QROPS Portugal for British Expats in Portugal
British expats living in Portugal or wishing to retire in Portugal can now transfer their pension into a QROPS Portugal to avoid UK taxes. British expats living or retiring in Portugal can take advantage of their offshore status and transfer their UK pension offshore to somewhere secure like Malta, an EU country and will no longer have to pay UK taxes on their pension if they stay offshore. The main benefit is avoiding 55% tax upon death that the UK imposes as well as UK income taxes. You can also move your pension into EUR rather than GBP, so that your pension income doesn’t increase and decrease with currency moves.
Even Portugese who have worked for a UK company and built up a suibstantial private pension can move to a QROPS to avoid 55% tax upon death and UK income taxes which are typically 20% – 45%.
Why live or retire in Portugal as a British expat?
Nearly 50,000 Brits live in Portugal. Portugal is defined as a Mediterranean climate and is one of the warmest European countries – the annual average temperature in mainland Portugal varies from 13 °C (55.4 °F) (in the north) to over 18 °C (64.4 °F) (in the south and on the Guadiana river basin). The Algarve, separated from the Alentejo region by mountains reaching up to 900m in altitude has a climate similar to that of the southern coastal areas of Spain. Portugal has 12 national parks and 9 natural reserves. Portuguese cuisine is diverse. The Portuguese have a culture of good food and throughout the country there are myriad good restaurants. Portuguese wines have received international recognition since the times of the Roman Empire.
Portugal is a developed country with an advanced and high-income economy, with a very high Human Development Index. It has the world’s 19th-highest quality-of-life, according to the Economist Intelligence Unit, and it is one of the world’s most globalized and peaceful nations. It is member of the European Union and the United Nations, as well as a founding member of the Latin Union, the Organization of Ibero-American States, OECD, NATO, Community of Portuguese Language Countries and the Eurozone.
Many British workers who go over to Portugal with their companies decide to retire in Portugal. A QROPS helps steady their income by denominating it in EUR as well as avoiding the 55% tax upon death that the UK government imposes.
The Benefits of a QROPS Portugal
What are the benefits of a QROPS Portugal Pension Transfer for British expats in Portugal?
• Avoid UK income tax
• 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 Malta, an EU country which has a DTA with Portugal, so your pension avoids UK tax and is paid gross.
What is QROPS Portugal?
A Qualifying Recognized Overseas Pension Scheme (QROPS Portugal) 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. A QROPS in Malta is the recommended destination for British expats n Portugal.
If you are living in Portugal 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 is an appropriate legal tax planning vehicle to avoid UK taxes if you are considering living or retiring abroad.
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- Avoids UK income tax of 0% – 50% and 55% tax upon death in the UK
- Due to the Double Taxation Agreements between Portugal and Malta, your pension is paid out gross with no tax taken off. Then you can remit to an offshore bank account or into a bank account in Portugal at which point you pay income tax in Portugal.
- 100% of pension pot can be passed on as a lump sum upon death to any named beneficiaries you want – normally your spouse or children
- Much wider range of investments available. You can purchase most shares, ETFs, bond funds, hedge funds, etc or just sit your pension in cash.
Tax on a QROPS Portugal
You pay tax on your worldwide income if you spend more than 183 days per year in Portugal. Non-residents pay a flat rate 25% on income.
British expats living in Portugal over 183 days per year pay:-
Income (EUR) Progresive Tax Rate (%)
0 – 7,000.00 14.5
7,000 – 20,000 28.5
20,000 – 40,000 37
40,000 – 80,000 45
You can find the latest Portugese income tax rates from the Governo de Portugal’s web site.
Are There Any QROPS in Portugal?
All of the QROPS in Portugal are for group pension schemes. You can see the list here.
You can move your QROPS to Malta though. Malta is an EU sovereign state with a double taxation agreement with Portugal which means your QROPS is paid out in Malta gross, free from tax.
What happens to my QROPS if I retire outside of Portugal?
You still avoid 55% tax upon death if you retire outside the UK. Your income tax circumstances would depend on the country you retire to and it’s tax relationship with Malta. If you ever return to live permanently in the UK, your pension will simply return to UK Self Invested Pension Plan (SIPP) rules and you would likely get a much reduced tax bill upon death.
For a free pension transfer analysis, please send an email to firstname.lastname@example.org
QROPS Portugal article written by QROPS SpecialistsQROPS Portugal for British Expats to Avoid UK Taxes on Their Pensions by Richard Malpass