British Expats in the Czech Republic Can Avoid UK Taxation on their Pension through a QROPS
Due to UK pension rules changes in 2006, British expats living in the Czech Republic or wishing to retire in the Czech Republic can now transfer their pension into a QROPS Czech Republic to maximize pension tax efficiency. British expats living or working in the Czech Republic can take advantage of their Czech address and transfer their UK pension offshore to somewhere secure like Malta or New Zealand and will no longer have to pay UK taxes on their pension if they stay offshore.
The Czech Republic has undertaken a number of economic reforms such as privatizations of many government owned companies. Annual GDP growth stood at around 6% until the recent global economic crisis in 2008. The country is the first former member of the Comecon to achieve the status of a developed country according to the World Bank (2006). In addition, The Czech Republic has the highest human development in Central and Eastern Europe, ranking as a ‘Very High Human Development’ nation. It is also ranked as the most democratic, and healthy (in relation to infant mortality) country in the region and is the second most peaceful country in Europe.
Why live or retire in the Czech Republic?
More than 7,500 Brits live in Czech Republic. The Czech Republic has a temperate continental climate, with relatively hot summers and cold, cloudy and snowy winters. Most rain falls during the summer. The temperature difference between summer and winter is relatively high, due to the landlocked geographical position. The Czech economy gets more than 5.5% of its total income from tourism. The historic city of Prague is a real pull for tourists. Czech is famous for its beer and is exported around the world. The Pilsener style beer originated in western Bohemian city of Plzeň, and further south the town of Budweis lent its name to its beer, eventually known as Budweiser. Tourists also come to see the famous puppetry and to visit natural spa towns.
The Czech Republic has one of the least religious populations on Earth. Historically, the Czech people have been characterised as “tolerant and even indifferent towards religion”. Czech cuisine is marked by a strong emphasis on meat dishes. Pork is quite common; beef and chicken are also popular. Goose, duck, rabbit and wild game are served. Football and ice hockey are the most popular sports in the Czech Repulic.
QROPS in the Czech Republic. What Would the Taxes be on My Pension if I Moved to a QROPS
If I moved to Czech Republic, what would the benefits be of a QROPS transfer?
• Avoid UK income tax
• Avoid UK dividends tax
• Avoid UK capital gains tax (CGT)
• Avoid UK inheritance tax (IHT) and 55% tax upon death that the UK imposes
• Currency choice. You can choose to have your pension transferred to a QROPS denominated in USD, EUR or keep it in GBP.
• Much wider range of investment choice. You could purchase mutual funds, ETF’s, shares, bank notes, etc.
• Full protection of lump sum upon death: Upon death, 100% of your pension pot gets passed on to your nearest and dearest
• Security: The pension is held in a secure jurisdiction such as Malta or NZ which are under the protection of the British Crown, but has its own strong financial regulations which are tax efficient
Which Currency Should I Transfer My QROPS to? Czech Republic and the Euro
As of 13/12/2012 there are around 25 Czech Koruna to the EURO, 19 to the US Dollar and 31 to the British Pound.
What are the rules concerning a QROPS if I transfer offshore whilst living in the Czech Republic?
A Qualifying Recognized Overseas Pension Scheme (QROPS Czech Republic) 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.
If you are living in Czech Republic at the moment, you can take advantage of your Czech (non-UK) address in order to transfer your UK pension into a QROPS to avoid further UK taxes down the line. A QROPS is one of many options to consider. If you have a final salary scheme, we can do a critical yield analysis for free or if you have a larger pension and you want a more detailed report, we can do a full TVAS report, so you can see the benefits of transferring to a QROPS compared to what you may lose in regards to protected rights in the UK.
QROPS Transfer in the Czech Republic. Which Jurisdiction is Best?
A New Zealand QROPS would have a more limited fund choice which would be managed by a discretionary fund manager, but you would pay zero income taxes in New Zealand as NZ has a DTA with the Czech Republic.
A Malta QROPS would allow a much freer range of investments. Malta also has a Double Taxation Agreement with the Czech Republic meaning your pension would be paid out gross in Malta with no tax taken from it.
Do I need to move my pension to Czech Republic?
No. The best option is to move to Malta or NZ. Malta may be a better option is EU based and has more DTA’s if ou ever decide to move on from the Czech Republic.
Do I need to live and retire in Czech Republic?
No, you can live anywhere offshore. As long as you are outside the UK, your QROPS will grow free of UK tax. If you ever return to live permanently in the UK, your pension will simply return to UK Self Invested Personal Pension (SIPP) rules and the taxation would be likely be less due to time apportionment relief.
QROPS transfers are a complex subject and are not always the best solution.
For enquiries, please send an email to firstname.lastname@example.org
Pension tax relief for British expats, QROPS Czech Republic article written by QROPS Specialists.