Ever since the Brexit referendum result was announced, Brits have been making contingency plans for the moment the UK parts ways with the European Union.
In Cyprus, around 15,000 UK citizens have applied for residence permits since July 2016 – amounting to almost half of the 32,281 permits now in force for Brits in the country, the Cypriot Civil Registry and Migration Department said.
In total, between expats and those based in the British military bases in the island, around 70,000 UK citizens currently live in Cyprus.
Many of these are taking steps to make sure their finances are taken care of.
Plan ahead
“The increase in applications for temporary and permanent residence cards is a reflection of UK nationals preparing for the UK’s eventual breakaway from the EU,” Jason Porter, business development director at Blevins Franks, told International Adviser.
“Similar scenarios are being played out in France, Spain, Portugal and other jurisdictions popular with British expatriates.”
“While those UK nationals residing in Cyprus need to regularise their situations there, it is also much easier to do this when you know what the rules are and what the process involves,” he added. “The fear here is really of the unknown – what the new rules might be if the UK left the EU without a deal on 31 October 2019, or what they might be after a transitional period, if a deal is agreed.
“The prevailing view is that it cannot get easier – so obtaining a residence card now, when there is a very strong chance this may simply be exchanged for whatever the replacement is when the UK leaves the EU, appears a more attractive route to those now residing in Cyprus.”
For all those currently holding a residence card – or in the process of obtaining one – tax and financial planning is paramount.
Retirement top of the list
British retirees looking to stay in Cyprus must contemplate transferring their private pension into a Qualifying Recognised Overseas Pension Scheme (Qrops), according to John Westwood, group managing director at Blacktower Financial Management.
“There remains a strong desire for expats to transfer their pensions overseas due to post-Brexit uncertainty as to whether they will be allowed to do so,” Westwood told IA.
“For those wishing to remain in Cyprus, many are keen to break all ties with UK, and their private pensions are a priority.
“Since the financial crisis on the island, scepticism remains regarding the local banks, and retirees tend to keep the bare minimum on deposit, preferring to keep cash overseas in the UK or offshore and utilise money transfer companies.”
Fresh faces
That said, if they wish to remain on the Island, they might have to change their attitudes towards the Cypriot financial services industry.
Much has changed since the financial crisis of 2008/09, with plenty of new players entering Cyprus’s wealth sector in recent years.
“We have seen a number of firms enter the market during 2019 – whether this is to service the local expat communities or to use the European passporting capabilities of the jurisdiction,” Westwood added.
Key pension concern
With a greater variety of wealth and financial advisory companies available, people in need of financial planning in the island should now be able lay their worries to rest.
“Cyprus has its own tax system and decides its own tax rules, and the relationship between the UK and Cyprus is not determined by the EU,” Blevins Franks’ Porter said.
“In fact, a new double taxation treaty between the UK and Cyprus only came into force on 1 January 2019. This will govern the taxing rights between the two jurisdictions for decades to come.”
Still, with the UK’s departure from the EU apparently coming closer, retirees need to decide what to do with their pension because, once – or if – Brexit is over, they could face tax charges on it.
“The main area of concern is the Overseas Transfer Charge, which can be imposed when UK pension schemes are transferred to a Qrops,” said Porter.
“Currently, this will not apply when you reside in Cyprus and the Qrops is in the EU.
“HM Revenue & Customs is, however, aware of the tax leakage that can result after a Qrops transfer, and a very simple change of legislation could extend the 25% tax charge to all UK pensions transferred overseas.”
