Retirement guide · 7 min read

How your pension is taxed in Cyprus (2026)

The 5% flat rate on foreign pensions, the new €5,000 exemption, the 2026 tax bands – and the questions to ask a tax adviser before you move.

The coast near Limassol. Photo: Hristina Marjanovic / Unsplash

One of the reasons so many British retirees choose Cyprus is the tax treatment of pensions, and the 2026 tax reform made it more attractive still. Here is how it works – and what to check with a tax adviser before you move.

First: become a Cyprus tax resident

These rules apply to Cyprus tax residents. You are generally tax resident if you spend more than 183 days a year in Cyprus. A separate 60-day rule exists, but it requires business or employment ties to Cyprus, so most retirees rely on the 183-day rule. Your adviser will also look at when you stop being UK resident under the UK’s statutory residence test.

The 5% flat rate on foreign pensions

Cyprus residents who receive a pension from abroad can choose to have it taxed at a flat rate of 5%. Since 1 January 2026, the first €5,000 a year is exempt (previously €3,420). The choice is made year by year, so you can pick whichever option produces less tax.

Or the normal tax bands

Alternatively, you can be taxed under the standard scale. From 2026 the first €22,000 of income is tax-free, followed by 20% up to €32,000, 25% up to €42,000, 30% up to €72,000 and 35% above that. For smaller pensions, the standard scale can work out cheaper than 5%.

Government service pensions

Pensions paid for UK government service – such as civil service, armed forces or police pensions – are normally taxed only in the UK under the UK–Cyprus double tax treaty, so they do not benefit from the 5% rate. Check how your own pension is classified.

Lump sums and other income

Lump sums taken on retirement, rent from a home in Cyprus and investment income are each treated differently. Rental income, for example, is taxed under the normal bands after a 20% deduction, and the separate defence contribution on rent was abolished from 2026. Ask your adviser to look at your whole picture.

Other taxes to know

• No inheritance tax in Cyprus.
• No annual property tax – only small municipal charges.
• GeSY health contribution – tax residents pay it on most income, including pensions.

Before you move

• Get personal advice from a tax adviser who knows both UK and Cyprus rules.
• Plan the timing of your move and of any pension withdrawals.
• Register with the Cyprus Tax Department and keep a record of your days in each country.
• Ask your adviser about applying under the treaty so that UK tax is not deducted from pensions taxable in Cyprus.

This article is general information based on the rules in force in 2026, not tax advice. Tax rules and treaty treatment depend on your circumstances – confirm with a qualified tax adviser before acting.