QROPS in the UAE


QROPS in the UAE

QROPS in the UAE

Those planning to take out a QROPS in the UAE may have read about the new QROPS tax imposed on UK pension transfer requests post 9th March 2017. While some advisers in the UAE may suggest that the end of QROPS in the UAE is all bad news for expatriates, we would argue that this is not the case.

Contrary to what many websites state when they extolled the virtue of QROPS in the UAE, it is not the QROPS that decides the way the pension is taxed during retirement but the Double Tax Treaty between where the pension is held and the residency of the retiring expat*

There has been little mention, and the cynical part of me thinks this is no accident, of the existing Double Tax Treaty between the UAE and the UK

This became effective from 1st January this year, and the taxation of pensions is mentioned within Article 17

“….. pensions and other similar remuneration paid to a resident of a Contracting State shall be taxable only in that State.“

This means that you pay your tax (if any) in the UAE, so what of moving to a QROPS to avoid tax?

One of the popular QROPS jurisdictions is Malta and this has been heavily used by advisers selling the idea of QROPS in the UAE . Malta also has a Double Tax Treaty with the UAE as can be seen from this list .

The taxation of pensions is mentioned within Article 18

“……pensions and other similar remuneration paid to a resident of a Contracting State in consideration of past employment shall be taxable only in that State.“

Can you see a similarity?

In fact they now both have the same provisions, meaning that there Is no income tax advantage at all for a QROPS in the UAE, for anyone that takes the pension while resident there, over a pension in the UK.

In other words, post the March 2017 budget, the issue of taxation of 25% on transfers to a QROPS in the UAE is only a significant issue for advisers who have been selling QROPS as a product rather than as a solution. Indeed the loss of QROPS is not really an issue for the majority of expats, despite what is being written elsewhere, as they can actually leave their pension in the UK for much the same benefits (indeed increased benefits since April 2015).

Those that have a QROPS in Gibraltar will notice there are no Double Tax Treaties with anyone and so little chance to offset or claim tax back from income in retirement.

Furthermore, since the vast majority of expats do not retire in the UAE*, then a QROPS in the UAE may have been the wrong advice anyway and anyone with a QROPS may be well advised to review this. Better products, lower costs, cleaner investment funds ( no commission ) , better regulation and the new Double Tax Treaty make the UK pension (often referred to as a SIPP although this may not be necessary for smaller funds where more competitive options may be available) the clear frontrunner for expats in the UAE.

Then again, it probably has been since April 2015 in truth

 

The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not except any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.

This article was published on 15th March 2017


“About

Chris Lean

Chris is a Chartered Financial Planner who writes blogs and articles to simplify and explain some of the financial issues that affect UK expats. Subjects include; hot topics, regulation and the ever-changing world of finance.


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