Malta has stepped up to the line as one of the new leading offshore pension jurisdictions by publishing tough tax compliance guidelines for retirement savers.
The island is tipped as the destination for billions of pounds of investments switched out of UK pension funds by expats and international workers.
Qualifying recognised overseas pensions (QROPS) are tax-effective pensions for expats. They also offer more flexible investment options than UK pensions and can sidestep currency exchange rate fluctuations.
The Maltese government is making clear that anyone switching pension funds to a provider based on the island can expect to comply with tax restrictions over and above those currently imposed elsewhere.
To make sure QROPS retirement savers obey tax rules, they must file a tax return in Malta, regardless of where they live in the world.
This is aimed at British expats headquartering their QROPS in Malta while living elsewhere.
QROPS investors can apply for a tax exemption by filing the return – but will have to prove where they are resident to take advantage of any double tax agreement between Malta and that country.
If Malta has no tax agreement with a country, the QROPS saver may have to pay income tax on pension benefits in Malta.
One effect of this policy will be to render a Malta QROPS ineffective for tax management for retirement savers who do not live in a country with which Malta has a double tax agreement.
As part of the offshore pensions crack down, the Maltese government has already warned that providers delisted in other QROPS jurisdictions are not welcome on the island
“Malta continues to work closely with HMRC on QROPS and we would be careful about which schemes we would allow to establish here. If schemes have had their QROPS status removed, then it is unlikely the MFSA would want to approve them,” said Joseph Bannister of the Maltese Financial Services Authority.