convention between the UK and Cyprus. I understand that this election will continue to apply until 31 December 2024 or until I revoke it.”
You should also include your full name and address, your UK Unique Taxpayer Reference (UTR) or National Insurance Number and your tax reference in Cyprus.
You can revoke your election at any time after you have made it. If you revoke the election the 2018 Convention will apply to all pension income received for the whole year in which the revocation is made.
Elections and revocations made to HMRC will automatically be shared with the Cyprus Ministry of Finance (and vice versa).
If you want your government service pension to be taxed in the country that pays the pension

_________________
Dave
Moira And Dave

“I know that you believe you understand what you think I said, but I'm not sure you realize that what you heard is not what I meant.”