QROPS Spain | UK pension Transfers to Spain in 2020

QROPS Spain

Transferring a UK Pension to Spain

There are no QROPS in Spain on the UK government’s recognised overseas pension schemes notification list ( 3rd July, 2020).

For residents in Europe, we recommend transferring a UK pension scheme to a QROPS in Malta. This is a regulated pension scheme and retirement benefits can be received anywhere throughout the European Economic Area (EEA) with no tax deducted at source.

Moving to Spain | UK Pension Transfers to a European Pension Scheme

If you are moving to Spain, it is advisable to transfer your pension from a retirement portfolio based in GBP to a retirement portfolio based in EUR.

We recommend transferring UK pensions to a QROPS in Malta. Pensions in Malta are regulated by the Malta Financial Services Authority (MFSA).

Your pension monies can be paid out in EUR to a local bank in Spain.

Why Transfer to a QROPS in Spain?

Reasons you may want to move your pension fund (also known as a ‘pension pot’) overseas to a QROPS:

  • your UK pension scheme is being closed or wound up
  • you want to transfer to a better pension scheme
  • you have pensions from more than one employer and want to bring your pension together under one platform which is more easily managed
  • you’re moving to Spain and want to move your UK pension to a pension scheme in Europe
  • you are already resident in Spain and want to move your UK pension to a pension scheme in Europe
  • you want to move your pension out of the UK and into a regulated pension scheme in Malta
  • you want to move your pension out of a UK retirement portfolio in GBP to a European retirement portfolio in EUR

Tax on a Malta QROPS for Residents in Spain

  • No tax on death at source
  • No tax on growth
  • There is a double taxation agreement between Spain and Malta
  • Local taxes in Spain apply when receiving retirement benefits

Tax on Transfer

There is no tax on transfer under current rules. 

However, there is an Overseas Tax Charge (OTC) which can apply if you leave the European Economic Area (EEA) within five years of transferring your pension scheme.

The European Economic Area (EEA) is made up of any EU member state including Spain, as well as Liechtenstein, Norway and Iceland.

So, only move your pension scheme to a QROPS in Malta if you intend to stay in Europe for a period of five years or more, otherwise there is a 25% Overseas Tax Charge or “exit tax” which will be applied.

How to Transfer My UK Pension to a QROPS

Please contact a regulated adviser who will provide you with the necessary forms to begin the process. Your adviser will guide you through the process and make recommendations based on your circumstances.

What happens to my QROPS in Malta if I return to the UK?

If you ever return to become resident in the UK, you have the ability to transfer your pension back to a UK Self Invested Personal Pension (SIPP) or you can leave your pension in a QROPS in Malta, however it would incur UK tax.

Please contact us for more information.

Which UK Pensions Are Taxed in Spain?

If you are tax resident in Spain, your UK state pension and any occupational pension income will be taxable only in Spain and not in the UK, under the terms of the UK-Spain Double Taxation Treaty. 

UK Government service funded pensions (for example, civil service, local government schemes, fire service, police and most teachers) remain liable only to UK tax and are not taxable in Spain.

Funded public sector schemes can be transferred to a QROPS.

Unfunded public sector schemes (e.g. NHS, civil service, teachers and armed forces) cannot be transferred to a QROPS.  

Income Tax in Spain (2019)

Savings taxable income is taxed at the following rates:

  • 19% for the first EUR 6,000 of taxable income.
  • 21% for the following EUR 6,000 to EUR 50,000 of taxable income.
  • 23% for any amounts over EUR 50,000.

For general taxable income, progressive tax rates are applied (which are the sum of the applicable rate approved by the state and the applicable rate approved by each autonomous community of Spain in their progressive tax rate scales). Tax liability may therefore differ from one autonomous community to another.

The following tables show the tax scale for withholdings approved by the state. This scale can be used as a guideline of the progressive tax rates applicable for the general taxable base. For the reasons stated above, the scale applicable in the corresponding autonomous community of Spain should always be consulted to calculate the total progressive tax rate.

Tax scale for withholdings applicable in 2019:

i) General Income:

 

Rate Bands

Income Tax Rate in 2019 

 

 
 

EUR

                                       %    

0 – 12,450

19%

 

 

12,450 – 20,200

24%

 

 

20,200 – 35,200

30%

   

35,200 – 60,000

37%

   

60,000+

45%

   

These rates apply to general taxable income. Different rates may apply depending on the region (“Comunidad Autónoma”) where the taxpayer is resident and will be applied on the taxpayer’s annual income tax return.

Please contact us for more information concerning QROPS.