QROPS - Don't get caught out by Tax when you retire

[Rock Private Office]

QROPS - Don't get caught out by Tax when you retire

Following the delisting of many QROPS schemes by HMRC due to non compliance withe the 'Spirit' of legislation it seems there is much confusion. HMRC appears most interested in the tax treatment of schemes and will look for proof of taxation (at the same rate as a local citizen) in the country of choice for your retirement before allowing gross payments from your pension.

You may consider the number of Double Tax Agreements (DTA's) in place in the jurisdiction in which your QROPS scheme is based to be key as this appears to offer more options and flexibility for retirement. However, it is not necessarily the number of DTA's that matter, what is far more important is an awareness of the practical application of such DTA's.

The fact is that, even if you are resident in a country that has a DTA with your pension's host jurisdiction, your QROPS scheme will still have to deduct tax unless there is evidence provided to show that the pension income is to be taxed and declared in the country of residence. Only then can the income tax department where the scheme is based (IoM, Malta, etc) allow gross payments at source. Remember if you retire in a country with no DTA, then it goes without saying that a QROPS will be subject to tax of up to the maximum rate at source (for example 20% in IoM and up to 35% in Malta).

You may have no idea where you will be working, let alone retiring in the future. But, your potential tax liability in retirement clearly requires meticulous ongoing attention in planning your future life and finances, or you may well find yourself unexpectedly and seriously out of pocket