The Brexit clock is ticking – are you legally resident?

07.03.18

Please note that this article is over six months old. While Blevins Franks takes care to make sure that information is accurate on the date of publication, some content may change over time. You should not rely on the accuracy of legislation and tax information in this article; take professional advice for your circumstances.

With Brexit date – scheduled for 29th March 2019 – just a year away, now is the time for UK nationals who wish to live here to ensure they are registered as legally resident in Cyprus.

With Brexit date – scheduled for 29th March 2019 – just a year away, now is the time for UK nationals who wish to live here to ensure they are registered as legally resident in Cyprus.

December brought reassuring news for expatriates as the UK and EU27 agreed that the “Withdrawal Agreement” will maintain existing residency rights. A joint statement confirmed that citizens “lawfully residing” on both sides, on the date of the UK’s withdrawal, can continue “to live, work or study as they currently do under the same conditions as under Union law”.

So if you are spending time in Cyprus and would like the freedom to continue doing so post-Brexit, you should take steps now to secure your residency if you have not already done so.

Similarly, if you are thinking about relocating, now is the time to take action, before the rules change. Beyond Brexit, the precise requirements, time and expense required to acquire permanent residency are uncertain.

Permanent residency – MEU3

Under Cyprus rules, if you are a citizen of an EU Member State and have been living in Cyprus for five years, you should have applied for a “Permanent Residence Certificate” (MEU3).

You can apply for this after a five-year period of uninterrupted legal residence in the Republic of Cyprus. This is not affected by temporary absences (not exceeding six months in a year).

‘Yellow slip’ (MEU1)

If you have not yet been here for five years, you (as an EU citizen) should have the Registration Certificate MEU1, commonly referred to as the ‘yellow slip’. If you intend to live in Cyprus, you should apply for this registration certificate within four months of your date of entry into the country.

If you are within this five-year period on Brexit day, your yellow slip is sufficient ‘lawful residence’ and means you can continue to live in Cyprus post Brexit, with the same rights and benefits as you have now. Once you have been here five years, you need to apply for permanent residence.

Take action now

Those thinking about establishing residency in Cyprus should act fast. There is likely to be a surge of interest and an administrative backlog for residency applications as the cut-off date draws nearer. Consider relocating and starting the residency process – under current rules – as soon as possible.

Benefits of being tax resident in Cyprus

Besides the lifestyle, climate and friendly people, there are also tax benefits to being resident in Cyprus.

You are regarded as tax resident if you spend more than 183 days physically present during a calendar year. You may also be considered tax resident in Cyprus under the ’60-day rule’. This applies to individuals who do not reside in any other single state for a period exceeding 183 days in total, and are not tax resident in any other state, and reside in Cyprus for at least 60 days, and have other defined Cyprus ties.

The key tax benefits of living in Cyprus are:

– Cyprus tax residents are liable to income tax on their worldwide income, but the first €19,500 is tax free.
– Interest and dividends are liable to “defence contribution” instead of income tax, but non-Cyprus domiciles are exempt. This means foreigners generally do not have to pay this tax until they have lived here for 17 years. Rental income is liable to both income and defence tax.
– You can choose whether your foreign pension income is taxed at the income tax rates or a flat 5% rate (with the first €3,420 tax-free).
– All UK source pension income is only taxable in Cyprus and not subject to UK tax. With most other countries, government service pensions remain taxable in the UK.
– There is no capital gains tax on the sale of shares. When it comes to property, only real estate in Cyprus is taxable.
– There is no inheritance tax in Cyprus.

Blevins Franks has over 40 years’ experience helping UK expatriates in Europe with the cross-border tax and financial planning. We have had an established office in Cyprus for over 15 years. We would be happy to answer your questions and provide advice on your personal situation.

We offer complimentary, no obligation initial consultations.

Send us an email or call us on 26 023 100.

Blevins Franks accepts no liability for any loss resulting from any action or inaction or omission as a result of reading this article, which is general in nature and not specific to your circumstances. Summarised tax information is based upon our understanding of current laws and practices which may change. Individuals should seek personalised advice.

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.

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