QROPS Italy. Tax Relief for British Expats in Italy and Italians Who Have Worked in the UK
British expats living in Italy or wishing to retire in Italy can now transfer their pension into a QROPS Italy to avoid taxes in the UK. British expats living or working in Italy can take advantage of their offshore status and transfer their UK pension offshore to somewhere secure like Malta, an EU country which has a double taxation agreement with Italy and will no longer have to pay UK taxes on their pension if they stay offshore. You can also choose to move your pension to New Zealand if you wish, which also has a double taxation agreement with Italy. The main reason is to avoid the 55% tax upon death that the UK imposes if you die whilst drawing your pension. A QROPS makes sure your family gets 100% of the pension pot upon death.
Italians working in the UK and Italians who have worked in the UK and built up a substantial private pension can also transfer their pension offshore to a QROPS to avoid the 55% tax upon death and UK income taxes on their pension(s).
Why live or retire in Italy if you are a British expat?
There are over 34,000 Brits living in Italy. Italy plays a prominent role in European and global military, cultural and diplomatic affairs. The country’s European political, social and economic influence, make it a major regional power. The country has a high public education level and is a highly globalised nation. Britain has close links Italy dating back to the Roman empire. According to The Economist, Italy has the world’s 8th highest quality of life. The country enjoys a very high standard of living.
The climate of Italy is highly diverse and can be far from the stereotypical Mediterranean climate, depending on location. You have everything in Italy from beaches to mountains to lowlands.
Many Brits move to Italy for work and end up retiring there. The warmer climates attract British expatriates wishing to retire in Italy. Others move for family reasons.
What are the Benefits of a QROPS Italy?
What are the benefits of a QROPS Italy Pension Transfer for British expats?
• Avoid UK income tax of between 20% and 45%
• Avoid UK dividends tax
• Avoid UK capital gains tax (CGT)
• Avoid 55% tax upon death
• 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 Malta which both have double taxation agreements with Italy, but have their own strong financial regulations which are tax efficient and outside of the UK tax net.
What is a QROPS Italy?
A Qualifying Recognized Overseas Pension Scheme (QROPS Italy) 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.
If you are living in Italy at the moment, you can take advantage of your offshore address in order to move your UK pension into a QROPS in Malta or New Zealand to avoid further UK taxes down the line. A QROPS can be an appropriate financial planning vehicle to avoid taxes if you are considering living or retiring abroad. Please ask us for a free pension transfer analysis.
What is the Tax on a QROPS Italy?
A Move to a New Zealand QROPS or Malta QROPS avoids taxation in those countries as they both have a double taxation agreement with Italy. The QROPS will also avoid UK taxation as your pension will be outside of the UK tax net.
The only tax you would pay would be income tax on your QROPS income on remittance to Italy when you draw your income. But, most importantly, you avoid the 55% tax upon death in the UK, so 100% of your pension pot is passed on to your loved ones.
Income Tax in Italy
You are tax resident in Italy if you were living physically in Italy for more than 183 days in the last calendar year. If you are a tax resident in Italy, Italy taxes you on their worldwide income. But unlike the IRS, they don’t seem to have any real means to know what you earn in other countries… yet. But more tax exchange agreements are becoming common place.
You get taxes at a national, regional and local level in Italy via the IRPEF or ‘Imposta sui Redditi delle Persone Fisiche’.
Income (EUR) Progressive Tax Rate (%)
0 to 15,000 23%
15,001 – 28,000 27%
28,001 – 55,000 38%
55,001 – 75,000 41%
75,000+ 43% (39% plus a 4% solidarity tax)
300,000+ 46% ( an additional 3% solidarity tax)
An additional 1.2% – 2.03% additional regional tax is also applied as well as a municipal tax of between 0% – 0.8%.
The latest information can be found from the Italian government’s tax department, Agenzia Entrate’s website income tax rates in Italy.
Do I need to move my pension to Italy?
No. There are 46 QROPS schemes listed on HMRC’s site, but most of them are for group pension schemes not individual schemes. Our advice for British expatriates who wish to retire in Italy is to move to a Malta QROPS, which is still within the EU and has a double taxation agreement with Italy. Your pension will be paid out gross with no tax deducted and 100% of your pension pot can be paid out as a lump sum to your family upon death.
By using Malta as a destination as a QROPS, you are being tax efficient. You may also want to consider moving your pension into EUR, so that fluctuations in currencies won’t affect your pension income. If you leave your pension in GBP, you will be open to currency fluctuations.
What happens to my QROPS if I retire outside of Italy?
If you are outside the UK, you will continue to reap QROSP benefits and you will only ay income tax in the country you retire in. If you return to the UK, your pension will simply return to UK Self Invested Pension Plan (SIPP) rules. You will also get time apportionment relief which may mean you pay little or no tax upon death. Please contact us for a free pension transfer analysis.
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QROPS Italy article written by QROPS SpecialistsQROPS Italy. British Expats Can Avoid 55% Tax Upon Death via QROPS by Richard Malpass