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Retirement in Cyprus

A warmer climate, slower pace and more money in your pocket. There are many reasons why more and more people are choosing to retire abroad.

Moving abroad attracts many

Many people dream of retiring to warmer latitudes. In addition to a milder climate, the chance of tax cuts and more money in the wallet attracts. But moving abroad in the autumn of age is a big step, which requires careful planning.

There are many benefits to retiring abroad, not least for the tax benefits that can be done. And virtually all Swedish pensioners can reduce their taxes by moving abroad.

Tax and pension, rules

According to Swedish law your pension income from Sweden shall be taxed by Sweden. If you retire abroad and “cut all ties” with Sweden, the tax on your pension will normally be much lower. Namely, there is a special tax in Sweden for people living abroad, so-called SINK tax, which is 25% (increased from 20% to 25% starting 1 January 2018). The requirement is that you have no significant connection and thus “cut all ties” to Sweden.

Limited taxpayer in Sweden

It is not enough to just move abroad if you want to reduce the tax on your pension. You must also make sure to follow other rules and thereby “cut ties” with Sweden. If you do this right, you will no longer have significant connection to Sweden.

If you want to be subject to limited tax liability in Sweden, you must therefore ensure that:

  • Discontinue your permanent residence in Sweden
  • Do not have a spouse or minor children left in Sweden
  • Do not sit on boards, own Swedish companies etc.
  • Do not stay too much in Sweden
  • Do not have income from renting real estate
  • Do not have income from capital

The double taxation agreement between Sweden and Cyprus

The double taxation agreement between Sweden and Cyprus regulates how the tax is to be distributed between the countries after moving to Cyprus.

NOTE: The double taxation agreement applies to both Southern and Northern Cyprus.

According to the double taxation agreement with Cyprus, pensions from Sweden are taxed as follows:

General Pension according to the Social Insurance Act.
Pension income is taxed both in Sweden (SINK) at 25% and in Cyprus. In Sweden, however, with a small deduction from the state pension of 0.77 price base amount per year. The Swedish tax is deducted from the tax paid in Cyprus. The tax will thus be 25%.

Occupational pension, public sector
Pension income is taxed only in Sweden (SINK) with 25% given that you are a Swedish citizen. Otherwise, income is taxed only in Cyprus.

Occupational pension, private sector
Pension income is taxed both in Sweden (SINK) at 25% and in Cyprus. The Swedish tax is deducted from the tax paid in Cyprus. The tax will thus be 25%.

Private pension
Pension income is taxed both in Sweden (SINK) at 25% and in Cyprus. The Swedish tax is deducted from the tax paid in Cyprus. The tax will thus be 25%.

Pension earned abroad
Income is taxed only in Cyprus at 5% after deduction of € 3,417.

NOTE: The Swedish so-called 10-year rule is reduced to seven years in the tax agreement with Cyprus.
This means that the Swedish capital tax of 30% is levied for seven years after relocation. This also applies if the shares are purchased after emigration.

More info on the Swedish Tax Agency’s website

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