QROPS Costa Rica. Pension Tax Relief
British expats living in Costa Rica or wishing to retire in Costa Rica can now transfer their pension into a QROPS Costa Rica to maximize pension tax relief. UK expats living or working in Costa Rica 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.
Any Costa Ricans who have worked in the UK can also transfer any private pensions they have built up in the UK offshore.
Why live or retire in Costa Rica?
In 2007, the Costa Rican government announced plans for Costa Rica to become the first carbon-neutral country by 2021. According to the New Economics Foundation, Costa Rica ranks first in the Happy Planet Index and is the “greenest” country in the world. There are nearly 5,000 Brits living in Costa Rica. As a foreign resident, you will not pay income taxes on foreign pensions or income generated outside of Costa Rica. There is also free education for all until the end of high school.
Single family residences in middle-class Costa Rica neighborhoods are priced much less than comparable housing in the UK, with monthly rents starting at around US$300. In addition, hiring help around the house – a maid or a cook – costs only $200 per month for a full-time employee. Savings are also realized on utilities; they are much cheaper than the UK. What’s more, Costa Rica’s temperate climate eliminates the need for expensive winter heating bills. The cool mountain air and sea breeze helps to cool your home in the summer. Public transportation is plentiful and inexpensive. A cross-town bus in San Jose, Costa Rica’s capital, costs just 25 – 50 cents. Bus fares from San Jose to the provinces are usually under $10.
The Benefits of a QROPS Costa Rica
What are the benefits of a QROPS Costa Rica Pension Transfer for British expats?
• 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 moving it out of the UK tax net, but into jurisdictions with its own strong financial regulations which are tax efficient
What is a QROPS Costa Rica?
A Qualifying Recognized Overseas Pension Scheme (QROPS Costa Rica) 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 5 years of living offshore, the reporting requirements to HMRC cease.
What is the economy of Costa Rica like?
According to the World Bank, Costa Rica’s GDP per capita is US$11,122 PPP (as of 2009); however, this developing country still faces the 4th highest inflation rate in Latin America, a lack of maintenance, a lack of new investment in infrastructure, a poverty rate estimated to be 5% to 8%, a 7.8% unemployment rate (2009) and a trade deficit of 5.2%. For the fiscal year 2007, the country showed a government surplus. Economic growth in 2008 diminished to a 3% increase in the face of a global recession (down from 7% and 9% growth in the prior two years). The unit of currency is the Colón, and as of October 2010, it trades around 507 to the U.S. dollar and about 705 Colones to the Euro.
In recent times, pharmaceuticals, financial outsourcing, software development, and ecotourism have become the prime industries in Costa Rica’s economy. High levels of education among its residents make the country an attractive investing location. Since 1999, tourism earns more foreign exchange than the combined exports of the country’s three main cash crops: bananas, pineapples and coffee. Coffee production has played a key role in Costa Rica’s history and economy, and by 2006, was the third cash crop export.
What is the Tax on a QROPS in Costa Rica?
There is no tax on QROPS for British expats in Costa Rica.
What is the personal income tax in Costa Rica
If you wish to work in Costa Rica, income tax is very low. Income up to ¢215,600.00 per month is exempt. 10% tax is due on income in excess of ¢215,600.00 up to ¢324,100.00 and 15% tax is due on incomes in excess of ¢324,100.00. Most importantly, there is no income tax on money earned outside of Costa Rica by residents. Corporations pay 30% tax and small businesses either 10% or 20% tax. For homeowners, property taxes, levied on your property’s street frontage, vary from one municipality to another, but are never over $10 per month per residence.
You can see the particulars for personal income tax in Costa Rica here.
Best QROPS Jurisdictions for British Expats in Costa Rica
Do I need to move my pension to Costa Rica?
No. Your pension can be transferred to a secure jurisdiction such as Gibraltar or NZ where it will be out of the UK tax system and your pension will be paid gross and grow tax free.
Do I need to live and retire in Costa Rica?
No, you can live anywhere offshore. As long as you are outside the UK, your QROPS will grow tax free. If you ever return to live permanently in the UK, your pension will simply return to UK Self Invested Pension Plan (SIPP) rules.
For enquiries, please send email to firstname.lastname@example.org
QROPS Costa Rica article written by QROPS Specialists.QROPS Costa Rica Pension Transfer for British Expats to Avoid Paying Taxes by Richard Malpass