QROPS Portugal | UK Pension Transfers To QROPS for British Expats living in Portugal
British expats resident in Portugal and Portguese employees who have worked in the UK can transfer their UK pension schemes to a regulated pension scheme in Malta to a pension scheme based in euros.
Transferring a UK Pension to Portugal
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 Portugal | UK Pension Transfers to a European Pension Scheme
If you are moving to Portugal, it is advisable to transfer your pension from a retirement portfolio based in GBP to a retirement portfolio based in EUR.
We recommend a QROPS in Malta. Pensions in Malta are regulated by the Malta Financial Services Authority (MFSA).
Your pension monies will be paid out in EUR to a local bank in Portugal.
Why Transfer to a QROPS in Malta as a Resident in Portugal?
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 Portugal and want to move your UK pension to a pension scheme in Europe
- you are already resident in Portugal 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 Portugal
- 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 upon 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 send to your UK pension scheme administrator to begin the process. Your adviser will guide you through the process and make recommendations based on your circumstances.
Please contact us for more information.
Non-Habitual Residents in Portugal
Brits with Non-Habitual Residency (NHR) will receive a flat rate of tax of 10% on their foreign pension income for those who acquire Portuguese residence after March 31, 2020. The rate is 0% if you attained NHR status before this date.
This applies to all non-Portuguese pension income and withdrawals, including lump sums.
The Non-Habitual Residence Scheme
The Non-Habitual Residents (NHR) scheme was set up to attract foreigners to come and live in Portugal.
Income tax is a flat rate of 20% under certain conditions if you are working in Portugal under the NHR scheme* (see below). The tax on a QROPS is a flat rate 10%.
Advantages of Moving to Portugal
Portugal is a popular retirement destination for British expats looking to retire abroad due to its climate, people and lifestyle.
There are also other tax advantages if you apply for the Non-Habitual Resident Scheme.
NHR Scheme Tax Guide
• There is a special tax rate of 20% applicable to employment and self-employment income derived from a “high value-added activities” exercised in Portuguese territory, as per a list published by the Portuguese tax authorities;
• employment income from a foreign source will be exempt from taxation, if such income is taxed in the State of source;
• tax exemption (with progression) for foreign-source income (professional income, pension, rental income, capital gains, interest, dividends, as well as other investment income), provided certain conditions are met. In most cases, capital gains on the sale of securities are taxable at a flat rate of 28%;
• no specific inheritance or gift tax; full tax exemption for gifts on inheritance to spouse, descendent or ascendants; Inheritance or gift to other individuals will be either not taxable or subject to a flat 10% Stamp Tax rate;
• no wealth tax and free remittance of funds either in Portugal or abroad
Applying for EU Residency in Portugal
Both EU/EFTA and non-EU residents are eligible to apply for permanent residence in Portugal after five years. The process is more straightforward for EU/EFTA citizens; you can read more here regarding Portuguese immigration policy for EU nationals and family.
Many British workers who move to work in Portugal with their companies decide to retire in Portugal. In such circumstances, it may be prudent to look into moving your pension to Europe.
Income Tax Rates in Portugal (2019)
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||Progressive Tax Rate (%)|
|0 – 7,091.00||14.5|
|7,091 – 10,700||23.0|
|10,700 – 20,261||28.5|
|20,261 – 25,000||35|
|25,000 – 36,856||37|
|36,856 – 80,640||45|
You can find the latest Portuguese income tax rates from the Governo de Portugal’s web site.
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, but it would incur UK tax.
For more information, please send us an email.