If you are an expat and a tax resident in Qatar with your pension in the UK, you may be liable to pay tax in the UK. However, with the right international pension advice, it might be possible to transfer your pension fund out of the UK into a Qualifying Recognised Overseas Pension Scheme (QROPS) allowing you to benefit from advantages. Our independent financial advice regarding transferring pensions offshore is specifically aimed at those who plan not to return to the UK as a resident.
From 6th April 2006, the rules for UK pension schemes including; retirement annuity contracts, small self-administered schemes, self-invested pension plans, personal pensions and occupational schemes; have been consolidated under ‘Registered Pension Schemes’. These come under either Defined Benefit or Defined Contribution Schemes.
More flexibility was offered to pension holders in April 2015 meaning that in most defined contribution cases, 25% of pension pots can be withdrawn tax free whilst the remainder (no matter drawdown, lump sum or annuity income) is taxed at the pension holder’s marginal rate of up to 45%.
If income is sourced in the UK, as is the case with a UK pension, then even non-UK residents are liable to pay UK income tax on those earnings in the same way as UK residents. Your UK pension, counted as UK source income, will therefore be taxed at your marginal rate. Tax is applied to the 75% that is not included in your tax free sum.
A Double Tax Agreement (DTA) between the country in which you are resident and the UK can mean that you are exempt from UK tax. If the DTA exists between the country in which your pension is held and the country in which you are resident, than you can choose, instead, not to pay tax where your pension is held in favour of being taxed where you are resident. International pensions transfer is a potentially complex business and we would always recommend bespoke independent financial advice to expats considering this option.
The DTA that exists between the UK and Qatar stipulates that any pensions or income ‘in consideration of past employment’ (including annuities) are taxed in Qatar if the individual is resident there.
Government pensions are treated a little differently. Professional international pension advice should be sought in all cases of international pension transfers. Your international adviser should be able to assist with this.
Legislation in April 2015 affects UK taxation on defined contribution scheme benefits. For instance, taxes on death benefits are now influenced by whether the pension scheme member passes away before or after reaching 75 years of age. Passing pensions onto beneficiaries after the death of the pension holder is now, in general, less costly. Tax rates are still up to 45% in some cases.
Non-UK residents with a QROPS can, in some circumstances, pass on benefits at a lower tax rate when they die. Independent financial advice with a qualified pension specialist should be sought for individual cases.
Gibraltar taxes of 2.5% apply to QROPS held in the jurisdiction as no DTA exists with Qatar. UK income tax does not apply if the person has been non-resident for at least five years or withdrawals are below £100,000.
Inheritance tax does not apply in Gibraltar and you are protected from UK inheritance tax.
Gibraltar QROPS holders are protected from UK death benefit charges if the member is not, and has not been for at least 5 years previously, a UK resident.
Independent financial advice should be sought in all pension transfers to Malta. Qatar and Malta do have a DTA in place which states that pensions will be taxed in the individual’s country of residence (Qatar in this case) instead of Malta. The highest rate of tax in Malta is 35% of the individual does not meet the residency requirements.
Government Service Pensions are treated differently.
UK income tax does not apply if the person has been non-resident for at least five years or withdrawals are below £100,000.
Inheritance tax does not apply in Malta and you are protected from UK inheritance tax.
Malta QROPS holders are protected from UK death benefit charges if the member is not, and has not been for at least 5 years previously, a UK resident.
Employee salaries are not taxed in Qatar. Income from businesses (including properties) sourced in Qatar is subject to company tax. GCC (Gulf Cooperation Council) and Qatari nationals are not subject to any income tax at all.
Foreign pensions are not subject to tax in Qatar providing they are not derived from or accrued in Qatar.
If the individual’s permanent home is in Qatar or their ‘vital interests’, than they are considered residents.
Equally, if the individual spends 183 days in any 12 month period in Qatar, they are also classed as residents.
Lastly, if the individual is employed by a sponsor or their spouse is, they are likely to be residents and hold a residence card.
The DTA has specific residency criteria.
For both the UK and Malta agreement, residency requirements are the same as above without mention of 183 days specifically, rather that Qatar is the individual’s ‘habitual abode’.
There are no net wealth, net worth gift or inheritance taxes.
QROPS transfer is entirely tax free as are the benefits and growth. Death does not attract taxes on the pension either.
Qatar has approximately 60 DTAs in place.
Leave the Pension in the UK
If the pension stays put in the UK, and the individual is a resident of the Qatar, then UK taxes apply to pension income. Death benefit charges still apply to funds in the UK.
Transfer to a Gibraltar QROPS
For those members who have been non-UK residents for five years or more, transferring a pension to a Gibraltar QROPS will mean not being exposed to UK taxes on income of up to 45%. The member will pay 2.5% tax in Gibraltar and zero tax in Qatar providing they are a resident. The QROPS protects from UK inheritance tax and (assuming 5 years as a non-resident in the UK) it will also protect from UK death benefit charges.
Transfer to a Malta QROPS
Again, assuming the member has been a non-UK resident for five years or more, this option will ensure the pension is not subject to income tax (up to 45%) in the UK. The member will no tax in Malta and zero tax in Qatar providing they are a resident and fulfil the DTA criteria. If the individual is not a resident in Qatar, taxes of 35% apply in Malta. The QROPS protects from inheritance tax in the UK (also with a zero rate of inheritance tax in Malta) and assuming a minimum of 5 years as a non-resident in the UK, it will also protect from UK death benefit charges.
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.