Retiring to Malta has a lot of attractions – hot summers, warm winters and a relaxed Mediterranean lifestyle in an English-speaking environment not being the least.
But retirement savers who switch their UK pension pots in to a ‘qualifying recognised overseas pension’ or QROPS are double winners.
The Maltese government has just launched an open invitation to wealthy British expats to relocate to the island – and in return is offering a discount income tax rate that is far better than those in the UK.
Couple this with the enhanced pension benefits paid by a QROPS and British expats have a lucrative and enticing tax package for their retirement.
Malta will charge 15% income tax on earnings brought in to the country – the basic UK rate is 20%, while higher rate tax payers will have a 40% or soon-to-be 45% charge.
A Maltese QROPS will also pay up to 30% of the transferred pension as a tax-free lump-sum, another improvement on Britain’s 25% deal.
The whole pension package comes with other enhancements –
- No need to buy an annuity
- No UK inheritance tax on unpaid funds which can be passed to family and loved ones – the UK tax charge is 55%
- Benefits paid gross in Euros to avoid currency exchange fluctuations
Gaining these tax advantages in retirement comes with some terms and conditions – but they are not too arduous:
- Expats must pay income tax of at least €7,500 a year, plus €500 for each dependent
- Malta has no inheritance tax or annual property taxes
In addition, British expats must buy a home on Malta or Gozo and live there as their main residence.
Some financial restrictions are imposed – a home purchase on Malta must involve an investment of €275,000 or €250,000 on Gozo. If renting, the annual fee must exceed €9,600 a year on Malta or €8,750 on Gozo.
Expats must visit Malta for at least 90 days in any tax year.
Financially, expats must have an independent income and private health cover so they do not draw on social security.
“Demand for this scheme is considered to be substantial,” said a government spokesman. “This is therefore an exciting programme that will be managed by the International Tax Unit of the Inland Revenue Department under the same arrangements for the other High Net Worth Individual (HNWI) schemes in force”.