Expats are growing increasingly concerned about the security of their pensions and savings – particularly those with a Qualifying Recognised Overseas Pension Scheme (QROPS) – as more governments look to tax the rich more in a bid to balance massive budget deficits.
France and Spain are now taxing trusts, but with lots of British expats and international workers often having large sums of money tied up in their QROPS, which are often trust-based pensions, what should they do?
This is a quick guide to the worrying developments for people who have worked and saved to create their valuable pension pots and how to keep them.
Should I be worried about my QROPS if I live in France or Spain?
You certainly need to be aware of the rules about making a full declaration of assets at home and abroad because the penalties for not coming clean with the tax authorities are severe, to say the least.
In January, the Spanish government introduced regulations requiring all tax residents, and that includes individuals as well as companies, to make a full declaration of their overseas assets and rights involving more than £42,000.
Those assets covered include investments, property and bank account. While there is no current tax liability on those assets, there are penalties for non-declaration. Penalties start at £8,400 and then there’s a £4,200 charge for each undeclared asset.
Are QROPS affected?
For expats living in Spain it is still unclear as to whether a person’s assets held within trust-based pension schemes, which include QROPS, will be affected.
In France there is still confusion since it appears that the French authorities don’t quite know what to do with QROPS. Best advice is to err on the side of caution to avoid unnecessary penalties.
My QROPS isn’t based in France or Spain
The new rules are for all overseas trusts to be declared, so while they are exempt from taxation in the financial centre where they are based, they should really be reported.
There are 39 QROPS based in France and 16 in Spain, so they will need to be declared, but many expats will have pensions in other financial centres.
What should I do?
You really need to contact a tax specialist without delay who can explain the rules, time limits and your legal obligations.
It’s also important to understand that the QROPS provider is under no obligation to make the declaration for you, so this is something you will have to undertake personally.
Why is this happening now?
With many European countries mired in debt, governments are considering taxing the wealthy by raiding public and private pensions.
The idea is being led by the European Central Bank, which is hinting that Eurozone countries looking for a bail-out must contribute towards their own misfortune by raising more tax from savings accounts and pensions.