It is a fact that Cyprus is using its low tax position and double taxation agreements with other countries to attract wealthy foreigners to invest/buy property and doing business here with, special provisions/attractions for permanent residents. It appears however that what is a Permanent Resident (which is the basis of the attraction) in Cyprus (or anywhere else) is not easy to establish towards the U.K. tax authorities.

In a recent Court of Appeal (U.K.) case, the Court decided that notwithstanding the fact that the 72 year old British (ex) resident lived abroad, he was still considered as being a British resident base “the centre of gravity of his life and of his interests was the U.K.” decided the Court. The Court came to the decision because notwithstanding the fact that Robert Gaines met all the typical requirements of a foreign resident, the fact the he owns a house in the U.K., he had a gun collection in the U.K. and sending his son to a U.K. school, was enough evidence that he never abandoned completely the U.K., residency and as such he was considered as being a British resident and therefore he was liable for U.K. tax payment. So it appears that the U.K. tax authorities have changed the basis of their examination and they now consider that the tax payer must more or less forget that he ever lived or even knows the U.K. Even belonging to a British golf club, it appears that it is an indication of British residency.

Of course all these came about due to the need of all Governments to collect much more taxes, in order to override the crisis and it may be that on this count, Cyprus may become a victim of this change of hart. Surely no country wants to have its nationals paying taxes in another country and things are getting more tough. The heavy tax measures taken by the Greek Government including increase in taxation to 30%, plus all sorts of other charges, have been met by billions of euros leaving Greece for abroad, some of which came to Cyprus. The Greek request to “send” those deposits back to Greece, was met a deaf ear on the Cyprus side, but it is also something that cannot be done. Without being an economist, we could have thought that at a time of crisis, Governments should attract deposits as opposed to send them away.

The recent dispute between Italy and Switzerland is a case in hand, as well as a statement by the German Government that it is prepared to pay (Bribe?). Swiss bank employees in order to possess German bank accounts in Switzerland!! The last two cases refer to tax eviction but it is an indication that tax etc plays an increasing important role during these difficult times. So far those who are considering Cyprus for its tax attractions must check with their own Government’s tax authorities of what the situation is first. People with money have a lot to gain/lose depending how they play their cards. In a recent most odd query by the British tax authority regarding a deceased who lived for many years in Cyprus, was whether the deceased bought a grave in Cyprus (they presume that this indicates his intention to stay in Cyprus for ever!!) in order to decide amongst other factors whether he was a permanent Cyprus resident (in which case no estate duty is paid as opposed to the U.K.)

So it appears that notwithstanding how Cyprus tax authorities are treating a foreign person, the native country may have other ideas and care is needed since the classification of a foreigner being a Cypriot permanent resident will be most likely resisted (at least by the E.U. countries).

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