ProACT Partnership’s successful seminar at Aphrodite hills this
week attended by over 100 people, highlighted the many tax changes of the last year that are impacting on expatriates.
Over 100 people gathered to hear how tax and trust changes at home and abroad were hitting the expatriate
in the pocket and making life harder.
CURRENCY CRUNCH
When the Cyprus Pound was fixed to the Euro on 1st July 2007 the rate was set at £1 to €0.585274. It assumed sterling was at then reasonably stable exchange rate of CYP£1= GBP£0.85.
OK. But then €1 = GBP£0.67 and today the rate has hit €1 = GBP£0.80. This is a massive 20% increase in the value of the Euro or decrease in the value of sterling depending
on your point of view. The changes are similar for Dollars and other currencies.
Put another way sterling pensioners have less Euro to spend, shop prices of goods have gone up and
Cyprus property is 20% more expensive to buy. This means one thing – a 2008 currency crunch for expatriates and businesses
selling to expatriates.
TAX FREE
There was some good news. Cyprus has increased the personal allowance to the equivalent of Cyp£11,400, taking many people on low pensions out of task.
A bonus is to be gained from the Euro exchange rate against sterling that means in effect anyone with a GBP pension up to
GBP£15,400 will pay no tax in 2008 at current rates. This will be a welcome relief to fixed income sterling pensions living
in Cyprus whose spending power has fallen
by 20% in a year as the Euro strengthens.
MEDICAL COVER
The UK has continued
to tighten up on the EU transfer of medical and social benefits to save money. They have lost a test case last month meaning
they will have to start paying disability living allowance again to UK
people living in the EU. However, they have appealed and the final outcome will take more time.
SOCIAL INSURANCE
Cyprus is tightening up and
increasing amounts paid on
social insurance. While there are great benefits for working expatriates - health, medical, sickness, pensions many continue
to avoid payment along with many locals and operate in the black market. The ProACT message is "get registered" - the
benefits outweigh the cost and protects the family.
CYPRUS INCORPORATED
The Cyprus government
increased tax revenues by 50% in 2007 and created a massive 500 million surplus. They are reaping the rewards of tighter enforcement
of property transfer, capital gains and VAT taxes. Expatriates should be aware that property taxes in Cyprus are high and they should know the full cost before signing a contract.
Too many developers skip over the taxes and unwitting cost buyers struggle with the tax payments
later. Maybe developers should be reducing prices to accommodate the extra buying costs with sterling V Euro exchange rate
making Cyprus property and goods 20% higher - increased taxes and a mortgage “credit crunch” means off plan property
sales are in for a tough year.
PLAN AHEAD
The UK in general
and EU in particular has attacked trusts as a tax planning tool over the last few years. But trusts still remain an effective
administration tool for assets and wealth that can have tax benefits.
When buying property or holiday financials, trusts can avoid capital gains and inheritance taxes.
They also allow the investor the freedom to invest in property abroad.
If you plan before you buy you can reap the profit of property investment, in the UK, Bulgaria or Cyprus without paying capital gains.
CAPITAL GAINS
The UK has introduced
a higher flat rate capital gains tax of 18% from 10%. If expatriates buy UK
property direct they can avoid this tax but only if they stay out of the UK.
Buy through a trust and give yourself the ability to return to the UK
and save capital gains tax.
Bulgarian property is the fastest growing European market with low Euro prices, low taxes and great
beach, golf and ski resort locations. The great tax planning news is they force you to buy the property through a company
meaning you can save tax and make good profits.
INHERITANCE TAX
Changes made in the UK
mean married couples automatically transfer two single nil rate band allowances to their children on second death. Even better,
this applies if you are widowed and didn’t make provision on first death.
But unmarried couples are not covered and still need a Will to ensure they minimize inheritance
tax on second death. The right will trust can save 120,000.
But Wills are also important to provide control and give lifetime interests in residential property
if desired. Using trusts can avoid probate delays. Using Wills does not avoid probate delays in Cyprus. Use lifetime trusts to save time and money on delays in obtaining probate.
PROTECTION
Trusts also give you protection. Cyprus
is a great location allowing you to retain control of assets without involving third party professionals and the tied in fees.
Whether financial advisers, solicitors, banks or trust companies no one likes to loose control and pay a price for it.
The seminar highlighted the most vulnerable time is when you die. Would you give your money to a
stranger? Many people do and pay for it later. Keep it in the family.
PENSIONS
Pensions are another form of trust and recent changes have allowed UK expatriates to transfer their pension plans abroad and achieve; higher tax free
lump sums, avoid the new 35% pension death tax, enjoy greater investment freedom including property abroad, and have the potential
to break free of the UK Inland Revenue altogether.
Again you can only take advantage of the tax breaks if you plan before you take action.
FREE REVIEW
In light of the many tax and trust changes over the last year a proactive review of how you hold
your property, valuables, financials and pension funds could save you thousands of pounds of tax in later years.
ProACT offer A FREE review of all tax and trust issues for
expatriates living, working, investing or retiring abroad..
