QROPS Russia. UK Pension Transfers for British Expats in Russia
British expats living in Russia or wishing to retire in Russia can now transfer their pension into a QROPS Russia to avoid paying taxes legally. British expats living in Russia can take advantage of their offshore status and transfer their UK pension offshore to somewhere secure like New Zealand and will no longer have to pay UK taxes on their pension if they stay offshore.
Russians working in the UK and returning to Russia can transfer their UK pensions offshore to avoid UK taxation. Russians who have built up a substantial pension can avoid UK tax upon death of 55% and pay the lower tax rate of 13% income tax in Russia rather than the UK tax rate of 20% – 50%.
Russia is the largest country in the world, covering more than one eighth of the Earth’s inhabited land area. Russia is also the ninth most populous nation with 143 million people. It extends across the whole of northern Asia and 40% of Europe, spanning nine time zones and incorporating a wide range of environments and landforms.
Russia has the world’s largest reserves of mineral and energy resources. It has the world’s largest forest reserves and its lakes contain approximately one-quarter of the world’s fresh water.
Following the Russian Revolution, Russia became the largest and leading constituent of the Soviet Union, the world’s first constitutionally socialist state and a recognized superpower that played a decisive role in the Allied victory in World War II. The Soviet era saw some of the greatest technology achievements of the 20th century, such as the world’s first human spaceflight. The Russian Federation was founded following the dissolution of the Soviet Union in 1991, but is recognized as the continuing legal personality of the Soviet state.
Why live or retire in Russia as a British expat?
More than 6,000 Brits live and work in Russia. Russia has the world’s 11th largest economy by nominal GDP or the 6th largest by purchasing power parity, with the 5th largest nominal military budget. It is one of the five recognized nuclear weapons states and possesses the largest stockpile of weapons of mass destruction.
Russia is a great power and a permanent member of the United Nations Security Council, a member of the G8, G20, the Council of Europe, the Asia-Pacific Economic Cooperation, the Shanghai Cooperation Organisation, the Eurasian Economic Community, the Organisation for Security and Cooperation in Europe (OSCE), and is the leading member of the Commonwealth of Independent States.
Russia’s 160 ethnic groups speak some 100 languages, although the Russian language is homogeneous throughout Russia. Here are some tips on moving to Russia, British expats moving to Russia.
QROPS Russia. The Benefits of UK Pension Transfers for British Expats in Russia
What are the benefits of a QROPS Russia Pension Transfer for British expats?
• Avoid UK income tax
• Avoid UK dividends tax
• Avoid UK capital gains tax (CGT)
• Avoid 55% tax upon death imposed in the UK if you die whilst drawing benefits
• 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. You can invest in shares, mutual funds, bond funds, cash etc from most of the world’s major exchanges, e.g. S&P 500, FTSE 100
• 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 which has its own strong financial regulations which are tax efficient, but outside the UK tax net.
What is QROPS Russia?
A Qualifying Recognized Overseas Pension Scheme (QROPS Russia) 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 Russia 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 a tax efficient vehicle to avoid UK taxes if you are considering living or retiring abroad.
What Returns Would I get on My QROPS in Russia?
This would depend on the QROPS and investments you choose. QROPS pension transfers to NZ currently employ a discretionary fund manager with five strategies available depending on your risk profile. This would be suitable for someone who doesn’t have time to look at his investments and just wants a relatively low volatile place to park his investments. Historically, the returns have been in the range of 3% – 5% per year.
For those with a higher risk appetite and especially for younger clients who have a longer time frame in which to make money from the QROPS, it may be prudent to move to a QROPS in Gibraltar. There is a 2.5% income tax compared to New Zealand’s zero tax rate, but you have a freedom of choice of investments. This means you can purchase precious metals ETF’s such as gold and silver, mutual funds, individual shares, hedge funds and bond funds. You could then target a return of 7%++ per year depending on your strategy.
You could also use unilateral tax credit relief to reduce your tax bill. In effect, you could claim the 2.5% tax you paid in Gibraltar against your Russian tax bill effectively reducing your Gibraltar tax bill to zero.
What is the tax rate in Russia?
Russia has a flat tax rate of 13%. The economic development of the country has been uneven geographically with the Moscow region contributing a very large share of the country’s GDP. Another problem is modernization of infrastructure, ageing and inadequate after years of being neglected in 1990s; the government has said $1 trillion will be invested in development of infrastructure by 2020. GDP is estimated to grow by 4.8% in 2011, whilst inflation may be 9.3%.
What tax will I pay on my QROPS in Russia?
- You will avoid UK taxation.
- You will avoid taxation in New Zealand where the QROPS is held.
- Due to the Double Taxation Agreement between New Zealand and Russia, you would just pay the Russian income taxes upon drawdown if you are still living in Russia at that time. The QROPS would grow tax-free.
QROPS Russia. Avoiding Tax on Pensions for British Expatriates in Russia
Do I need to move my pension to Russia?
No. Your pension can be transferred to a secure jurisdiction such as New Zealand where it will be out of the UK tax system and your pension will be paid gross and grow tax free.
Do I need to live and retire in Russia?
No, 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 and you would get time apportionment relief.
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Pension tax relief for British expats, QROPS Russia article written by QROPS Specialists.