UK Pension Transfers to Malta
British expats living abroad can now transfer their pensions to a QROPS Malta to avoid UK taxes. A Qualifying Recognized Overseas Pension Scheme in Malta avoids up to 45% tax upon death imposed in the UK after 75 and also avoids UK income taxes of up to 45%. But, you have to be careful of the Double Taxation Agreements with the country you live in to make sure you don’t get hit with a high income tax on remittance in the country you reside in or at source in Malta. Malta currently has 65 Double Taxation Agreements with countries around the world, but you need to study each individual Double Taxation Agreement to understand where the tax liability is. The tax may be imposed in Malta, shared with Malta or be taxed in your country of residence. Gibraltar QROPS, New Zealand QROPS or Hong Kong QROPS may be a better choice in many cases, particularly if you live in a country which does not have a Double Taxation Agreement (DTA) with Malta. In those circumstances, you would pay tax in Malta.
Under most circumstances, if a Double Taxation Agreement exists, a transfer to a QROPS in Malta would mean 0% tax in Malta and 0% tax in the UK.
However, some of the DTA’s mean that the tax could be shared or that the tax could be imposed in Malta, in which case the tax would be between 0% and 35%, however the withholding tax is 25% if no Double Taxation Agreement exists.
So, a Malta QROPS is certainly not a one size fits all pension transfer jurisdiction for QROPS and a suitability report should be prepared to show the options available.
However, in general, a Malta QROPS is suitable for most UK pension transfers to EU destinations due to the strong Double Taxation Agreements and because Malta is in the EU.
Are QROPS in Malta Safe?
After the bank crisis in Cypus, the first question should be is Malta a secure, safe offshore financial centre? Well, first of all, Malta is more of an onshore financial centre within the EU. Secondly, according to the Central Bank of Malta’s Financial Stability Report, the five core Maltese banks hold assets that are only 223% the country’s GDP, which is half of Europe’s average. The Maltese core banks are nowhere near their Cypriot counterparts: they are smaller, more conservative and generally risk-averse. They also have a lower exposure to Greek debt.
“Malta could be the future Dubai of the EU,” Klaus Pedersen, the Internationalization Manager at Malta’s Chamber of Commerce told Al Arabiya English on Wednesday.
At the start of 2013, the Chamber launched a Middle East Business Council to tap into business links between the island and Arab states, with a particular focus on the Gulf countries.
Malta could be an economic tax efficient hub due to its proximity to Europe, the North East and Africa whilst also having over 65 Double Taxation Agreements. The country has a credit rating of BBB+. They are also attracting business in communications and IT.
Why Transfer to a QROPS in Malta?
If you are living or working or intend to retire anywhere in the EU, but are not resident in Malta, you can transfer into a QROPS in Malta to avoid UK taxes. You can then pay your pension income into an offshore account or into a local bank in the EU country you live in.
Furthermore, you can choose the currency your pension is denominated in after a move to a QROPS in Malta. This is great if you live in Spain or the EU. Your pension can be held in Euros, which will minimise currency fluctuations. Alternatively, you can leave in GBP or hold in USD. You also get a much wider choice of funds to invest in. You can hold mutual funds, unit trusts, hedge funds, ETF’s and shares within your portfolio on most of the major exchanges around the world or if you want safety, you can buy government treasuries, UK gilts, corporate bonds or even an international annuity.
You can also move your current pension or pensions ‘in specie’ into a QROPS, which means that you can move your funds currently held in a SIPP into a QROPS in Malta. If you have multiple pensions, you can transfer them all into one QROPS and manage them all in the one place.
History of Malta QROPS
Malta has a long and distinguished affiliation with the UK as a trusted and reliable ally in war and peace. The country has two official languages, Maltese and English, with Maltese being considered the national language. Malta gained independence from the United Kingdom in 1964 and became a republic in 1974, whilst retaining membership in the Commonwealth of Nations. That is one of the benefits of a Malta QROPS with all of the administrative staff being able to speak English.
Malta is a member of the United Nations (since 1964) and a member of the European Union (since 2004). Malta is also party to the Schengen Agreement (since 2007) and member of the Eurozone (since 2008). The Schengen Agreement allows freedom of movement of labour and capital which paved the way for modern Qualifying Recognized Overseas Pension Schemes (QROPS). The idea was that if you retired or moved abroad to Europe, it didn’t make sense to leave your pension in the UK. The idea of a QROPS is not to avoid taxes, but to move to a place where it is taxed appropriately.
Malta planned their first QROPS at the end of December in 2009. Even though the Maltese regulators gave QROPS in Malta the green light, it took until March the following year before the first two schemes launched and open their doors to UK pension transfers. But, it wasn’t until the new QROPS rules changes in April 2012 when over 300 Guernsey QROPS and Isle of Man QROPS were removed that Malta business really started to pick up.
QROPS in Malta for British Expats Retiring in Malta
QROPS Malta pensions for British expats living in Malta and other countries have been available on the island since December 2009. The offshore financial centre is steadily becoming more popular with a reputation for providing a competitive tax regime, a stable economy as well as clearly defined financial regulations.
Malta QROPS follow the same rules as any other QROPS offshore pension scheme. The Inland Revenue lays down the rules a QROPS scheme must follow for inclusion as a registered pension scheme on the UK QROPS list. Each individual QROPS scheme is managed by trustees who determine the terms and conditions of their specific QROPS within the framework provided by HMRC. This means that the administration of a QROPS can vary from one scheme to another. Email us for the latest Malta QROPS fees and Malta QROPS list.
For British expats who retire in Malta, they will be exposed to income tax of between 5% and 35% depending on their annual income. However, they will avoid all UK taxes and most importantly, they will be able to pass 100% of their pension pot onto their spouse of any named beneficiaries upon death.
This could also be set up to provide an income for a spouse or child. This is a popular option for those with spouses who aren’t financially competent or have little knowledge of the financial options available. A trust can be set up to pay contributions in the future. If set up correctly, this could actually provide an income for life which could be passed on continually for generations free from inheritance tax.
The Security of a Malta QROPS
The Malta Financial Services Authority (MFSA) was established by law on 23 July 2002. It is a fully autonomous public institution and reports to Parliament on an annual basis. The MFSA has taken over supervisory functions previously carried out by the Central Bank of Malta, the Malta Stock Exchange and the Malta Financial Services Centre to become the single regulator for financial services. The sector incorporates all financial activity including banking, investment and insurance. The MFSA also manages the Registry of Companies and has also taken over responsibility as the Listing Authority.
Over the past decade, Malta has moved from being an offshore to an onshore jurisdiction. It has completed a programme of reforming all its finance sector legislation in line with international best practice and was one of the first six countries in the world to reach an advanced accord on fiscal matters with the Organisation for Economic Co-operation and Development (OECD). As a result of this agreement Malta is NOT considered as a tax haven. It is actively involved with the OECD, the EU and the Commonwealth in modelling global regulatory policy.
Malta’s finance industry has benefited significantly from the country’s national policy of moving to the mainstream. Financial Services is the fastest growing sector of the Maltese economy and one of the most important employers of trained professional staff. This is one of the key reasons that Malta QROPS have become so popular and seem to be well liked by HMRC.
The Insurance Business Act, 1998, and the Insurance Brokers and Other Intermediaries Act, 1998 regulate the insurance sector. The Banking Act, 1994 and the Financial Institutions Act, 1994 regulate the provision of banking and financial services. Under the Prevention of Money Laundering Act, Malta established a financial intelligence analysis unit (FIAU), which reports to the Attorney General. Malta is gradually abolishing bearer accounts.
Why Malta is now one of the top 3 QROPS jurisdictions for UK pension transfers:
Safety and security: Malta is in our opinion the clear choice in terms of robust QROPS legislation.
Key Reasons for a UK Pension Transfer to a Malta QROPS:
The Maltese Financial Services Authority (MFSA) consulted with HMRC to ensure that the domestic pension rules were compatible with HMRC requirements. Only then were the first Maltese QROPS approved locally. Each QROPS is approved individually by the MFSA.
A Maltese QROPS qualifies on the basis that its domestic pension taxation is compatible with HMRC (as above) and that it is in the EU. As Malta is based in the EU, there are no additional subjective requirements that are required for the schemes to remain a QROPS.
HMRC cannot legislate currently or retrospectively against a regulated pension in an EU member state.
The MFSA approve each QROPS individually, the due diligence and capital adequacy requirements ensure that only the most diligent providers can operate a Maltese QROPS. The MFSA ensure continuing compliance through stringent audit requirements, annual reporting and publication of financial statements.
With a wide network of over 65 double tax treaties, a Maltese QROPS does not have to rely on statutory instruments to ensure tax efficient withdrawals.
There have been a number of QROPS that have been removed from the HMRC list. A QROPS in Singapore was removed because it was not registered correctly with the local regulator. A Hong Kong QROPS was removed because it was not set up in line with local Hong Kong pension rules and QROPS in Guernsey have had to work through some issues with HMRC based upon different providers interpretations of the 70% income for life rule.
None of these issues could occur in Malta.
What is a QROPS Malta?
A Qualifying Recognized Overseas Pension Scheme (QROPS Malta) allows your UK pension to be transferred offshore to reduce your tax burden. Effectively, you will no longer pay UK tax on your pension after you have been offshore for 5 years and after 10 years of living offshore, the reporting requirements to HMRC cease. You can draw a higher lump sum of 30% upon transfer if you have been offshore for 5 years and you can also receive ‘programmed withdrawals’ from your QROPS in Malta. You are allowed up to 50% of any increase in income as a lump sum every 3 years. This is figured out by the trustees.
Benefits of a UK Pension Transfer to Malta
What are the benefits of a QROPS Malta Pension Transfer for British expats?
• Avoid 55% tax upon death whilst drawing your pension benefits
• Currency choice. You can choose to have your pension transferred to a QROPS in Malta denominated in USD, EUR or keep it in GBP. If you are in a country in Europe, e.g. Spain, you may wish to have your pension paid out in EUR, so you don’t have to worry about currency fluctuations affecting your pension every year.
• Have the ability to make higher returns with a much wider choice of funds
• Family Protection: Upon death, the entire pension pot gets passed on to your nearest and dearest. You can also set up trusts based on a letter of wishes choosing how that lump sum is paid out.
• Security: Pensions in Malta are regulated by the MFSA and Malta has some of the strongest pension regulations which are also EU approved.
Tax on Your QROPS in Malta
What taxes do I pay in Malta on my QROPS?
Countries Where there is No Tax in Malta on Your QROPS
In these countries, there would be no tax applicable in Malta.
0% tax in Malta and 0% tax in the UK:
Albania, Armenia, Australia, Austria, Bahrain, Belgium, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Finland, France, Georgia, Germany, Greece, Guernsey, Hungary, Iceland, Ireland, Isle of Man, Israel, Italy, Jersey, Kuwait, Lebanon, Libya, Luxembourg, Malaysia, Montenegro, Morocco, Netherlands, Palestine, Pakistan, Poland, Portugal, Qatar, Romania, San Marino, Saudi Arabia, Serbia, Slovakia, South Korea, Slovenia, South Korea, Spain, Sweden, Switzerland, Syria, Tunisia, Turkey, United Arab Emirates, Uruguay, USA
Countries Where there is a shared tax in Malta on Your QROPS in 2013
Tax is shared on a QROPS in Malta for residents of Barbados, Estonia, India, Jordan, Latvia, Lithuania and Singapore.
The tax is shared on a Malta QROPS for residents in Canada and Norway. This is capped however a 15%.
Countries Waiting for Tax Ratification with Malta
Treaties awaiting ratification: Azerbaijan, Bosnia and Herzegovina, Kuwait, Oman, Russia, Thailand, Ukraine, Uruguay.
Countries Where You Would Pay Tax on a QROPS in Malta
Bulgaria, Hong Kong and South Africa have Double Taxation Agreements, but the tax is paid in Malta. All other countries with no DTA with Malta would also pay tax in Malta on any pension income which is received at source in Malta. Tax would be between 0% and 35%. The Withholding tax is 25% if no DTA exists.
Countries where the Tax on a QROPS in Malta is Paid Overseas
Residents of Australia, Ireland and South Korea would pay income tax in those countries on remittance from Malta.
Personal Income Tax in Malta and Malta QROPS
Withholding Tax on Your QROPS if You Live in a Country Which Does Not Have a DTA with Malta
|Pension in EUR||Income Tax Rate|
|€0 to €700||0%|
|€700 to €3100||20%|
|€3100 to €7800||30%|
For Non-Malta Residents (British expats who live outside of UK and Malta)
If you do not live in Malta, your QROPS will usually be paid gross and no Maltese or UK taxes will be applied as long as you live in a country which has a Double Taxation Agreement (DTA) with Malta and that DTA doesn’t specify you have to pay tax in that country. However, you will have to pay the income tax upon drawdown in the country that you live in.
If you live in a country which does not have a Double Taxation Agreement with Malta, the Maltese withholding tax will be applied. If you live in a country which does not have a DTA with Malta for example Thailand, a Gibraltar QROPS may be a better solution.
For Maltese Residents (British expats who live in Malta)
If you are a British expatriate living in Malta or you are a British expat considering moving to Malta which is already an attractive destination for British expats; it is set to become even more attractive as new tax rules have been introduced to further improve an already favourable tax regime.
With no inheritance, wealth, or annual property taxes in place in Malta, British expats often venture there to both work and retire. Now, new changes have further relaxed income tax too.
British expatriates working in Malta will now be taxed at just 15% on all the income they derive from Malta, half as much as the earlier rate of 30%. Any income sourced from outside Malta is completely tax free, as are capital gains from outside Malta.
However, to qualify for this special rate British expats in Malta must meet certain requirements.
The expat must not be a habitual resident or domiciled in Malta. Also, the expat must have professional qualifications or be highly skilled in specific sectors including: Chief Executive Officer, Chief Risk Officer, Chief Financial Officer, Chief Operations Officer, Chief Technology Officer, Chief Investment Officer, Portfolio Manager, Senior Trader/Trader, Senior Analyst (including Structuring Professional), Actuarial Professional, Chief Underwriting Officer, Chief Insurance Technical Officer, Head of Marketing or Head of Investor Relations.
The expat must also claim a salary of £75,000 or more.
For expats who want to retire in Malta there are different requirements and tax rates.
If you are an EU national who is not domiciled in Malta then you have free reign to retire there and enjoy very favourable tax rates. Any capital gains received will be remitted free from tax, meaning that if you retire with the intention of living off capital you can live completely tax free. There also special investment structures that can help you minimise tax.
QROPS Malta. Full List of Countries Which Have Double Taxation Agreements with Malta
Which countries have a Double Taxation Agreement with Malta?
If the country you live in has a Double Taxation Agreement (DTA) with Malta, your pension will be paid gross with no UK or Maltese taxes imposed. If the country you reside in does not have a DTA with Malta, a withholding tax of between 15% and 35% may be taken.
- Czech Republic
- Hong Kong
- Isle of Man
- San Marino
- Saudi Arabia
- South Africa
- South Korea
- United Arab Emirates
- United Kingdom
Treaties awaiting ratification: Azerbaijan, Bosnia and Herzegovina, Kuwait, Oman, Russia, Thailand, Ukraine, Uruguay
Should I Transfer My UK Pension to Malta?
If you live in Malta or in a country which has a Double Taxation Agreement with Malta, then a QROPS pension transfer is a great option to avoid paying UK taxes legally. If you live in a country which does not have a Double Taxation Agreement with Malta, you may be better off transferring to a Gibraltar QROPS or New Zealand QROPS.
Do I need to live and retire in Malta to get the QROPS Benefits?
No, if you move your pension into a QROPS in Malta 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 return to UK Self Invested Personal Pension (SIPP) rules. You will also get time apportionment relief and will pay less tax as you have several opportunities to take higher lump sums or benefits offshore.
Who are the Cheapest Malta QROPS Trustees?
QROPS competition in Malta is now maturing with several candidates who have entered the market, although STM, Sovereign and Brooklands are among the bigger names in the market.
The QROPS market is constantly evolving. In order to get the lowest Malta QROPS fees and figure out which jurisdiction will be most tax efficient and give you the lump sum as well as the pension income you need, you should contact a QROPS specialist.
For enquiries, please send an email to email@example.com
QROPS Malta article was written by QROPS Specialists.QROPS Malta by Richard Malpass