The UK HMRC has without warning de-registered all of the QROPS which were registered in Cyprus. This has come as a complete surprise to the Cypriot pension industry which thought that it had escaped the strong arm of the HMRC.
New regulations brought in by the UK tax authorities back in April 2012 resulted in 300 Guernsey registered QROPS being immediately removed from the HMRC approved list. This was as a consequence of residents and non-residents being taxed differently on their pensions in Guernsey. This was in contravention of the rules laid down by the HMRC whereby from April 2012 all residents and non-residents must be taxed the same.
It can only be assumed that HMRC has taken a similar stance now with Cyprus. Because up until last month all benefits received under a Cypriot QROPS was taxed at 5% for non-residents only. Non-residents in Cyprus were defined as individuals either living abroad, non Cypriot passport holders or those who were not conducting economic activity in Cyprus. If you have already registered and transferred your UK pension into a Cypriot QROPS your position will not have changed.
The best option we believe now for individuals looking to transfer their UK pension into a QROPS remains Malta. This is for a number of reasons including the double taxation agreements which are held with over 60 countries with Malta. Furthermore you will not be liable to pay the UK inheritance tax of 55% on death and income tax of up to 50% on benefits. With a Maltese QROPS you will be able to benefit from 0% tax on income and capital gains. If you are then still wanting to live in Cyprus you will then only be liable for 5% income tax. In some circumstances it may be better to transfer your pension into a QROPS held in another country such as Gibraltar – please contact us for more information.
In summary we shouldn’t be surprised that the UK authorities have removed the Cypriot QROPS – there are still many options still available to you.
Please don’t hesitate to get in touch and speak to one of our specialist QROPS advisers here.