Question to the HM Treasury:

To ask His Majesty's Government what plans they have to normalise tax laws to allow dependents of UK Armed Forces in Cyprus to work for UK companies while in Cyprus.

The government has no plans to amend its rules on the taxation of cross-border employment income as they apply to military dependents living in the Sovereign Base Area of Cyprus.

There are no UK tax rules that prevent a person from working for a UK employer whilst they are resident in Cyprus. This includes individuals living within the Sovereign Base Area. Whether a country has the right to tax employment income will depend on where the person is resident and how much time is spent working in the other country.

The UK has a comprehensive Double Taxation Agreement with the Republic of Cyprus. This is based on the Model Tax Convention produced by the Organisation for Economic Cooperation and Development and regulates which country has the right to tax income in which circumstances. The UK and Cyprus have well established international rules which address how income is taxed when a person is resident in one country and works in another. These rules operate so that an individual is not taxed twice on the same income.

Where a person is resident in the Sovereign Base Area, they are not considered a tax resident in either the UK or Cyprus; instead, they are subject to the tax rules of the Base. There is a provision within the law of the Sovereign Base Area allowing for a credit for any tax paid elsewhere. This ensures that residents of the Sovereign Base Area do not suffer double taxation on income earned from employment outside of the Sovereign Base Area.