QROPS South Korea | UK Pension Transfers to South Korea
QROPS South Korea: Transfer your UK pension to a Recognised Overseas Pension Scheme (ROPS) in Hong Kong to pay zero income tax in South Korea, zero tax on growth and zero tax on death of your pension scheme.
British expats living in South Korea or wishing to retire in South Korea can now transfer their pension into a QROPS South Korea to maximize pension tax relief. British expats living or working in South Korea can take advantage of their offshore status and transfer their UK pension offshore to somewhere secure like Hong Kong and will no longer have to pay UK taxes on their pension as long as they remain tax resident abroad. Furthermore, if they remain tax resident in South Korea, their income tax bill will be zero thanks to the Double Taxation Agreement between Korea and Hong Kong which gives the taxation rights to Hong Kong.
Koreans who have worked in the UK and South Koreans working in the UK can also transfer their hard earned UK pensions offshore as well to avoid UK taxation. You can see Korean jobs in the UK here.
Why live or retire in South Korea as a British expat?
More than 3,400 British expats live and work in South Korea. South Korea has a market economy which ranks 14th in the world by nominal GDP and 12th by purchasing power parity (PPP) which makes it one of the largest economies in the world with global companies such as Hyundai, Kia, Daewoo and Samsung. It is a developed high income country and is a member of OECD. South Korea is one of the Asian Tigers, and is the only developed country so far to have been included in the group of Next 11 countries.
South Korea had one of the world’s fastest growing economies from the early 1960s to the late 1990s, and South Korea is still one of the fastest growing developed countries over the last decade along with Singapore, HK and Taiwan; the other three members of Asian Tigers. South Koreans refer to this growth as the Miracle on the Han River.
For the British expats in South Korea, you can take advantage of your offshore address to reduce UK tax on your pension as well as protect your wife and children from high taxation should anything happen to you. One of the benefits of a QROPS South Korea is the availability to hold multiple currencies, so you could hold a portion of your pension in Pounds, Dollars, Euros or Rand or hold the entire pension in one currency.
Transferring a UK Pension to Hong Kong for a Resident in South Korea
If you are a British expat in South Korea or if you are Korean returning to live in South Korea after a stint working in the UK, you can transfer your pension to Hong Kong to avoid any tax on your retirement pot at retirement age.
The HK-South Korea Double Taxation Agreement clearly gives the taxation rights to South Korea, as can be seen under article 17:
Pensions and other similar remuneration (including a lump sum payment) arising in a Contracting Party and paid to a
resident of the other Contracting Party in consideration of past employment or self-employment and social security
pensions shall be taxable only in the first-mentioned Party
So, the taxation rights go to Hong Kong and since the tax rate is zero in Hong Kong, a Korean pension would not be subject to tax on income, growth or death.
Benefits of a HK ROPS for a Resident in South Korea
- Zero income tax as long as you remain tax resident in South Korea
- Zero tax on growth
- Zero tax on death as long as you remain tax resident outside the UK
- If you return to the UK, death tax may be significantly less due to time abroad
- Choose the investments you want: you can self direct pension investments, but they need to be signed off by the HK pension trustees
- Choose the currency of your investments and retirement benefits
- 100% gets paid out to chosen beneficiaries upon death
- Regulated by the HK MPFA
- Transferring a UK Pension to New Zealand for a Resident in South Korea
Another alternative is to transfer your pension to New Zealand. New Zealand ROPS don’t have the free choice of investment as HK ROPS as pension funds are pooled.
NZ is a tax neutral QROPS / ROPS jurisdiction, so it doesn’t matter where you live in the world, tax will always be zero in New Zealand, you would then pay local income taxes, in this case you would pay South Korean income tax on your pension. What are the personal income tax rates in South Korea?
Personal Income Tax Rates in Korea:
Korea has progressive tax rates, which in 2010 were as follows:
- Earnings up to W12million Tax Rate is 6%
- Earnings from W12 million to W46 million Tax Rate is 15%
- Earnings from W46 million to W88 million Tax Rate is 24%
- Earnings over W88 million Tax Rate is 35%
- Earnings over W300 million Tax Rate is 38%
Flat Tax: Foreign residents can choose to pay a flat rate of income tax of 16.5% instead of the progressive taxes as described above
Resident Surtax: All residents (Korean and Foreign) pay a resident surtax, which is 10% of their taxable income.
Korean Income tax is payable on worldwide income including pension income. Up to 3,000,000 Wong per year is non-taxable on any pension. Some meals, car expenses, housing, medical bills and education expenses are also tax deductible. You can see all the deductions on p. 50 here.
Tax residency in South Korea
Most foreign employees are required to pay Korean income taxes, which are generally withheld and paid by the employer. Teachers, from certain countries with tax agreements with Korea, working for colleges or universities are sometimes entitled to an exemption from paying Korean taxes for a limited number of years. You will need to check with your own embassy to find out if your country is one of them and to confirm how the wording of that particular agreement affects your tax situation. This provision does not apply to teachers working for hagwons or private companies in South Korea.
Foreign residents who have stayed in South Korea for longer than five (5) years during the last ten (10) year period are taxed on their world-wide income. However, foreign residents who have stayed in Korea for five (5) years or less during the last ten (10) year period are taxed on Korea-source income and foreign source income as well only if the foreign source income is paid by a Korean entity or transferred to Korea.
Will I receive my UK state pension in South Korea?
Yes. Thanks to modern banking, you can get your state pension paid anywhere in the world. However, if you get your state pension paid into a bank in South Korea, it will not increase in line with CPI, the new measure of inflation in the UK. Effectively, your pension will be frozen.
This is the same in Australia, NZ, South Africa and many other countries that British expats live in, so don’t expect it to happen soon. Click here to learn more about frozen pensions.
Can I Claim Back My NPS Pension Contributions I Paid in South Korea?
As it stands, if you are a British expat returning home to the UK or elsewhere, you cannot transfer your NPS Korean pension contributions to the UK.
British expats who work in South Korea or who have worked in South Korea in the past are required by law to contribute to the Korean National Pension Scheme. The only way British expatriates will ever see any return on this money is if you work for at least 10 years in South Korea and subsequently retire there at 65. However, for British expats who return home or retire in a different country, these contributions are lost.
This may seem unfair, especially as expats from other countries such as the USA, Canada and more recently Australia, have the good fortune to be able to claim back a lump sum payment of their pension contribution when they leave South Korea. So, if you lobby your local MP’s perhaps things may change in the future.
Please click here to sign a petition to allow a pension lump sum payment for Brits leaving South Korea to be paid out. You can also contribute to the conversation andlike us on Facebook.
Do I have to Pay Tax on My QROPS in South Korea?
If you transfer your pension to a ROPS in Hong Kong, there is zero income tax in South Korea due to the South Korea-HK DTA. There would be no tax on growth or death as long as you remain tax resident outside the UK.
If you transfer your pension to a ROPS in New Zealand, you would pay South Korean income tax. There would be no tax on growth or death as long as you remain tax resident outside the UK.
If you transfer your pension to a ROPS in New Malta, you would pay South Korean income tax. There would be no tax on growth or death as long as you remain tax resident outside the UK.
What is a QROPS South Korea?
A Qualifying Recognized Overseas Pension Scheme (QROPS South Korea) 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. These reporting requirements are undertaken on your behalf by the QROPS trustees in any case.
If you are living in South Korea at the moment, you can take advantage of your offshore address in order to move your UK pension into a QROPS South Korea to avoid further UK taxes down the line. Koreans who have worked in the UK and built up a substantial pension as well as British expats living in South Korea should consider a QROPS transfer for tax efficiency.
What Happens to My QROPS / ROPS If I Move Back to the UK or Elsewhere
If you move back to the UK, your QROPS / QROPS would face UK income tax. You would likely pay little in the way of UK death taxes due to time spent abroad, but ask us for a brochure explaining how that would work.
If you move to another country, you usually would pay income tax in your country of residence, but it depends on the Double Taxation Agreements between your ROPS jurisdiction and your country at retirement, as the DTA’s take precedence over local personal income tax rules.
For enquiries, please send email to firstname.lastname@example.org
UK Pension Transfers to South Korea, QROPS South Korea article written by QROPS Specialists.QROPS South Korea Pension Transfer for British Expats to Avoid Paying Taxes by Richard Malpass