The tax benefits of moving to Mauritius, Portugal, and Cyprus
as compared with South Africa5th May 2021
Just two years ago the International Monetary Fund (IMF) declared in a report that South Africans live in one of the 10 most heavily taxed countries in the world (tax-to-GDP ratio). Back in 2019, the report highlighted that personal income taxes had increased by 125% in just ten years.
Fortunately, South Africa is not the only sunny climate in which we can live – there are others that offer security, stability, and better tax rates. Here we compare Portugal, Mauritius, and Cyprus as alternatives for property investors.
Mauritius has become more than just a luxury holiday destination for honeymooners. It’s now a popular investment destination and financial hub offering attractive tax regimes and a stable economy, and has become very accessible to businesses as well as individuals.
Personal tax is a flat rate of 15%, which makes it a very competitive alternative for property investors or those keen on setting themselves up in the Indian island country.
‘Generally, the tax rate in Mauritius is very competitive, with no estate duty, no CGT (capital gains tax) and low transfer charges into property at around 5% depending on the property and the scheme,’ says Mertens. ‘If immovable property is structured into a Mauritius Domestic company,’ he continues, ‘there will be 15% tax on the profits, but deductions over that property can further reduce the overall tax rate substantially.’
Cyprus is often described as the ‘jewel of the Mediterranean’ and boasts a rich history and culture. It’s a former British colony, so English is spoken here too.
Personal tax is levied on a sliding scale from 20% up to 35%. Again, it’s not as competitive as Mauritius but certainly has a better personal tax rate band than that of South Africa.
There are a number of incentives and tax breaks that home buyers and expats can take advantage of here. Mertens says: ‘There are various exemptions that can be applied – for example on dividends, which can be tax-free. If a South African tax resident invests in Cyprus, and is not a tax resident of Cyprus, then only income arising in Cyprus is taxed. CGT is 20% in Cyprus but does not apply if, for example, immovable property is transferred on death or is gifted to immediate family members. Transfer fees on property range on a sliding scale: 3% up to €80,000; 5% for property values between €80,000 and €170,000; and 8% for property values exceeding €170,000. If property is transferred between spouses or close family, the rate is 0.1%.’
How South Africa compares
Overall, all three countries in this comparison have tax rates that are generally lower than those of South Africa (see table below).
‘The SA tax rate ranges from 18% at the low end to 45% at the top end for taxable income over R1,577,300, and our CGT inclusion rate is 40%. Transfer duty on immovable property in South Africa ranges from 3% for properties under R1 million to 13% for properties valued over R11 million,’ says Mertens.
‘Like any investment decision, proper advice must be sought, and care must be taken to align with reputable agents and professionals in the country in which the property investment is being made,’ advises Mertens.
How South Africa’s tax rates compare to those of Portugal, Mauritius, and Cyprus
|Tax type||South Africa||Portugal||Mauritius||Cyprus|
|Capital gains tax||40% inclusion rate***||28%||No capital gains||20%|
* For tax year 1 March 2020 to 28 February 2021
** 10% applies to individuals whose annual net income does not exceed MUR 650,000
*** 40% of your capital gain is added to your income and you are taxed at your tax bracket for that year