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“Expats hit by 25% Tax Charge on Overseas Pension Transfers”

So, scary headlines aside, is there really anything to be concerned about and are you going to be clobbered with a 25% tax bill?

Well, in reality, for most of us expats living in Spain the simple answer is no. As always, the devil is in the detail, not in the headlines – even from such an august publication as the FT.

Checking the legislation gives a completely different and much less dramatic story (shock headlines and horror stories sell papers) for us EU expats living in Spain and the reality is that the Overseas Transfer Charge (OTC) of 25% does not apply under the following circumstances:

  • If the transfer request was before 8/3/17.

Or if any one of the following five conditions apply:

  1. The Member (you) is tax resident in the country in which the QROPS is established –
  2. The Member is tax resident in the European Economic Area and the QROPS is established in the European Economic Area.
  3. The QROPS is an Occupational Scheme and the member is an employee of the sponsoring employer under the scheme.
  4. The QROPS is a Public-Sector scheme and the member is an employee of a sponsoring employer under the scheme.
  5. The QROPS is set up by an International Organisation and the member is an employee of a sponsoring employer under the scheme.

Condition 2 is highlighted as this probably applies to most readers of The Olive Press, and the majority of my clients.

For example, when UK (or other European Economic Area) citizens who have moved to Spain (also EEA) discuss moving a pension, the most likely jurisdictions for a transfer to QROPS are Malta or Gibraltar (both EEA). Of course, Gibraltar as a Crown Dependency of the UK may be out of the frame when the UK exits the EU and I will discuss Malta in a future article.

What does this mean to a Spanish Tax resident who originally came from a European Economic Area country like the UK? In simple terms, point 2 above applies. “The member is a tax resident in the European Economic Area and the new pension (QROPS) is established in the European Economic Area”.

The result for most of us flies in the face of the headlines above which should now read:

“No Overseas Tax Charge to pay for the majority of Expats in Spain”

But maybe that would not sell as many papers!

Other News

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Rosemary’s career in the financial services sector began in 2008 when she signed up for what she initially imagined would be a “regular 9 to 5 job” at a bank. However, in the wake of that year’s global banking crisis, Rosemary re-evaluated her professional priorities and realised that the best way she could help clients in the difficult financial climate of the time would be to climb the career ladder to a position of influence. She was further excited by working under a new set of regulations that would offer clients an unprecedented level of extra protections.

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New Governor Brings Confidence to Financial Management Industry

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The move is largely thought to be positive step for financial management services in the Cayman Islands, as Roper has said he will make it a priority of his role to “listen and learn” from those around him.

Mr. Roper brings a wealth of experience to the job. He was most recently minister and deputy head of mission for the U.K. in Beijing, China, but has worked in other notable capacities, including as the UK Ambassador to Algeria, Deputy Head of Mission in Brasilia and, of particular interest to the financial management industry in the Cayman Islands, as First Secretary for Economics and Development with the Organisation for Economic Cooperation and Development (OECD) in Paris.

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