Whilst there is no inheritance tax in Cyprus, it is still essential that you have a will which covers all your assets in Cyprus, irrespective of whether you are a Cypriot national or not. This is because if you die intestate, your estate will be disposed of according to Cypriot laws of succession.
The concept of domicile can be complex and it may be appropriate to seek legal advice as to your status, because this can be key when it comes to inheritance. Basically, everyone acquires a Domicile of Birth, which is the country in which you were born. This can be changed to a Domicile of Choice, although in practice this is very difficult to do and, in some cases (for example, if you were born in Denmark or the US), is virtually impossible.
In order to make somewhere your Domicile of Choice, you need to set up home in another country and sever all links with your country of birth and show you have no intention of ever returning there (and even that may not be enough in some instances)!
At the very minimum, if you want to make Cyprus your Domicile of Choice, you must prove you are permanently resident in the country, and intend to stay here for the rest of your life.
An estate consists of two elements – the immoveable and the moveable assets. Immoveable assets consist of land and property; moveable assets consist of everything else – for example cash, money held in bank accounts, household goods, cars etc.
Dying without a will is known as dying intestate. If you die intestate, you have no choice as to how your estate is distributed; it will be divided according to the laws of intestacy in the country in which you are domiciled.
If you die intestate in Cyprus, then your domicile will be used to determine the distribution of your assets.
- Overseas Domicile
The immovable estate is distributed according to Cypriot laws of intestacy; the moveable estate will be distributed according to the intestacy laws of your country of domicile. And, even if you reside in Cyprus which has no inheritance tax (IHT), you may be subject to such taxes on your estate according to local law there.
- Cyprus Domiciled
Both your immoveable and moveable estate are distributed according to Cypriot laws of intestacy.
If your father was born in the UK or any other Commonwealth country, then you have the freedom to dispose of your whole estate (both immoveable and moveable) by Will. However, if that is not the case then things get more complex.
Cyprus has a complex set of Succession laws which are based on the principles of “forced heirship”; in essence, assets are distributed to your surviving relatives in an order of precedence which dictate who should get what and under which circumstances.
Broadly, an estate will be divided in two parts – the disposable section and the compulsory section.
In the case of the disposable section where a will has been made but which is not covered by the Commonwealth provisions, then between a quarter and a half of an estate can be passed by Will (the exact portion depends on which of the deceased’s relatives are alive at the time of their death). In the event that somebody dies and leaves no spouse, child, descendants of a child or parents, then the whole estate can be distributed by Will.
The balance of the estate will be distributed according to the forced heirship rules. In the simplest case, where somebody dies and leaves a spouse and children, then only a quarter of the estate can be distributed by Will; the rest is then passed to the wife and children in equal shares, including the matrimonial home.
Where the complexity arises is if the deceased’s family situation is not so straightforward at the date of their demise. If the deceased left a spouse and parents, but no children, for example, or left a spouse, had no children or grandchildren, but had surviving brothers and sisters.
There is a complicated set of rules and order of precedence which needs to be followed in such cases, depending on the actual family situation of the deceased at the time of their death. Those potentially affected by such a situation may want to seek legal advice as to implications of their circumstances.
All experts agree that it is important not to die intestate because otherwise you have no control over how your assets will be divided; they will be subject to the intestacy laws in your country of residence and Domicile of Birth (unless you have managed to pass the rigorous tests for electing somewhere else as your Domicile of Choice).
If you have a father born in the Commonwealth, then if you have a Will you have complete freedom as to how your estate will be distributed. However, for those whose father does not qualify under the Commonwealth rule, things may be more complicated, and their ability to dispose of their assets as they wish, limited by the law.