QROPS Jurisdictions Overview
Qualifying Recognized Overseas Pension Schemes (QROPS) are not located in every country and for British expats who want tax optimisation and the best investment outcome, they must take care when choosing the correct QROPS jurisdiction to park their pension. Frequently, their UK pension is transferred to a tax efficient QROPS jurisdiction such as Malta, Hong Kong or New Zealand whilst they retire in a country such as Portugal or Dubai. QROPS pension income and retirement benefits can be paid directly into your local bank of choice abroad.
For example, if you live in Egypt, there are no QROPS jurisdictions there and for economic security, you may not want your pension transferred to Egypt anyway. You would be better off transferring your pension to a tax neutral country such as New Zealand for example, which is a regulated, secure OECD country and your retirement benefits from your pension would just be paid directly into an offshore or Egyptian bank account of your choice at your retirement age of 55 or later.
In this article, we will do a quick QROPS jurisdiction review with links to more in-depth articles to the various QROPS jurisdictions.
How to Choose the Best QROPS Jurisdiction
Choose your QROPS jurisdiction / QROPS destination below. We have listed the countries where you may retire and the Double Taxation Agreements with the QROPS jurisdictions in question.
There are many others, such as Australian QROPS which now allow UK pension transfers if you are over 55, but the main third country QROPS jurisdictions / destinations for UK pension transfers are: the Isle of Man, Gibraltar, Hong Kong and New Zealand.
We are now going to give QROPS “awards” to the various jurisdictions which may help give you some insight into best QROPS choices.
Best QROPS Jurisdiction for Inheritance Planning – NZ QROPS (no max age to take benefits)
Best QROPS for Pension Security – NZ QROPS followed by the Isle of Man
Best QROPS for Maximum Pension Drawdown – Malta QROPS
Best QROPS for Europe – Malta QROPS (but need to check the DTA’s)
Best QROPS for the USA and Canada – Malta QROPS (but you need to be careful with the investment choices)
Best QROPS for Asia – Hong Kong and New Zealand QROPS
Best QROPS for Maximum Investment Options – Malta and Gibraltar QROPS
You can see that each case is unique, please contact us for a pension transfer review.
QROPS Jurisdiction Comparison
We now compare the various QROPS jurisidctions. The table below shows a a comparison between the different retirement benefits and taxation in the various QROPS jurisdictions.
Malta QROPS Vs. Gibraltar QROPS Vs. New Zealand QROPS Vs. IOM QROPS
|Pension Rules||Malta||Gibraltar||New Zealand||Isle of Man|
|Current Pension Income Permitted||Flexible Drawdown Available (Similar to UK)||150% GAD within 5 years of non-UK residency. Higher levels of income may be allowed after 5 years of residency at trustee’s discretion||150% GAD within 5 years of non-UK residency. Actuarial basis after 5 years of non UK residency||150% GAD within 5 years of non-UK residency. Actuarial basis after 5 years of non UK residency|
|Proposed Pension Income Permitted||Flexible Drawdown Available (Similar to UK)||Gibraltar changed income tax rules in 2014 to allow more than 30% commutation – still awaiting clarification from HMRC (April 2016)||NZ Providers have confirmed that they will amend their documents to remove all references to 70% income for life – awaiting clarification from HMRC (April 2016)||Isle of Man authorities are not expected to introduce full flexibility in the short term.|
|Income Tax Treatment in Your Country of Residence||No income tax if DTA with your country of residence allows it otherwise up to 35%||A withholding income tax of 2.5% is applied at source plus your local income tax||No income tax in New Zealand||No income tax if DTA with country of residence allows it otherwise up to 20% income tax|
|Tax-Free Lump Sum (PCLS)||30% of fund value after 5 years of non–UK residency||30% fund value after 5 years of non–UK residency||30% of tax relieved funds plus 100% of any investment growth||30% fund value after 5 years of non–UK residency|
|Early Retirement Age||55||55||55 unless member has ill health||55|
|Maximum Age for Taking Pension Benefits||75||75||No Maximum||75|
|Investment Options||Open architecture subject to trustees’approval||Open architecture||Pooled Funds||Open architecture|
|Moody’s Country Credit Rating||A3||N/A||Aaa||Aa1|
|EU Member||Yes||Yes by virtue of being UK territory||No||No|
|Dedicated Pension Regulator||Yes||Yes||Yes||Yes|
|Tax Authority||Malta Inland Revenue||Gibraltar Income Tax Office||New Zealand Inland Revenue||Income Tax Division of Isle of Man Treasury|
|Financial Services Regulator||Malta Financial Services Authority||Gibraltar Financial Services Commission||New Zealand Financial Markets Authority||Isle of Man Financial Services Authority|
|Compensation scheme||Yes but pensions excluded||Yes but pensions excluded||Yes||Cash in pensions / policyholder protection on life contracts|
|Double Tax Agreements||65*||0 however Gibraltar has 27 Tax Information Exchange Agreements (TIEA) signed (correct at 1 July 2015)||39*||23*|
* correct at May 2016
The Isle of Man is the most popular QROPS jurisdiction for 2013. This QROPS destination allows a much higher pension income to be paid out over time, so it is especially popular for those who wish to access a higher level of annual pension income. AN IOM QROPS is therefore a good option for those that may be in poor health and live in countries at retirement which have a DTA with the Isle of Man.
However if no DTA exists, a 20% income tax is imposed at source in the Isle of Man. The Isle of Man also has a 7.5% tax upon death which is deducted at source in the Isle of Man which is higher than other QROPS jurisidictions, most of which charge zero tax on death.
A 30% Pension Commencement Lump Sum (PCLS) is allowed in the Isle of Man after 5 years of being resident outside the UK. The pension income is usually higher than the 120% GAD rates which were previously allowed in the UK. In fact, your pension is worked out on your age and actuarial basis, but annual income can be high.
Countries which have a DTA with the Isle of Man
|No.||Country||Where QROPS is Taxable||Signed||Effective||Status|
|1||Australia||Pensions only taxable in the country of residence||29 January 2009||6 April 2011 (Isle of Man) 1 July 2011 (Australia)||In force|
|2||Bahrain||Pensions only taxable in the country of residence||3 February 2011||1 January 2013 (Bahrain) 6 April 2013 (Isle of Man)||In force|
|3||Belgium||Pensions only taxable in the country of residence||16 July 2009||Awaiting ratification||Not in force|
|4||Denmark||Pensions taxable in the IOM||30 October 2007||1 January 2009 (Denmark)6 April 2009 (Isle of Man)||In force|
|5||Estonia||Pensions only taxable in the country of residence||8 May 2009||January 2010 (Estonia) 6 April 2010 (Isle of Man)||In force|
|6||Faroe Islands||Pensions taxable in the IOM||30 October 2007||1 January 2009 (Faroes) 6 April 2009 (Isle of Man)||In force|
|7||Finland||Pensions taxable in the IOM||30 October 2007||1 January 2009 (Finland) 6 April 2009 (Isle of Man)||In force|
|8||Greenland||Pensions taxable in the IOM||30 October 2007||1 January 2009 (Greenland) 6 April 2009 (Isle of Man)||In force|
|9||Guernsey||If pension earned from work in IOM = taxable in IOM otherwise taxable in country of residence(i.e. Guernsey)||24 January 2013||5 July 2013||In force|
|10||Iceland||Pensions taxable in the IOM||30 October 2007||1 January 2009 (Iceland) 6 April 2009 (Isle of Man)||In force|
|11||Ireland||Pensions only taxable in the country of residence||24 April 2008 1 January 2009 (Ireland) 6 April 2009 (Isle of Man)||In force|
|12||Jersey||If pension earned from work in IOM = taxable in IOM otherwise taxable in Jersey||24 January 2013||21 June 2013||In force|
|13||Luxembourg||Pension taxable in IOM unless pension not related to employment||in which case taxable in country of residence (i.e. Luxembourg)||8 April 2013 Awaiting ratification||Not in force|
Click here for more info on the Isle of Man QROPS
QROPS Gibraltar has taken over as the second most popular QROPS jurisdiction for British expatriates around the world. The Gibraltar QROPS destination is the de facto solution if you do not know where you will end up retiring in the world.
The Gibraltar QROPS avoids all UK taxes and has a flat rate of income tax of 2.5% which is deducted at source in Gibraltar. There are no taxes upon death.
Any country can be used with a QROPS in Gibraltar, you just pay the 2.5% income tax at source. It is then up to you to report any income in the country you retire in and pay income tax in that country.
A Gibraltar QROPS is very flexible and allows a huge range of investments from ETF’s to shares to mutual funds, gilds and commercial property.
A 25% Pension Commencement Lump Sum (PCLS) is allowed in Gibraltar. The pension income is usually 150% of UK GAD. At least 70% of the pension pot must be used to pay an annual retirement income for life.
Click here for more info on a QROPS in Gibraltar
Hong Kong QROPS are back in favour again due to their strong Double Taxation Agreements (DTA’s).
Hong Kong QROPS are occupational, tax-recognised, registered and non-vested pension schemes. This makes them attractive investments for many countries due to the way they are perceived by foreign tax jurisdictions.
Furthermore, the various Double Taxation Agreements tend to give the taxation rights to Hong Kong, which means in many instances, your pension benefits can be paid out tax-free.
A 25% tax -free Pension Commencement Lump Sum (PCLS) is allowed to be paid out from your QROPS pension in Hong Kong. The rest must pay you an annual income for life.
A major benefit of a Hong Kong QROPS is that it also has a strong DTA with the UK, which could be important if you ever move back to the UK, as it gives the taxing rights to Hong Kong. However, if this is seen to be abused, you may still be taxed in the UK.
Countries which have a DTA with Hong Kong
QROPS in Malta takes the no.3 QROPS jurisdiction for 2013. This popular QROPS destination is best used for British expats in Europe. Malta is an EU country and has 65 Double Taxation Agreements with countries around the world. For most of these countries, your QROPS will be paid out gross, free of tax in Malta. Although it does depend on the specific Double Taxation Agreements (DTA’s) between Malta and your country of residence in retirement.
Please note if you live in a country which DOES NOT have a DTA with Malta, you will pay tax of between 15% and 35% on any pension income which will be deducted at source in Malta. You may then also pay income tax in your country of residence, although you can often get foreign tax credits.
****PLEASE NOTE: The Malta QROPS Trustees will require EVIDENCE that a member is tax resident in a jurisdiction with a suitable DTA before any payment can be paid gross, otherwise tax in Malta will be deducted.*****
A 25% Pension Commencement Lump Sum (PCLS) is allowed in Malta if you take full flexible pension income like the UK. Flexible pension income is allowed in Malta, so you can draw your entire pension pot, the same as UK rules. However, you may pay Maltese income tax or the tax in your country of residence depending on the DTA’s at the time of your retirement.
Malta Income Tax Rates for 2008 – 2012
|Chargeable Income €||Tax Rate (%)||Tax Deducted (€)|
|0 – 700||0%||0|
|701 – 3100||20%||140|
|3101 – 7800||30%||450|
Countries which have a DTA with Malta
|Country||Date Signed||Where Taxable||DTA Article|
|Albania||02/05/2000||Pension income taxable in Albania||Article 21|
|Australia||09/05/1984||Pension income taxable in Australia / temporary residents taxed in Malta||Article 18|
|Armenia||Initialled / being negotiated|
|Austria||29/05/1978||Pension income taxable in Austria||Article 18|
|Azerbaijan||Initialled / being negotiated|
|Bahrain||06/03/2012||Pension income taxable in Bahrain||Article 20|
|Barbados||05/12/2001||Shared jurisdiction / pension income taxable in Malta|
|Belgium||28/06/1974||Pension income taxable in Belgium||Article 21|
|Bosnia-Herzegovina||Initialled / being negotiated|
|Bulgaria||23/07/1986||Pension income taxable in Malta||Article 18|
|Canada||25/07/1986||Shared jurisdiction*||Article 18|
|China||02/02/1993||Pension income taxable in China||Article 22|
|Croatia||21/10/1998||Pension income taxable in Croatia||Article 21|
|Cyprus||22/10/1993||Pension income taxable in Cyprus||Article 22|
|Czech Republic||21/06/1996||Pension income taxable in Czech Republic||Article 21|
|Denmark||30/12/1998||Pension income taxable in Denmark||Article 18|
|Egypt||20/02/1999||Pension income taxable in Malta||Article 18|
|Estonia||03/05/2001||Shared jurisdiction / pension income taxable in Malta||Article 21|
|Finland||30/10/2000||Pension income taxable in Finland / Annuity Income taxable in Malta||Article 18|
|France||29/08/2008||Pension income taxable in France||Article 22|
|Georgia||23/10/2009||Pension income taxable in Georgia||Article 21|
|Germany 08/03/2001||Pension income||taxable in Germany||Article 18|
|Greece||13/10/2006||Pension income taxable in Greece||Article 21|
|Guernsey||10/3/2013||Pension income taxable in Guernsey||Article 20|
|Hong Kong||8/11/11||Pension income taxable in Malta||Article 17|
|Hungary||06/08/1991||Pension income taxable in Hungary||Article 22|
|Iceland||23/09/2004||Pension income taxable in Iceland||Article 21|
|India||08/09/1994||Shared jurisdiction / pension income taxable in Malta||Article 23|
|Ireland||14/11/2008||Pension income taxable in Ireland||Subject to remittance limitation**|
|Isle of Man||23/10/2010||Pension income taxable in the Isle of Man||Article 21|
|Israel||Signed – Not yet in force|
|Italy||16/07/1981||Pension income taxable in Italy||Subject to remittance limitation**|
|Jersey||19/07/2010||Pension income taxable in Jersey||Article 21|
|Jordan||16/04/2009||Shared jurisdiction / pension income taxable in Malta||Article 21|
|Korea||25/03/1997||Pension income taxable in Korea||Article 21 – Subject to remittance limitation**|
|Kuwait||24/07/2002||Pension income taxable in Kuwait||Article 22|
|Latvia||22/05/2000||Shared jurisdiction taxable in Malta||Article 22|
|Lebanon||16/04/2010||Pension income taxable in Lebanon||Article 21|
|Libya||28/12/2008||Pension income taxable in Libya||Article 23|
|Lithuania||17/05/2001||Shared jurisdiction taxable in Malta||Article 22|
|Luxembourg||29/04/1994||Pension income taxable in Luxembourg||Article 21|
|Malaysia||03/10/1995||Pension income taxable in Malaysia||Article 18|
|Mexico||Initialled / being negotiated|
|Moldova||Initialled / being negotiated|
|Montenegro||04/11/2008||Pension income taxable in Montenegro||Article 21|
|Morocco||26/10/2001||Pension income taxable in Morocco||Article 18|
|Netherlands||18/07/1995||Pension income taxable in the Netherlands||Article 19|
|Norway||02/06/1975||Shared Jurisdiction*||Article 18|
|Pakistan||08/10/1975||Pension income taxable in Pakistan||Article 21|
|Palestine||Signed – Not yet in force|
|Poland||07/01/1994||Pension income taxable in Poland||Article 22|
|Portugal||26/01/2001 Pension income taxable in Portugal||Article 21|
|Qatar||26/08/2010||Pension income taxable in Qatar||Article 18|
|Romania||30/11/1995||Pension income taxable in Romania||Article 23|
|Russia||Signed – Not yet in force||Being renegotiated|
|San Marino||10/09/2009||Pension income taxable in San Marino||Article 21|
|Saudi Arabia||Signed – Not yet in force|
|Serbia||16/06/2010||Pension income taxable in Serbia||Article 21|
|Singapore||29/02/2008||Shared Jurisdiction / Pension income taxable in Malta|
|Slovakia||07/09/1999||Pension income taxable in Slovakia||Article 21|
|Slovenia||08/10/2002||Pension income taxable in Slovenia||Article 22|
|South Africa||16/05/1997||Shared jurisdiction / pension income taxable in South Africa||Article 18|
|Spain||08/11/2005||Pension income taxable in Spain||Article 21|
|Sweden||09/10/1995||Pension income taxable in Sweden||Article 21|
|Switzerland||06/07/2012||Pension income taxable in Switzerland||Article 21|
|Syria||22/02/1999||Pension income taxable in Syria||Article 21|
|Thailand||Initialled / being negotiated|
|Tunisia||31/05/2000||Pension income taxable in Tunisia||Article 21|
|Turkey||Signed – Not yet in force|
|UAE||13/03/2006||Pension income taxable in the UAE||Article 21|
|Ukraine||Initialled / being negotiated|
|United Kingdom 12/05/1994||Pension income taxable in the United Kingdom||Article 18 – Subject to remittance limitation**|
|United States of America||10/11/2010||Pension income taxable in the USA||Article 17 – Double Taxation Relief Order|
|Uruguay||11/3/11||Pension income taxable in Uruguay||Article 20|
MALTA DOUBLE TAXATION AGREEMENT DETAILS
Whilst the majority of DTAs provide for pension income to be taxed in the country of residence of the member, there are some exceptions.
1. Shared Jurisdiction*:
In the cases of shared jurisdiction these treaties give the source state (Malta) primary tax jurisdiction, with tax relief granted in the Residence State for any tax deducted in Malta. For Canada and Norway, pension income is taxable in Malta, capped at 15%, members can elect to have their pension income taxed in Canada.
2. Subject to Remittance Limitation**:
Some of the DTAs have a “remittance limitation” clause included, which requires the pension income to be remitted to a bank account in that country in order to obtain relief from tax in Malta. However this only comes into force if the country of residence only taxes pension income on a remitted basis (as opposed to a worldwide basis).
The only countries that have a remittance clause and tax on a remittance only basis are:
UK and Ireland – where payments are made to individuals resident but non domiciled in Ireland, the pension payment should be received (paid directly by the Trustee) or remitted (subsequently transferred by the beneficiary) to Ireland. Korea – where payments are made to inward expatriates that have been resident in Korea for not more than 5 years in a 10 year period the pension payment should be received (paid directly by the Trustee) or remitted (subsequently transferred by the beneficiary) to Korea.
********The Trustees will require evidence that a member is tax resident in your country of retirement with a suitable DTA with Malta before allowing your pension payment to be paid gross.***********
Please click here for more info on a pension transfer to a QROPS in Malta
QROPS in New Zealand had fallen out of favour as you need to use a Discretionary Fund Manager (DFM) which means your pension options are usually limited to five options based on risk, so for people who usually invest via UK SIPP’s this may seem limiting. However, this may be one of the safest routes for QROP schemes precisely due to this fact. I encourage any non-sophisticated investors to seriously consider this Qualifying Overseas Pension Scheme in New Zealand.
There is zero tax in New Zealand, it is a secure tax neutral QROPS jurisdiction which has very strong pension regulations and protection from the Financial Markets Authority in New Zealand.
There in no tax on income and no tax on death if you remain resident outside the UK.
In this way, NZE offers a tax simple, tax certain solution for your clients. Importantly, it also means that a NZ QROPS is a future proof solution. You don’t need to transfer your QROPS to another jurisdiction because you no longer live in a country where the current host QROPS has a Double Taxation Agreement (DTA) in operation.
Also, you can take up to 100% of any increase in the value of your pension pot as a tax-free cash lump sum along with the usual 30%. You also are not required to take a pension like you do in other QROPS jurisidctions. So, if your pension just wants to be invested conservatively and passed onto your children, there is no safer destination to park your pension than in New Zealand, an OECD country.
Under an NZ QROPS, the scheme must provide you with an annual pension income with 70% of the pension pot that is transferred.
Also, the fees on QROPS in New Zealand are now lower than before. You can set up a QROPS in New Zealand for 200 GBP set up fee and 200 GBP per year after for smaller pension pots. Larger pensions are 750 GBP set up fee and 500 GBP per year after.
We see a NZ QROPS as an appropriate destination especially for clients already in retirement as a safe, tax-neutral QROPS destination appropriate for inheritance planning. There is no tax on income or death in NZ, you just pay income tax in your current of residence.
Examples of countries where you would pay no income tax on a NZ QROPS pension include Dubai (UAE), Brunei, Hong Kong, Malaysia, Philippines, Singapore, Thailand, South Africa, Qatar, Kuwait, Oman, Monaco, Portugal (to qualify, you need to register as a non-habitual resident with the Portuguese tax authorities), Latin America: Belize, Costa Rica, Ecuador, Uruguay and Panama, the Caribbean islands: Anguilla, Bahamas, Bermuda, Cayman Islands, British Virgin Islands, Turks and Caicos as well as Vanuata (near Australia).
List of Countries which have a DTA with New Zealand
United Arab Emirates
United States of America
Click here for more info on a QROPS pension transfer to NZ