QROPS Tax Rules Show Malta Stands for Compliance


It would appear that the Guidelines published by the Inland Revenue relating to qualifying recognised overseas pensions schemes a few days ago have been hailed by practitioners for providing a clear signal that the Malta jurisdiction stands for compliance, not tax avoidance.

The guidelines cover taxation of funds and benefits and registration of beneficiaries of QROPS. The timing of their publication is important, particularly in the wake of heightened interest in Malta from Guernsey QROPS providers. In May, Guernsey pension trustees managing more than 300 schemes were reported to be examining the potential for setting up new schemes here after Her Majesty’s Revenue and Customs dropped Guernsey as an approved QROPS jurisdiction.

In reality, not more than five or six applications for registered scheme administrators from Guernsey have been filed with the Malta Financial Services Authority, as far as Matthew Brincat, secretary general of the Malta Association for Retirement Scheme Practitioners, is aware.

“The association’s members generally welcome these guidelines as a step in the right direction for Malta,” Dr Brincat told The Times Business. “The guidelines are necessary to show Malta’s willingness to comply with HMRC rules on QROPS and in order for there to be clarity in relation to the taxation of distribution from licensed retirement schemes.”

Malta was approved as a QROPS jurisdiction by HMRC in 2009. QROPS enable people no longer resident in the UK to transfer pension benefits accumulated in a UK-recognised pension scheme to another recognised pension scheme outside the country, allowing for tax flexibility for employers and their employees.

MFSA chairman Joseph Bannister said the regulator was always in consultation with the Inland Revenue where taxation involved regulated entities.

He explained the guidelines represent a clear interpretation of what is already contained in the income tax legislation – all income arising from licensed pensions schemes, whether they are trusts, companies or funds, are taxable at the normal rate in Malta. If the recipient of the income is not resident in Malta but in a tax treaty country – Malta has more than 55 double taxation treaties – then the relevant provisions in the treaty apply. If the recipient is in a non-treaty country, then the Malta tax provisions will apply.

“Malta must not be seen as a jurisdiction where people can transfer their pensions to avoid tax,” Prof. Bannister emphasised with The Times Business. “HMRC removed QROPS status from a number of Guernsey-based schemes. If the Guernsey legislation allowed the establishment of pension schemes which did not satisfy QROPS status requirements, then it is obvious that these schemes would be unable to obtain a licence in Malta. In reality, while the authorisation by the MFSA of pension schemes is increasing, these are all new schemes.”