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QROPS Chile Pension Transfer for British Expats to Avoid Taxes


QROPS Chile. Pension Transfers for British Expats in Chile

British expats living in Chile or wishing to retire in Chile can now transfer their pension into a QROPS Chile to maximize pension tax relief. UK expats living or working in Chile can take advantage of their offshore status and transfer their UK pension offshore to somewhere secure like New Zealand or Gibraltar and will no longer have to pay UK taxes on their pension if they stay offshore.

Even Chileans who have worked in the UK and built up a substantial private pension can transfer it offshore to avoid 55% tax upon death whilst drawing benefits and UK income taxes of 20% – 45% that the UK imposes.

qrops chile
QROPS Chile Pension Transfer for UK Expats

Why live in Chile as a British expat?

More than 5,000 British expats live in Chile. The British Chileans are people of British ancestry, in full or in part, who reside in Chile. The British have been very important in the formation of the Chilean nation. They include Chileans of English, Scottish and Welsh ancestry. The highest percentage of British Chileans is found in Punta Arenas, followed by Santiago, Valparaiso, Concepcion, Viña del Mar and Antofagasta.

Around 32,000 English settled in Valparaíso, influencing the port city to the extent of making it virtually a British colony during the last decades of the 19th century and the beginning of the 20th century. In Valparaíso they created their largest and most important colony, bringing with them neighbourhoods of British character, schools, social clubs, sports clubs, business organizations and periodicals. Even today their influence is apparent in specific areas, such as the banks and the navy, as well as in certain social activities, such as football (soccer), horse racing, and the custom of drinking tea.

Chile is one of South America’s most stable and prosperous nations and a recognized middle power. It leads Latin American nations in human development, competitiveness, income per capita, globalization, economic freedom, low perception of corruption and state of peace. It also ranks high regionally in freedom of the press and democratic development. However, it has a high economic inequality.

Residents are taxed on their worldwide income, while nonresidents are taxed only on Chilean-source income. Persons not domiciled or resident in Chile are subject to income tax on services rendered abroad and paid from Chile. Foreigners are taxed on Chilean-source income only during their first 3 years in Chile (although a 3-year extension is permitted). Thereafter, they are subject to taxation on a worldwide basis. An individual is resident if he/she remains in Chile for 6 consecutive months in a calendar year or more than 6 months in 2 consecutive tax years. Depending on the circumstances, domicile can be obtained from the first day in the country.

A QROPS Chile is paid gross from New Zealand or Gibraltar in either USD, EUR or GBP. There is no tax on the money paid out in NZ and a flat rate of income tax of 2.5% in Gibraltar. When you draw an income you can then have this money paid into an offshore account or into your Chilean bank account.

A QROPS transfer to New Zealand employs a discretionary fund manager and your pension remains in GBP and you can choose from 5 strategies based on your risk profile.

A QROPS transfer to Gibraltar allows you to invest in most shares, mutual funds, ETF’s, bonds, etc on the major stock exchanges and you can also choose the currency of your pension. You may prefer to have currency denominated in USD.

The Benefits of a Pension Transfer to QROPS Chile

What are the benefits of a QROPS Pension Transfer for British expats in Chile?

• Avoid UK income tax
• Avoid UK dividends tax
• Avoid UK capital gains tax (CGT)
• Avoid UK inheritance tax (IHT)

• Currency choice. You can choose to have your pension transferred to a QROPS denominated in USD, EUR or keep it in GBP

• Have the ability to make higher returns with freedom of investment

Family Protection: Upon death, the entire pension pot gets passed on to your nearest and dearest

Security: The pension is held in a secure jurisdiction such as New Zealand or Gibraltar which is outside the UK tax net, but has its own strong financial regulations which are tax efficient

What is a QROPS Chile?

A Qualifying Recognized Overseas Pension Scheme (QROPS Chile) allows your UK pension to be transferred offshore to reduce your tax burden. Effectively, you will no longer pay UK tax on your pension whilst you are offshore and after 10 years of living offshore, the reporting requirements to HMRC cease.

What is the economy like in Chile?

Chile is one of South America’s most stable and prosperous nations, leading Latin American nations in human development, competitiveness, income per capita, globalization, economic freedom, and low perception of corruption. However, it has a high economic inequality, as measured by the Gini index. In May 2010 Chile became the first South American country to join the OECD. In 2006, Chile became the country with the highest nominal GDP per capita in Latin America.

During the early 1990s, Chile’s reputation as a role model for economic reform was strengthened when the democratic government of Patricio Aylwin, who took over from the military in 1990, deepened the economic reform initiated by the military government. Growth in real GDP averaged 8% from 1991–1997, but fell to half that level in 1998 because of tight monetary policies (implemented to keep the current account deficit in check) and because of lower export earnings, the latter which was a product of the Asian financial crisis. Chile’s economy has since recovered and has seen growth rates of 5–7% over the past several years.

If you are living in Chile at the moment, you can take advantage of your offshore address in order to move your UK pension into a QROPS Chile to avoid further UK taxes down the line. A QROPS Chile can be a good tax planning vehicle to avoid UK taxes if you are considering living or retiring abroad. However, we would need to assess your pension income first to see if it is suitable for a transfer.

What Tax Would I Pay On My QROPS in Chile?

Individuals resident or domiciled in Chile are subject to income tax on their world-wide income.

However an individual taking up domicile or residency in Chile is taxed only on Chilean source income for the first 3 years, on application this may be extended.

So, at least at first, your QROPS would avoid tax in Chile. You can choose to have your pension paid into a local bank account in Chile or an offshore bank account.

Persons without domicile nor residency in Chile are taxed on their Chilean source income.

A person is deemed to be domiciled or resident in Chile if:

It may be assumed from the activities that he/she wishes to stay in the country on a permanent basis (domicile).

If he/she spends more than six months in the country in a given calendar year or over a period of two years (resident).

Residents of Easter Island are tax free. There are also some other tax free zones. If you are liable for income tax, the rate is between 15% and 45%. You can see more about the Chilean tax rates below.

Personal income tax in Chile.

QROPS Chile Jurisdictions. Which QROPS Jurisdiction is Best for British expats in Chile?

Do I need to move my pension to Chile?
No. Your pension can be transferred to New Zealand or Gibraltar where it will be out of the UK tax system, where it is paid gross, free of tax.
A transfer to NZ would attract no taxes and NZ has a double taxation agreement with Chile. You can also get an extra lump sum of any increase in the pension pot value after transfer. On the downside, the fund range is limited. A transfer to Gibraltar frees up your investment options, but a flat rate of tax on your income of 2.5% would be taken.

Do I need to live and retire in Chile?
As long as you live outside the UK, either in Chile or elesewhere abroad, you can move your pension offshore to Guernsey or the Isle of Man. Your pension will grow tax free unless you move back to the UK, then it will revert to a UK SIPP.

For enquiries, please send email to info@qropsspecialists.com

QROPS Chile article written by QROPS Specialists.

QROPS Chile Pension Transfer for British Expats to Avoid Taxes by

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