ProACT Sam explores the time and tax liability for Expats Living and Working Abroad
It’s a general rule in many countries around the world that tax is due.
Whether a toll to cross a bridge, a duty to post some mail or drink some Whiskey.
Tax planning for business, property and inheritance is always a pleasure for the tax savings that stay in your families pocket, and a good reason to relocate to Cyprus, but it doesn’t mean that tax liabilities go away when you go abroad, they follow you untill 6 months after you are dead….
TAX RETURN LIABILITY
When you make a tax return for business or as an individual then you are liable to settle that tax at that time. Remember though the legally the liability to review a tax return, and for you to keep records for inspection, is 7 year. More than that, it is 7 years after an assessment.
With Cyprus Tax assessments taking years, recently improved to only 3 years, that means a Cyprus tax resident in 2024 , could have this year’s tax reassessed up to 2034.
Better to make a correct return and not have that hanging over you.
EVERY LITTLE TAX COUNTS
In the UK generally income is collated into one big bill. That is not the same for all countries and non more so than Cyprus where a range of different taxes arise unrelated to any ‘earned’ income.
This is a source of confusion for taxpayers and the administrators.
In Cyprus a person could earn €19,500 without paying INCOME TAX .
That does not mean that such people have no tax to pay.
Since 2019 Cyprus have a health tax chargeable on all income worldwide.
While it is no more than 2.65% it is chargeable on to all Cyprus Tax Residents and ALL their worldwide income of any sort WITHOUT any allowances.
Anyone tax resident of Cyprus with EURO 100 income from savings, interest, rental, royalties, business, salary, from any source worldwide – even work abroad – in 2023 has a full year tax return to do now and pay the relevant taxes.
There may also be a Property rental tax to pay at a flat rate that is tax assessed separately to income taxes.
Exchange of information and technology allows these taxes to be better collected.
Property Agents are now tax reporting and exchanging data along with every business filing a VAT return.
Local authorities join in registering rental properties and tenancies.
Banks, pension payers, investment managers all report income and gains to the tax authorities.
All information flowing to the tax assessors to reconcile income and gains to the beneficial owners tax number.
This includes across borders.
Through Beneficial Ownership rules all Anti Money Laundering regulated entities must confirm the identity and tax number of all income and capital beneficiaries in their systems.
This allows the flow of info to local, home and overseas tax authorities where and expat is resident.
It may take a year or two for the information to be collated but it could well come back to bite you…. not least when you try to get tax clearance on an estate to sell property, business or settle the estate of a family member.
TAXATION TO THE GRAVE
In Cyprus there is no Inheritance tax.
Unfortunately for Expats Inheritance and Capital Gains tax are payable back in the home country.
While your tax residence can change every few years, your tax domicile determines the liability to Inheritance taxes.
Dying in Cyprus still needs tax clearance from the UK. That involves an Inheritance Tax assessment With a 40% liability on your world wide capital.
If you could claim to be non domicile to the UK on death then only UK assets would suffer inheritance tax.
The inheritance tax is due and payable in cash with 6 months of death and before an estate can be settled. Tax is a debt and liability to the estate, like a loan.
That could mean a quick sale of family property to settle the Inheritance Tax bill.
INHERITANCE TAX PLANNING
Inheritance tax planning works. Using a Will for your assets in Cyprus, UK and other jurisdictions is the way to protect your family from the cost and delay of probate.
Gifting assets to family while retaining lifetime income works really well to save inheritance taxes and probate delays.
A simple Will doesn’t always cover the essential in tax planning.
For Business and Property a Family Trust is a great way to create a legacy and protect the families wealth.
ProACT Know How and have been advising Expats with great success over 20 years to make tax savings for family business, property and inheritance. Where there’s a Will there’s a start.
How can your family save tax?
ProACT Sam Orgill