Do you have a UK registered pension and are you a tax resident in India?

If so, and your pension remains in the UK, you should be aware of your possible UK tax obligations. Furthermore, benefits could be available should you transfer these pension funds out of the UK to other secure jurisdictions under HMRC’s favourable Qualifying Recognised Overseas Pension Scheme (QROPS) regime.

Tax Options

Leave the Pension in the UK

Leave the Pension in the UK

If the pension remains in the UK, no UK tax should be due on UK pension payments (if paid in consideration of past employment) or UK annuity payments, under the DTA, with tax payable in India accordingly. Furthermore, the fund remains exposed to the UK death benefit charges.

Gibraltar QROPS

Transfer to a Gibraltar QROPS

Transferring to a Gibraltar QROPS can alleviate UK tax on payments (at up to 45%) with 2.5% Gibraltar tax due on pension payments with tax payable in India for ROR (at up to 33.99%) with a foreign tax credit available to alleviate any double taxation. No Indian tax if RNOR or NR and not received/deemed to be received/accrue/deemed to accrue in India. Furthermore, the QROPS can protect from the UK death benefit charges if non-UK resident (5 years +) and there is no Gibraltar IHT.

Malta QROPS

Transfer to a Malta QROPS

Transferring to a Maltese QROPS can alleviate UK tax on payments (at up to 45%). Under the DTA no Maltese tax should be payable on the pension payments with tax payable in India for ROR (at up to 33.9%). No Indian tax if RNOR or NR and not received/deemed to be received/accrue/deemed to accrue in India. Furthermore,
the QROPS can protect from the UK death benefit charges if non-UK resident (5 years +) and there is no Maltese IHT.

If you leave your pension in the UK

If you leave your pension in the UK

From 6 April 2006 a single set of rules came into effect. Under this system, the tax treatment for all types of approved schemes, including occupational schemes, small self-administered schemes, personal pensions, self-invested pension plans and retirement annuity contracts have been amalgamated into the rules for Registered Pension Schemes. These can be either Defined Benefit or Defined Contribution (DC) Schemes.

DTA between the UK and Argentina

DTA between the UK and India

There is a DTA between the UK and India. This provides exemption from UK tax for UK pensions or annuities paid to residents of India. “Pension” is defined as that paid in consideration of past employment or by way of compensation for injuries received in the course of employment, or Social Security Pensions.

There is separate provision for Government Service Pensions.

Gibraltar QROPS

Gibraltar QROPS

Gibraltar has no DTA with India, therefore the QROPS pension payments to you would be taxable in Gibraltar,
currently at a rate of 2.5%.

No UK income tax if non-UK resident (for 5 years + or total withdrawals are below £100,000).

No Gibraltar Inheritance Tax.

Protection from UK IHT.

Protection from UK death benefit charges, if non-UK resident (and non-UK resident for last 5 years + before payment). 

Malta QROPS

Malta QROPS

Malta has a DTA with India, effective from 1 January 2015 in Malta and 1 April 2015 in India. This provides that pensions and other similar remuneration paid to a resident of India in consideration of past employment shall be taxable only in India. This is a change to the previous DTA which allowed Malta the right to tax such income (at up to 35%).

We understand that the Maltese Tax Authorities will not, generally, apply the Pensions Article to QROPS where the Pensions Article states “in consideration of past employment”.

In such cases they can utilise the Other Income Article. This also states that the income would only be taxable in India.

So the tax position remains the same, only taxable in India.

There is separate provision for Government Service Pensions.

No UK income tax if non-UK resident (for 5 years + or total withdrawals are below £100,000).

No Maltese Inheritance Tax.

Protection from UK IHT.

Protection from UK death benefit charges, if non-UK resident (and non-UK resident for last 5 years + before payment).

Pension benefits

Pension Death Benefits Payment – UK Tax

From 6 April 2015, the UK tax treatment of benefits from DC schemes on death depends, amongst other things, on the age of the member at the time of death (i.e. pre or post 75). From this date, generally, there should be a lower UK tax cost on passing pension value to heirs on death. However, that said there is still a possible current tax rate of up to 45%.

For those that are non-UK resident and have a QROPS the UK tax cost on succession can be less. 

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This general information has been provided on the basis of our understanding of the current legislation in the UK, Gibraltar & Malta as of April 2015. Should any of the information provided be inaccurate, incomplete or misleading, we take no responsibility for any reliance placed on it. We recommend that individuals always seek specialist multi-jurisdictional (where relevant) tax advice so that their individual circumstances can be fully considered.