Expats enjoying low taxes in Cyprus could see their financial future dash by the terms of any future Eurozone bail-out.
The government is fighting a desperate rearguard action to avoid going cap in hand to the Eurozone for cash to prop up beleaguered banks.
The nation has already taken some cash from Russia and is trying to leverage a deal by threatening to go back to Moscow for more money to ease the terms of a Eurozone bail out.
Terms are under discussion in Europe – but one result is likely to be increasing taxes across the board.
Even if the rate of income tax is kept down, other indirect taxes will go up – like VAT and duties charged by the government on commodities like fuel and energy.
Taxes set to rise
The picture for British expats is bleak – a spokesman for international tax specialist Blevins Franks said: “We cannot rule out the possibility that it will look to earn more revenue from income taxes, whether from employment or income from capital. Tax rates here are relatively low.”
Personal tax rates leave plenty of room for manouevre.
The top income tax rate is 35% with a £15,560 tax free threshold – both could easily change if an austerity budget is imposed.
Hospitals may have to start charging for healthcare, while VAT is expected to will rise to 18%.
A mansion tax on all homes worth more than £400,000 is also on the agenda.
Meanwhile, many British expats face bankruptcy and their retirement savings wiped out after property deals on the Mediterranean island have soured.
High Court challenge
A British IFA allegedly advised them to buy homes in Cyprus with cash lump sums from redundancy pay outs, pensions and inheritances.
The expensive homes came complete with sea views, pools and luxury fittings to make them more appealing as holiday lets.
The IFA arranged Swiss Franc mortgages – and as recession gripped the Eurozone, Swiss Franc mortgage payments went up.
To add to rising rates, the developer has failed to complete on some villas and apartments, but leaving the investors to pay mortgages on assets that are decreasing in value as property prices plunge on the Cyprus.
Around 70 investors are about to take action against the IFA in the High Court, London.