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

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, then generally the DTA allocates the taxing rights to Zambia. However, such income has to be taxable in Zambia for exemption from UK tax. Generally foreign pensions are not taxable in Zambia, unless it is related to Zambian employment where the salary was subject to Zambian tax. Therefore if not taxable in Zambia, UK tax would remain due (at up to 45%). Furthermore, 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 generally no tax in Zambia on payments, even if remitted to Zambia (unless related to Zambian employment). 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 Malta QROPS for non-residents (5 years +) can alleviate UK tax on payments (at up to 45%) with up to 35% Malta tax on payments and no tax in Zambia on payments, even if remitted to Zambia (unless related to Zambian employment). 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 Zambia

Under the DTA between the UK and Zambia generally pensions and annuities derived from the UK by an individual resident in Zambia, and taxable on that income in Zambia, are exempt from tax in the UK. In essence, full relief is available under the DTA from UK tax on the UK pension, with tax only payable in Zambia. Current progressive rates up to 35%.

If Zambia does not tax the pension but exempts it (see Zambian Tax Position overleaf), which is the case where the foreign pension is not related to Zambian employment, then the UK may tax the UK-source income accordingly.

There are separate provisions for Government Service Pensions.

A new DTA between Zambia and the UK was signed on 4 February 2014, but has not yet come into effect.

The new DTA has similar provisions regarding the treatment of UK pension income received by a Zambian resident.
Gibraltar QROPS

Gibraltar QROPS

Gibraltar has no DTA with Zambia, 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 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 last 5 years + before payment).
Malta QROPS

Malta QROPS

Malta has no DTA with Zambia, therefore the QROPS pension payments to you would be taxable in Malta,
currently at rates of 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 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.