Malta QROPS Strengthens its Stance in the QROPS Market
In light of new rules made by the Inland Revenue, Malta has strengthened its stance in the market and has made it abundantly clear that Malta does not stand for tax avoidance, but for tax compliance. This is notably different from some of the schemes which were running in other jurisdictions and ensures that the Malta QROPS will have a solid standing in the QROPS market place.
No Mass Exodus to Malta QROPS as yet by Guernsey Schemes
HMRC QROPS guidelines cover taxation of funds and benefits and registration of beneficiaries of QROPS. The timing of the Inland Revenues publication is important, particularly in the wake of heightened interest in Malta from Guernsey QROPS providers. In May, Guernsey pension trustees managing more than 300 schemes were reported to be examining the potential for setting up new schemes here after Her Majesty’s Revenue and Customs dropped Guernsey as an approved QROPS jurisdiction.
However, no more than 5 or 6 applications for registered scheme administrators from Guernsey have been filed with the Malta Financial Services Authority, as far as Matthew Brincat, secretary general of the Malta Association for Retirement Scheme Practitioners, is aware reports the Times of Malta. So, the mass exodus from Guernsey QROPS to Maltese QROPS has not yet occurred as was expected.
“The association’s members generally welcome these guidelines as a step in the right direction for Malta,” Dr Brincat told The Times Business. “The guidelines are necessary to show Malta’s willingness to comply with HMRC rules on QROPS and in order for there to be clarity in relation to the taxation of distribution from licensed retirement schemes.”
Malta was approved as a QROPS jurisdiction by HMRC in 2009. QROPS enable people no longer resident in the UK to transfer pension benefits accumulated in a UK-recognised pension scheme to another recognised pension scheme outside the country, allowing for tax flexibility for employers and their employees.
MFSA chairman Joseph Bannister said the regulator was always in consultation with the Inland Revenue where taxation involved regulated entities.
He explained the guidelines represent a clear interpretation of what is already contained in the income tax legislation – all income arising from licensed pensions schemes, whether they are trusts, companies or funds, are taxable at the normal rate in Malta. If the recipient of the income is not resident in Malta but in a tax treaty country – Malta has more than 55 double taxation treaties – then the relevant provisions in the treaty apply. If the recipient is in a non-treaty country, then the Malta tax provisions will apply.
The MFSA are trying to keep the quality of schemes of a high nature. Prof. Bannister emphasised with the Times of Malta, “Malta must not be seen as a jurisdiction where people can transfer their pensions to avoid tax”. “HMRC removed QROPS status from a number of Guernsey-based schemes. If the Guernsey legislation allowed the establishment of pension schemes which did not satisfy QROPS status requirements, then it is obvious that these schemes would be unable to obtain a licence in Malta. In reality, while the authorisation by the MFSA of pension schemes is increasing, these are all new schemes.”
If I Move to a Malta QROPS, What Tax Would I Pay?
The Malta QROPS is not seen as a jurisdiction which is trying to avoid tax. This is the key in the Inland Revenue’s eyes. If for example, you are living in Spain, you can transfer your pension to a Maltese QROPS. You then avoid the 55% tax upon death whilst drawing benefits that is imposed in the UK and UK income taxes. However, you would have to pay Spanish income taxes upon drawdown, so this is seen as tax compliance rather than tax avoidance. If you move to a country which does not have a double taxation agreement with Malta, the pension would be taxed in Malta at the relevant Maltese income tax rates.
Those wishing to transfer to a QROPS, please send enquiries to: