Hundreds of British expats retire to Spain every year to enjoy better weather and a much lower cost of living. Yet many are unaware however that the country can also be a tax haven for their pension.
If you are a resident of Spain – or will become one – there are significant, tax-efficient benefits of transferring your pension into a QROPS.
By utilising a QROPS, you can enjoy a 25% tax-free lump sum, wider investment choice and the ability to pass on 100% of your fund to your loved ones upon death.
Which jurisdiction is best?
Malta holds a long-standing reputation as a prominent offshore financial centre, and with its full membership of the EU and network of tax treaties with a host of governments, a Maltese QROPS is often the best choice.
For UK pension holders moving to Spain, the island has three distinct advantages:
- English speaking jurisdiction,
- low-cost economy, and;
- full membership of the European Union.
Malta began offering QROPS in 2009. Since the beginning individual trustees providing QROPS have needed to obtain approval from the island’s pension regulator, the Malta Financial Services Authority (MFSA).
The MFSA requires detailed information before approving a scheme. Whilst this can prove troublesome for trustees, it means you benefit from unparalleled investor protection.
Why not Spain?
Like many other countries, Spanish law doesn’t recognise trust structures, which is necessary in order for the country to accept UK pensions. Therefore a transfer to a QROPS in Spain by a Spanish resident would incur negative taxation consequences – as you would effectively be taking assets held in trust, out of trust.
Will I be penalised if I return to the UK?
Every year for ten years your QROPS provider will provide an annual report to HMRC detailing any payments on income taken from your fund.
If you choose to return to the UK at a later date however, your QROPS will hold no major disadvantages – and in fact there are advantages. One of these is the legislation which means you will only pay income tax on 90% of your pension income.
Given the right circumstances, Maltese QROPS are an excellent way for you to avoid UK taxes on your pension and pass on 100% of your fund to your loved ones.
To learn if a transfer is right for you, please contact us using the form at the top of this page.