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QROPS Malaysia for British Expats Avoiding Taxes


QROPS Malaysia for British Expats Avoiding Taxes

QROPS Malaysia – British expats living in Malaysia or wishing to retire in Malaysia can now transfer their pension into a QROPS Malaysia to maximize pension tax relief. British expats living or working in Malaysia can take advantage of their offshore status and transfer their UK pension offshore to somewhere secure like a ROPS in Malta, ROPS in Hong Kong or ROPS in New Zealand and will no longer have to pay UK taxes on their pension as long as remain tax resident outside the UK.

Malaysians who have worked for a British company or worked in the UK and built up a substantial pension in the UK can also transfer their pension to a QROPS Malaysia to avoid UK taxes.

qrops malaysia

Why live or retire in Malaysia as a British expat?

Malaysia is a former British territory and still has mainly ties to its Commonwealth partner. The F1 attracts a lot of tourism and business each year. Many Malaysian students come to the UK to study as well and most Malaysians speak fluent English.

Over 16,000 British expats live and work in Malaysia.

Benefits of a QROPS Malaysia for British Expats in Malaysia

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

  • Avoids UK income tax as long as you remain tax resident outside the UK
  • Avoids Malaysian income tax
  • Avoids UK inheritance tax (IHT) even if you return to the UK as long as money remains inside the ROPS
  • Avoids up to 45% tax upon death that a UK pension imposes after drawdown at 75 years of age
  • Currency choice. You can choose to have your pension transferred to a QROPS denominated in USD, EUR or keep it in GBP. This can then be paid into your local Malaysian bank account in Ringgit at retirement
  • Has the ability to make higher returns with freedom of investment or conversely, you can park all your cash in a high interest bank account or buy bond funds to reduce risk
  • Family Protection: Upon death, the entire pension pot gets passed on to your nearest and dearest tax-free; you can also name the beneficiaries and the percentage of who gets what
  • Security: The pension is held in a secure jurisdiction such as Malta which was formerly under the protection of the British Crown, but has its own strong financial regulations which are tax efficient

How Do I Transfer into a QROPS Malaysia?

Can I move my UK pension scheme to Malaysia?

No. You cannot transfer to a QROPS in Malaysia. Your pension can be transferred to a secure jurisdiction such as Malta, NZ or Hong Kong, where it will be out of the UK tax system and your pension will be paid gross and grow tax-free with no tax on death as long as you do not become UK tax resident in the future.

Do I need to live and retire in Malaysia?

No, you can live anywhere offshore and receive QROPS / ROPS benefits. As long as you remain tax resident outside the UK, your QROPS will grow free of UK taxes. If you ever return to live permanently in the UK, it is likely your death tax liability may be negligible due to time apportionment relief. If you retire to another country, taxation will depend on the local rules there and the Double Taxation Agreement that exists with Malta.

What is the Best QROPS for a Resident in Malaysia

For British expats who want to retire in Malaysia and for Malaysians with UK pension plans who want to retire back home, at the moment you have three choices for your pension fund.

Transferring a UK Pension Fund to a Hong Kong Pension Scheme for a Resident in Malaysia

  • A HK ROPS attracts zero tax in Hong Kong
  • Avoids all UK taxes as long as you remain tax resident outside the UK
  • 25% tax-free cash lump sum available at age 55; the rest to pay an annual income for life
  • No taxes on growth or death
  • Freedom of investment choice: you can self direct investments
  • Freedom of currency choice: choose the currency of your pension plan
  • Strong regulations under the HK MPFA
  • Unvested, occupational pension scheme which is tax recognised in Hong Kong
  • 100% goes to nominated beneficiaries upon death and you can choose the percentages of any pension shared out

Transferring a UK Pension Fund to a Malta Pension Scheme for a Resident in Malaysia

The Malta-Malaysia DTA shares the tax burden. The DTA gives the source state, Malta (the primary tax jurisdiction), with tax relief granted in the Residence State, Malaysia, for any tax deducted in Malta. So, Malta will pay out the pension gross, free from any tax and Malaysia won’t tax the remittance income.

  • A Malta ROPS attracts zero tax in Malta if you remain a Malaysian resident
  • Avoids all UK taxes as long as you remain tax resident outside the UK
  • 25% tax-free cash lump sum available at age 55; the rest can be accessed when you want; flexible drawdown similar to the UK
  • No taxes on growth or death
  • Freedom of investment choice: you can self direct investments
  • Freedom of currency choice: choose the currency of your pension plan
  • Strong regulations under the Malta MFSA
  • 100% goes to nominated beneficiaries upon death and you can choose the percentages of any pension shared out

Transferring a UK Pension Fund to a Malta Pension Scheme for a Resident in Malaysia

The NZ-Malta DTA gives the taxation rights to Malaysia. There is no tax in Malaysia on foreign pension income.

  • A NZ ROPS attracts zero tax in New Zealand ; it is a tax neutral territory
  • Avoids all UK taxes as long as you remain tax resident outside the UK
  • 30% tax-free cash lump sum available at age 55; the rest has to provide an annual income for life
  • No taxes on growth or death
  • Pooled investments in GBP based on your risk tolerance
  • Freedom of currency choice: choose the currency of your pension plan
  • Strong regulations under the FMA in NZ
  • 100% goes to nominated beneficiaries upon death and you can choose the percentages of any pension shared out

Click here to read more on the DTA clauses for a UK Pension Transfers to Malaysia.

What is the economy like in Malaysia?

The Malaysian economy is a modern state-orientated, but nevertheless fairl open and growing economy. The state plays a significant but declining role in guiding economic activity through macroeconomic policy. In 2007, the economy of Malaysia was the 3rd largest economy in S-E Asia and 29th largest economy in the world by purchasing power parity with GDP for 2008 of $222 billion and a growth rate f between 5% and 7% over the last 5 years.

In 2009, GDP per capita (PPP) of Malaysia stood at US$14,900. In 2009, the nominal GDP was US$383.6 billion and the nominal per capital GDP was US$8,100. As one of three countries that control the Strait of Malacca, international trade plays a large role in its economy. Malaysia used to be the largest producer of tin, rubber and palm oil in the world. Manufacturing is still very important to the country’s economy. Malaysia is the world’s largest Islamic banking and financial centre.

qrops-in-malaysia

What is the Tax on QROPS Malaysia?

A QROPS in HK, NZ and Malta attract zero tax in Malaysia as foreign pensions are not taxed in Malaysia. It is important to move out of a UK pension scheme though to avoid the taxes on death in the UK. Also, stops other changes in future UK tax regulations affecting you.

What taxes do I have to pay on my pension as a British expat living in Malaysia?

Taxes for foreigners living as a resident in Malaysia (more than 182 days per year) is separated between tax on income derived from sources in Malaysia and tax on income received in Malaysia from overseas.

Income remitted into Malaysia from overseas by a resident individual, a trust body, a cooperative and a Hindu Joint Family can be exempted from income tax.

A Recognised Overseas Pension Scheme (QROPS / ROPS) is exempt from taxation in Malaysia.

Other taxes in Malaysia are listed below for non-pension monies.

Personal Income Tax Rates in Malaysia

An individual is taxed on his chargeable income at graduated rates from 2 % to 30% after the deduction of tax relief. An individual with chargeable income of less than RM 2,500 is taxed at zero rate.

This means that if you transfer your UK pension offshore to a safe jurisdiction such as Malta or Hong Kong, you can avoid all taxes on your pension as it is set up as a trust and your retirement benefits will be paid out gross; this will be a non-taxable event as the income is remitted into your local Malaysian bank account.

“A QROPS attracts zero income tax in Malaysia and avoids all UK taxation as long as you remain tax resident outside the UK.”

Taxation in Malaysia

Corporate tax in Malaysia runs at 25%. Personal income tax for those working in Malaysia runs at between 0% and 26%, whilst sales tax is between 5 and 10%.

However, there is zero income tax on a QROPS in Malaysia and avoids all UK taxation. This includes offshore QROPS such as Malta or NZ QROPS as well as the local Malaysian QROPS.

What is a QROPS Malaysia?

A Qualifying Recognized Overseas Pension Scheme (QROPS Malaysia) 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, the reporting requirements to HMRC cease.

If you are living in Malaysia at the moment, you can take advantage of your offshore address in order to move your UK pension into a QROPS to avoid further UK taxes down the line. A QROPS for British expats living in Malaysia is one of the best vehicles to avoid UK taxes if you are considering living or retiring abroad.

Malaysian QROPS

The Malaysian Government Pension Scheme – Employees Provident Fund (EPF)

You can see the full QROPS list here. There is only one Qualifying Recognised Pension Scheme in Malaysia and that is the government ‘Employees Provident Fund’ (EPF). Click here for more information on the Employees Provident Fund. It may take some time to load. You have various options and can withdraw early at 50 or 55 as well as use monies to build a house, reduce your mortgage, due to ill health, if you leave Malaysia or to make Hajj if you are a Muslim. Seeing as it allows all this, it is our opinion that it fails HMRC’s rules for being a ROPS and will be removed from the list in future. It may also be subject to a 55% unauthorised tax charge if you draw benefits.

Retirement Benefits of a Government Malaysian Pension Scheme

All EPF contributions will be paid dividends until the member attains the age of 75 years. A minimum dividend of 2.5% is assured by the government. The dividend given to you is based on monthly and yearly balances.

The dividend for every member’s account is calculated based on aggregate daily balance and would be paid in Ringgit. Click here to see the Employees Provident Fund Retirement Benefits.

However, you may be better off to transfer to a Malta QROPS which would keep your pension in GBP. You could invest in almost anything you want: shares, ETF’s, mutual funds, hedge funds, UK gilts, US treasuries, bond funds, high interest bank deposits and even commercial property. It should be possible to target a 7% return per year. Furthermore you can take a 25% tax-free lump sum upon at 55 and Malta has flexible drawdown, so you can access 100% of your pension monies any time you like after 55.

To find out more about QROPS Malaysia, please contact us.

Pension tax relief for British expats in Malaysia, QROPS Malaysia article written by QROPS Specialists.

QROPS Malaysia for British Expats Avoiding Taxes by

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