Move Your UK Pension to Gibraltar QROPS for Bangkok Expats
Bangkok expats should consider moving their UK pension to a Gibraltar QROPS, not a Malta QROPS as claimed by some other sites. This is exactly why it is important to employ QROPS specialists to look into your situation. In fact, in many cases and especially for some smaller pensions or final salary pensions, you may even be better off leaving your pension in the UK. But, for larger pots, British pensioners resident in Thailand should consider a Gibraltar QROPS.
Stop press 2016: A Hong Kong QROPS or New Zealand QROPS is now more suitable as both have Double Taxation Agreements with Thailand. Please email us for the latest QROPS fees and options.
Why Not a Malta QROPS for Bangkok Expats?
If you are retiring in Thailand, a Malta QROPS is not going to cut it. Firstly, for Malta QROPS, they will require you to declare that you are tax resident in Thailand. Most pensioners won’t have businesses or work in Thailand, so won’t have a tax certificate to show they are paying tax in Thailand. Without this, pensioners in Thailand will end up paying Maltese income taxes. Most pensioners would pay 20% to 30% tax on their Maltese pension income. This could be as high as 35% on any pension income. So, in fact, you could end up paying more tax than if you just held your pension in the UK. Only very small pension pots (under 14,000 EUR total pension pot) would avoid Maltese taxes.
There is no Double Taxation Agreement between Malta and Thailand. The treaty is still in negotiation and if it is passed, it would mean you pay Thai income tax on your pension income. This could be more than you would pay in the UK as you wouldn’t get the same high personal allowances.
Why a Gibraltar QROPS is a Better Option for Bangkok Expats
For British expats in Bangkok and Thailand, a better option would be to transfer your UK pension to a QROPS in Gibraltar. A QROPS in Gibraltar is only taxed at source in Gibraltar at a flat rate of 2.5%. There is no tax on death and the investment options for your pension income are almost unlimited. There would be no tax on pension income in Thailand.
How Does Thailand Tax Foreign Pensions?
How is income tax assessed in Thailand?
We need to look at Thai law in detail to see where the determination of the Thai tax treatment for international cross-border pension payments starts. Section 41 of the Thailand Revenue Code prescribes that a resident of Thailand, who earns income from a post or an office held abroad or a business carried out abroad or from property situated abroad, shall, upon bringing that income into Thailand, pay income tax in Thailand. Section 41 defines a resident as a person who resides in Thailand for a period(s) that aggregates 180 days or more in the tax year which runs from January to December.
Residents and non-residents are taxed on their assessable income derived from employment or business carried out in Thailand, regardless of whether the income is paid in Thailand or paid into a foreign company or account.
However, and this is the important part, residents who derive income from outside Thailand (i.e under a Gibraltar QROPS), will be subject to tax only where it is remitted into Thailand in the year it was derived.
Since QROPS hold existing pension monies that were derived in the past, a QROPS would be exempt from Thai taxation. A Malta QROPS would not help though, as you would pay income tax in Malta without a letter from the Thai authorities that you pay tax there, whereas a Gibraltar QROPS would pass the test and you would just pay 2.5% income tax at source. This is a lot better than the 20% – 45% income tax in the UK and up to 35% in Malta.
You can see PwC’s paper on Thai taxation here.
Opening a Thai Pension Plan
Some foreigners who work in Thailand can also opt to open a Thai pension plan. These are known as LTF’s or Long Term Funds. You can also open RMF’s or Retirement Mutual Funds. If you are working in Thailand and you are planning to stay long term, the tax deductibility of these funds may make them a tempting investment. However, you should tread with caution, especially if you are unsure about where you will retire in Thailand. You can save around THB 370,000 or about USD 12,000 this year in Thai taxes by contributing to these tax-advantaged funds.
Both LTF’s and RMF’s in Thailand provide Thai tax deductions on contributions in the current Thai tax year and earnings grow free of Thai tax. Subject to meeting the LTF or RMF fund requirements, funds can also be withdrawn tax-free. However, often money must be vested for five years before you can touch them. These funds are always denominated in Thai Baht.
Also, If you fail to meet the required minimum contribution schedule or withdraw funds prior to reaching age 55, or have not met the five-year holding requirement, you will have to pay back any tax deduction you received along with penalty fees. In addition, any capital gains will be subject to a 10% tax.
All the big banks do LMF’s. Here is an example of Kasikorn Bank’s LTF’s along with their LTF performance.Why Bangkok Expats Need a Gibraltar Not a Malta QROPS by Richard Malpass