Tax Returns Money to You
Sam Orgill of ProACT Partnership discusses tax savings for Expats
The official ‘non-recession’ is beginning to bite. Inflation, in the form of higher prices we have suffered for the past year, is now being officially recognised as high. We may not officially be in a recession, but it sure feels like one. In the words of the song ‘money is too tight to mention’.
What we have to go through is a correction for the excesses of the property bubble of the last 15 years. The good news, for those who have invested heavily in property especially if using mortgages, is that governments around the world have agreed to use inflation to avoid the ‘inconvenient truth’ that banks would otherwise go bust right now – taking investors money with them and calling in mortgage loans.
The costs of avoiding recession and depression however still include a (now smaller) correction in property prices around the world. With new property sales in
For long term property investors this is not a problem. In fact, as more people rent than buy, rental returns should rise in the coming years. The losers will be those selling property in the current market or paying mortgages with rising interest rates.
Don’t forget we have two forces at play in our current recession; one the credit crunch and two the strength of the euro. Related yes, but impacting differently in
So what is the good news? First of all the Euro value of property has risen strongly against sterling and the dollar, so in capital terms your wealth is enhanced. If the Euro’s current strength becomes a new norm then euro property investors have made a windfall capital gain when they sell in the future.
The second gain follows the Euro’s 15-20% currency movement to higher euro exchange rates. This benefits many expats taking them out of paying tax on pension’s altogether. This benefit is compounded, for the better, by an increase in personal allowances of Euro2,400 over the previous CYP10,000 pa figure. This means expats with pensions up to GBP£15,000 should pay no tax provided they are not working.
That’s better
So tax bills should fall for many this year. Income tax returns are due in July for estimates of income and pension for individuals and business in 2008. The tax is paid in three instalments from 1/8/08.
If you have savings overseas and receive interest or dividends then a half year return is all due in July with flat tax rate of 10% and 5%* payable respectively by the end of the month.
Property Rental income is due to pay 3% savings tax and again a half year return is due in July.
It maybe tax has been paid in your home country. With UK Banks a 20% tax at source is charged with a liability up to 40%. This could be reclaimed and the much lower tax paid in
If you are sitting on capital gains abroad think about capitalising as there is no capital gains tax on investments in
* net additional tax due on
Pay Less Get More
It has been an expensive year for everyone and now more than ever it is important to pay less and get more. Review your pension, investment and property income to ensure you are claiming maximum allowances and paying minimum income and savings tax. Ensure your business pays social insurance so you can claim state sickness and child benefits as well as qualify for the Cyprus Health Service. Review your currency holdings and income payment arrangements to ensure you don’t get stung on currency conversions and bank charges.
ProACT Partnership offer professional UK legal & accountant services including offer free reviews of all living abroad tax issues and can help save you money and get more benefits.
Sam Orgill
Tel 26 819 424
www.propactpartnership.com
