QROPS in Malta: Introduction
After obtaining a license as a Maltese scheme under the Special Funds (Regulation) Act, schemes can apply for recognition as a Malta QROPS with the HMRC.
Pension schemes established in Malta and regulated by the Malta Financial Services Authority (MFSA) may be considered on a case by case basis by the HM Revenue & Customs (HMRC) to be eligible for the status of Qualifying Recognised Overseas Pension Schemes (QROPS) under UK Law. This recognition is based on the current legislation in both Malta and the UK.
Interest in Malta as a jurisdiction in order to host QROPS has been very high ever since recognition was obtained. Licences have been issued in the pensions sector and the Maltese Qualifying Recognised Pensions Schemes (QROPS) were approved by the UK’s tax authorities thus opening up parts of the valuable UK pensions market to Malta. Malta already hosts a number of QROPS which have been recognized by HMRC.
Tax treatment of Maltese QROPS
A UK resident who has built up a Pension Fund within a scheme approved by HMRC or who has built up benefits in a HMRC approved UK Pension Scheme and who lives overseas as an expatriate may transfer existing pension provisions into a QROPS (Qualifying Recognised Overseas Pension Scheme).This can give many employers and their employees more tax flexibility on these benefits.
QROPS can receive the transfer of UK Pension Benefits without incurring an unauthorised payment and scheme sanction charge. QROPS status has significance for UK tax purposes only. Whether or not a transfer to a QROPS may be made depends also on the scheme being able to accept a transfer under the legislation of the country in which it is established. The tax treatment of any income received also depends upon where the individual is deemed to be tax resident at the time.
Malta QROPS are increasingly popular vis-a-vis British Expatriate due to the tax advantages that may be reaped by transferring a UK pension fund into a Malta QROPS. Tax charges arise on the individual (up to 55 per cent of the amount transferred) and on the scheme administrator of the UK registered pension scheme (15 per cent of the amount transferred) making the transfer if the pension scheme receiving the transferred pension savings is not a QROPS.[2]
Malta QROPS: Defintion
A QROPS is a pension scheme (be it an occupational pension scheme or not) set up outside the UK which:
- is a recognised overseas pension scheme broadly equivalent to a UK Registered Pension Scheme that meets the requirements as prescribed under the UK ‘The Pension Schemes (Information Requirements - Qualifying Overseas Pension Schemes, Qualifying Recognised Overseas Pension Schemes and Corresponding Relief) Regulations 2006’;
- is regulated as a pensions scheme in the country in which it is established;[3]
- recognised for tax purposes in the country that the QROPS is established.[4]
The second and third above-mentioned requirements are satisfied by the laws and regulations in Malta that deal with Retirement Schemes.
The scheme is deemed to be established in the country where its registered office and main administration are based. In the case of trust-based schemes, the country of establishment is generally determined by where the scheme trustees are resident.
QROPS: requirements
The scheme manager must utilize the requisite official form to notify the HMRC that the scheme is a recognised overseas pension scheme and to inform the HMRC of the name of the country or territory in which the scheme is established. In response to such a notification HMRC would send the scheme manager a letter of acceptance that the scheme is a qualifying recognised overseas pension scheme and would provide the unique QROPS reference number for that scheme.
The scheme manager of the QROPS is also bound to report the payments to HMRC as set out in the Pension Schemes (Information Requirements - Qualifying Overseas Pension Schemes, Qualifying Recognised Overseas Pension Schemes and Corresponding Relief) Regulations 2006 in relation to payments made in respect of relevant scheme members if the member is:
- resident in the UK when the payment is made (or is treated as made), or
- not UK resident at the time the payment is made, however has been resident in the past five tax years from the time the payment is made.[5]
Establishing a QROPS in Malta
A Pension Scheme which is established and registered in Malta is a pension may be approved by HMRC in the UK to accept transferred funds and thus be deemed to be a Qualified Recognised Overseas Pension Scheme (QROPS). The scheme must meet the high standards established by the HMRC and the Maltese regulatory authorities and is subject to the laws and regulations of the Maltese jurisdiction.
In order to establish a QROPS in Malta, a retirement scheme must be created by way of trust or contract in accordance with the Special Funds (Regulation) Act, 2002 which regulates retirement schemes in Malta. An application must then be made by the scheme administrator to the UK Board of Inland Revenue for approval of the scheme as a QROPS in light of the UK Finance Act 2008.
Through the EU Directive on the Activities and Supervision of Institutions for Occupational Retirement Provision (IORPS), occupational pension schemes set up in Malta already have regulatory recognition in all countries of the European Economic Area (EEA). Pension Schemes set up in Malta also have access to Malta’s broad network of Double Taxation Agreements.
[1] http://www.hmrc.gov.uk/PENSIONSCHEMES/qrops.pdf
[2] http://www.hmrc.gov.uk/tiin/tiin650.pdf
[3] The Pension Schemes (Categories of Country and Requirements for Overseas Pension Schemes and Recognised Overseas Pension Schemes) Regulations 2006 establishes the requirements to be met if there is no local body by which it could be regulated.
[4] The Pension Schemes (Categories of Country and Requirements for Overseas Pension Schemes and Recognised Overseas Pension Schemes) Regulations 2006 state the conditions for satisfying tax conditions if there is no such recognition under local law.
[5] http://www.hmrc.gov.uk/manuals/rpsmmanual/RPSM14101070.htm
