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

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 payments for Japanese residents, with tax payable in Japan at up to 50.84%. This is also the case for non-permanent residents (even if not remitted) due to the operation of the DTA. However, the fund remains exposed to the UK death benefit charges.

Gibraltar QROPS

Transfer to a Gibraltar QROPS

Transferring to a Gibraltar QROPS for non-UK residents (5 years +) can alleviate UK tax on payments (at up to 45%) with 2.5% Gibraltar tax on payments and no tax in Japan if not remitted to Japan by a non-permanent resident of Japan, or if paid to a non-resident. Japanese tax at up to 50.84% if a permanent resident of Japan. A foreign tax credit should then be available to alleviate any double taxation. 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 for non-UK residents (5 years +) can alleviate UK tax on payments (at up to 45%) with tax charged in Malta at rates up to 35% and no tax in Japan if not remitted to Japan by a non-permanent resident of Japan, or if paid to a non-resident. Japanese tax at up to 50.84% if a permanent resident of Japan. A foreign tax credit should then be available to alleviate any double taxation. 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 Japan

There is a DTA between the UK and Japan. Under this pensions and other similar remuneration beneficially owned by a resident of Japan is taxable only in Japan. 

There are separate provisions for Government Pensions.

Gibraltar QROPS

Gibraltar QROPS

Gibraltar has no DTA with Japan, therefore the QROPS 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 tax 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 the last 5 years + before payment).

Malta QROPS

Malta QROPS

Malta has no DTA with Japan, therefore the QROPS payments to you would be taxable in Malta (at rates up to 35%).

No UK income tax if non-UK resident(for 5 tax 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 the 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.