Tory Chancellor Phillip Hammond introduced new tax rules for British expats and international workers transferring their pensions out of the UK in his Budget 2017 speech.
The controversial measure involves a 25% tax charge on some transfers to Qualifying Recognised Overseas Pension Schemes (QROPS).
Here, the new rules are explained for British expats or international workers with UK pension funds.
Who pays the 25% QROPS tax charge?
The new rule is an ‘either or’ measure with three conditions. Retirement savers should only match one of the criteria to avoid the QROPS tax charge.
Retirement savers do not pay the tax charge if:
- They live in the same country as the provider of their QROPS is based
- They live in a European Economic Area (EEA) country and their QROPS is based in another EEA country
- The QROPS is an employer scheme
Which QROPS centres are in the EEA?
QROPS offshore pensions for expats are provided by 39 countries, 20 are members of the EEA, while the European Union provides an employer scheme.
HM Revenue and Customs (HMRC) publishes an updated list of schemes every fortnight.
Here’s a complete list:
| Country | QROPS centre | EEA member | Employer scheme |
|---|---|---|---|
| Australia | x | ||
| Austria | x | x | |
| Barbados | x | ||
| Belgium | x | x | |
| Bulgaria | x | x | |
| Czech Republic | x | x | |
| Denmark | x | x | |
| European Union | x | x | |
| Finland | x | x | |
| Germany | x | x | |
| Gibraltar | x | ||
| Greece | x | x | |
| Guernsey | x | ||
| Hong Kong | x | ||
| Hungary | x | x | |
| Iceland | x | x | |
| India | x | ||
| Ireland | x | x | |
| Isle of Man | x | ||
| Jamaica | x | ||
| Jersey | x | ||
| Kenya | x | ||
| Kosovo | x | ||
| Latvia | x | x | |
| Liechtenstein | x | x | |
| Luxembourg | x | x | |
| Malta | x | x | |
| Mauritius | x | ||
| Netherlands | x | x | |
| New Zealand | x | ||
| Norway | x | x | |
| Portugal | x | x | |
| South Africa | x | ||
| Spain | x | x | |
| Sri Lanka | x | ||
| Sweden | x | x | |
| Switzerland | x | ||
| Turkey | x |
Among the 1,308 QROPS provided across these countries may be numerous employer schemes, so check your QROPS status before making a transfer to determine where you can live.
So where can an expat live and have a QROPS?
From the chart, an expat can live in anywhere in the EEA, providing the QROPS is based in another EEA country.
So, living in Spain with a QROPS in Malta is no problem, for example.
If an expat lives in a QROPS centre outside the EEA, their pension must be based in the same country – so any expat in Australia, Hong Kong or India must have a local QROPS.
How is the tax charge paid?
The transferring pension scheme deducts the money before the transfer is made.
QROPS Information and Guidance
For more information about QROPS and the benefits it provides, download the iExpats QROPS Guide or complete the Get Advice form.
