Transferring a UK Pension to Europe as a Resident in Portugal
Residents in Europe have the option of transferring a UK pension scheme to a Qualifying Recognised Overseas Pension Scheme (QROPS) in Malta.
Malta is a country in the European Union and a member of the European Economic Area.
A QROPS in Malta is a regulated pension scheme and retirement benefits can be received anywhere throughout the European Economic Area (EEA).
Moving to Portugal | UK Pension Transfers to a Pension Scheme in Europe
If you are moving to Portugal, it is possible to transfer private pension schemes in the UK to Europe by setting up a QROPS in Malta.
It is possible to set up a QROPS in euros rather than pounds sterling.
Transferring a Pension to Europe
You may want to move some or all of your pension fund (sometimes called a ‘pension pot’) if:
- you’re changing job
- your pension scheme is being closed or wound up
- you want to transfer to a better pension scheme
- you have pensions from more than one employer and want to bring them together
- you’re moving overseas and want to move your pension to a scheme in that country
source: https://www.gov.uk/
Tax on a Malta QROPS for Residents in Portugal
- No tax at source in Malta if resident in the European Economic Area
- There is a double taxation agreement between Portugal and Malta
- Local taxes in Portugal apply
Tax on Transfer
There is no tax on transfer under current rules.
However, there is an Overseas Tax Charge (OTC) which can apply if you leave the European Economic Area (EEA) within five years of transferring your pension scheme.
How to Transfer a UK Pension to a QROPS
A financial adviser can provide you with the necessary forms to begin the process. An adviser will guide you through the process and make recommendations based on your circumstances.
Please contact us for more information.
Non-Habitual Residents in Portugal
Brits with Non-Habitual Residency (NHR) will receive a flat rate of tax of 10% on their foreign pension income for those who acquire Portuguese residence after March 31, 2020. The rate is 0% if you attained NHR status before this date.
This applies to all non-Portuguese pension income and withdrawals, including lump sums.
The Non-Habitual Residence Scheme
The Non-Habitual Residents (NHR) scheme was set up to attract foreigners to come and live in Portugal.
Income tax is a flat rate of 20% under certain conditions if you are working in Portugal under the NHR scheme* (see below). The tax on a QROPS is a flat rate 10%.
Advantages of Moving to Portugal
Portugal is a popular retirement destination for British expats looking to retire abroad due to its climate, people and lifestyle.
There are also other tax advantages if you apply for the Non-Habitual Resident Scheme.
NHR Scheme Tax Guide
• There is a special tax rate of 20% applicable to employment and self-employment income derived from a “high value-added activities” exercised in Portuguese territory, as per a list published by the Portuguese tax authorities;
• employment income from a foreign source will be exempt from taxation, if such income is taxed in the State of source;
• tax exemption (with progression) for foreign-source income (professional income, pension, rental income, capital gains, interest, dividends, as well as other investment income), provided certain conditions are met. In most cases, capital gains on the sale of securities are taxable at a flat rate of 28%;
• no specific inheritance or gift tax; full tax exemption for gifts on inheritance to spouse, descendent or ascendants; Inheritance or gift to other individuals will be either not taxable or subject to a flat 10% Stamp Tax rate;
• no wealth tax and free remittance of funds either in Portugal or abroad
Applying for EU Residency in Portugal
Both EU/EFTA and non-EU residents are eligible to apply for permanent residence in Portugal after five years. The process is more straightforward for EU/EFTA citizens; you can read more here regarding Portuguese immigration policy for EU nationals and family.
Many British workers who move to work in Portugal with their companies decide to retire in Portugal. In such circumstances, it may be prudent to look into moving your pension to Europe.
Income Tax Rates in Portugal (2019)
You pay tax on your worldwide income if you spend more than 183 days per year in Portugal. Non-residents pay a flat rate 25% on income.
British expats living in Portugal over 183 days per year pay:-
| Income | Progressive Tax Rate (%) |
|---|---|
| 0 – 7,091.00 | 14.5 |
| 7,091 – 10,700 | 23.0 |
| 10,700 – 20,261 | 28.5 |
| 20,261 – 25,000 | 35 |
| 25,000 – 36,856 | 37 |
| 36,856 – 80,640 | 45 |
| 80,640+ | 48 |
You can find the latest Portuguese income tax rates from the Governo de Portugal’s web site.
What happens to my QROPS in Malta if I return to the UK?
If you ever return to become resident in the UK, you have the ability to transfer your pension back to a UK Self Invested Personal Pension (SIPP) or you can leave your pension in a QROPS in Malta, but it would incur UK tax.
For more information, please send us an email.
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