As a global financial hub, Malta continues to emerge, and pension providers continue to be drawn to the Mediterranean island to set up new schemes.
With flexibility, stability and a high level of regulation being among its more prominent features, Malta also benefits from having more than 65 double taxation agreements in place (with more in the processing stage). This means that QROPS set up within the jurisdiction can work in a tax-efficient manner with most of the more popular destinations for retirement.
Any benefits administered to a beneficiary by a Maltese-established pension scheme, are classified as income (earned from a pension). This can mean the beneficiary is subjected to Maltese income tax, the highest rate of which is 35%. However, the rate differs when applied to residents and non-residents, if a non-resident, the double taxation agreement between the Maltese and the country of residence will dictate tax treatment.
If the taxing rights are given over to the country of residence, Malta will not tax the income as it leaves. The majority of Malta’s agreements give the tax rights to their counterparts (examples are Jersey, Spain and the Isle of Man), however some of the less popular retirement destinations like Egypt and Finland ask that Malta taxes the benefits at their end.
The exception to these two scenarios comes in tax treaties signed with countries such as the US, the UK and Holland. These treaties specify that the taxing right is allocated to the country in which the beneficiary resides unless they are subject to tax in their residence on a remittance basis. Tax on remittance is an advantageous form of taxation available to those residing in their country, but not permanently domiciled.
Tax Evaluation
It’s full of complexities, and although Malta is the only jurisdiction with QROPS specifically tailored to work with the reporting requirements of the US, tax planning and consultation is a must in advance of any kind of pension transfer being considered. It has its advantages, but to offer a sweeping generalisation and state that it works for every UK pension holder now living – or planning to retire – in the US would be very much wide of the mark.
Malta has a transparent regulator which has for a long time committed itself to QROPS, the economy is stable and tax regime is favourable. As an EU member state it has laws in line with EU regulations, so cross-border pensions are made readily available and come with the backing of some of the most noteworthy financial providers out there.
It is for these reasons that we see Malta attracting new QROPS business at a rate incomparable with any other jurisdiction.
For detailed advice on all aspects of QROPS, including more insight on Malta as a jurisdiction, contact us today.
About John Cassidy
