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Gibraltar Proposes Law Change To Offer UK QROPS

Tuesday, May 15, 2012

The Gibraltar government has published a Bill that would amend the territory's legislation to allow local practitioners to offer Qualifying Recognised Overseas Pension Schemes (QROPS) under a regime compliant with new rules set by the UK tax authority, HM Revenue and Customs (HMRC).

HMRC permits the transfer of a UK taxpayer's pension entitlements to another jurisdiction in which they are seeking permanent residence, free from tax. However, in recent months, HMRC has introduced more stringent rules concerning these QROPS, removing a number of structures from its list of recognised schemes.

The legislation, due to be tabled before Gibraltar's parliament within six to eight weeks, imposes requirements, restrictions and taxation on QROPS in an effort to meet each of the requirements. In particular the legislation proposes:

  • A maximum commutation of 30% of the pension fund;
  • A minimum retirement age of 55 (except in very specific circumstances relating to chronic ill health);
  • Taxation of 2.5% on distributions from the fund to beneficiaries of the imported pension scheme;
  • Requirements to prevent an imported pension scheme being transferred to another scheme outside Gibraltar which does not comply with the original requirements; and,
  • Retrospection to April 6, 2006, to enable the small number of pension schemes imported into Gibraltar since that date to comply with the requirements of other jurisdictions which allow exporting of pension funds.

The Minister with responsibility for Financial Services, Gilbert Licudi, highlighted the importance of the legislation, which he said would ensure access for Gibraltar practitioners to engage in the administration of QROPS. He said: It opens up a line of business which has previously, in effect, been out of reach for Gibraltar. It will create work for pension schemes administrators and will also create income from taxation for Gibraltar in respect of distributions from the imported pension schemes."

"It is important to stress that these changes will not affect in any way the benefits which Gibraltar pensioners get from their current pension schemes. The proposals only apply to certain pension schemes established outside Gibraltar and which are subsequently transferred to Gibraltar," he added.

The amendments will not affect the rules governing those occupational pension schemes which have been or may be established in Gibraltar where distributions are taxed at a zero rate, he clarified.