Where in the world do expats have to go to pay the lowest rates of income tax on their Qualifying Recognised Overseas Pension Scheme (QROPS) benefits?
Few countries offer a zero rate of income tax but quite a few offer a low rate to wealthy expats who have the cash to buy a home or invest in a business.
The top 10 zero income tax destinations are either in the Caribbean or Middle East.
In no particular order of preference, they are: the Bahamas, Bahrain, Bermuda, Brunei (Asia Pacific), the Cayman Islands, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (Dubai and Abu Dhabi).
Three steps to a tax-free retirement
Most of these countries do not have a local QROPS provider, so here’s how a British expat can set up a tax-free retirement lifestyle.
- Qualify as tax resident in one of the zero income tax countries – this may mean registering for a golden visa and having to prove personal net worth
- Set up a QROPS offshore pension in a ‘third party’ friendly financial centre such as Malta.
Malta is a QROPS centre of choice for many expats because providers allow pension scheme members to have a financial base on the islands while living wherever they wish overseas.
Draw money from the pension as you wish with no income tax.
Pension payments are gross in a range of currencies so no tax is deducted at source.
Some Malta QROPS also allow flexible access on the same terms as the UK, which means 100% of the fund can be withdrawn if required.
If not, Malta also has a 30% tax-free lump sum payment compared to 25% in the UK
- Relax in the sun and enjoy your retirement while making more of the money you have worked hard to save
Specialist tax advice
The World Tax Guide profiles the corporate and personal tax rules for each nation and explains other financial centres also offer zero rate income tax, such as Monaco, Guernsey and Andorra.
Before moving and hoping to pay no tax on your pension, take professional advice from a tax expert who can explain when and how you become tax resident in your new home and if any local rules affect your financial plans.