Since the introduction of new QROPS legislation in April 2012 we are regularly being asked why are QROPS providers shifting to Malta?
QROPS, otherwise known as Qualifying Recognised Overseas Pension Schemes, are an HMRC offshore pension scheme which can provide an individual with many advantages, including lower tax rates on benefits, no currency effects on income and greater investor freedom.
However in April 2012 the HMRC issued new rules and regulations as they felt that many of the jurisdictions which were providing these pension schemes were not doing so in the spirit of the plans. Guernsey in particular fell foul of these new regulations. The reason being was that under European Union legislation it states that both those who are resident and those who are non-resident must be taxed at the same rate if the pension scheme is held in the same country. However in Guernsey this was not the case and the HMRC subsequently went and removed over 300 of the 313 existing QROPS plans that had previously been authorised by Her Majesty’s customs and excise.
As a consequence of this move by the HMRC the Maltese Inland Revenue has proactively moved to take advantage of the downgrading in Guernsey’s status and has introduced further guidance making sure that they fit clearly with the HMRC’s principles behind the QROPS schemes.
These guidelines, which have been introduced with immediate effect, to the Maltese QROPS legislation include;
- Any person benefiting from a QROPS in Malta must notify and be listed with the Maltese Income Tax and Revenue Office – submitting an annual taxation return.
- The annual tax return needs to inform the Maltese Tax office if any tax has been held back at source or if there is a double taxation agreement held with another country. Malta holds over 60 double taxation agreements with European countries.
- In the annual submission the individual of the scheme must provide detailed information of the double taxation agreement as well as detailing the tax residency of the scheme holder – i.e. a tax residency certificate.
- Any money which is paid from the Qualified Pension Scheme must be made as a retirement benefit.
By changing the guidelines and by taking a proactive approach the Maltese Offshore Pension market has seen an significant rise in the number of people looking for a Maltese QROPS. Furthermore there has been a significant increase in the number of providers who are looking to establish their own Maltese QROPS scheme.
However you need to be careful when looking into transferring your pension into a Maltese QROPS as there are many countries where Malta does not hold a double taxation agreement with. As a consequence you could be liable to pay the 35% tax on benefit in Malta and then be held accountable to pay the tax where you are resident.
It is always our recommendation to seek professional advice when deciding on where to move your UK pension. If you would like to speak to one of our qualified, offshore pension specialists please don’t hesitate to get in touch with us at MyQROPS.net.