Malta’s attraction and suitability for QROPS

Malta’s attraction and suitability for QROPS

It has been widely reported in the local and foreign media, that Guernsey-based Qualifying Recognised Overseas Pension Schemes (QROPS) providers, are finding Malta suitable to set up new schemes.

QROPS which are Pillar II pension schemes established outside the UK and which are recognised as such by HMRC, are said to be leaving Guernsey due to HMRC implementing new tax legislation. As a result of these new tax rules, such Guernsey QROPS would need to be removed by HMRC from its list of approved schemes, resulting in their clients looking for new jurisdictions for their setup.

Leading international service providers specialised in pension schemes such as QROPS have highlighted that Malta had become a popular choice among European countries due to Malta’s many double tax agreements, thus avoiding double taxation. It has been said that Malta offers the right characteristics including highly regulated environment such as the Special Funds (Regulation) Act, and subsidiary legislation in pension fund set up and compliance provisions.

Malta’s legislative framework meets the high standards set by HMRC and still, as Maltese QROPS, may afford greater flexibility as regards to investments and withdrawals when compared to UK schemes. It is also attractive to use Malta from a tax perspective due to the additional flexibility and tax advantage that would not be achieved at the expense of investment security, a over-riding concern particularly in the context of retirement pensions. Malta being a small economy has one single regulator – the Malta Financial Services Authority (MFSA) . This is a definite bonus to those clients who want to use Malta as the alternative solution.

A brief on setting up QROPS in Malta

–  QROPS set up in Malta would general be made in the form of a Trust (or otherwise by contract). Each scheme must be licenced by the MFSA through an   appropriate application and accompanying the Trust deed and other documentation required by the Authority.

Consideration taken at application stage include:

• compliance provisions
• protection of investors and general public
• protection of Malta’s reputation
• protection of competitiveness and choice
• repute and suitability of scheme administration and other parties connected to the scheme

–  Every Maltese pension scheme must be audited

–  Appointment of an administrator must be approved by MFSA

–  A licenced “asset manager” may be required in certain particular schemes

–  A custodian may also be required for the safekeeping of all or certain assets pertaining to the scheme

–  Once a pension scheme is established, the administrator will be required to apply to HMRC for formal recognition.

Contributor’s benefit under Maltese QROPS

Details as to timing and amount of benefits would normally be specified in the Trust Deed/Scheme document. Mainly these would relate to:

–  Generally speaking, a beneficiary under a Maltese QROPS may only receive benefits once he or she shall have attained age of 50 but before turning 70;

–  Upon maturity, beneficiary is entitled to opt for a lump sum payment or annuity payment

Posted on 15th May 2012

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