New Mallorca Olive Press columnist, Blacktower’s Sandy Paterson, gives the lowdown on your pensions

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SEVEN PRINCIPLES: Mallorca-based Blacktower expert Sandy Paterson advises on Spanish investment

‘Expats hit by 25% tax charge on overseas pension transfers’

-But does this really apply to you?

MY recent meetings with clients in Spain have largely revolved around transferring pensions out of the UK into Qualifying Recognised Overseas Pensions (QROPS, as most of us known them).

Without exception, all of my new clients have been scared to discuss their UK pensions with a financial advisor over here because of screaming headlines like this one above (Financial Times – March 10, 2017).

PENSION: Mallorca-based Blacktower expert Sandy Paterson gives pension advice

But, in truth, this is little more than a scare story and it is highly unlikely that anyone is about to get clobbered with a 25% tax bill.

In reality, most of us expats will see nothing of the sort…and, as always, the devil is in the detail not in the headlines even from such a respected publication as the FT.

When I looked into the legislation I actually discovered a completely different, and much less dramatic situation for us expats living in Spain and the reality is as follows:

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.       You are a tax resident in the country in which the QROPS is established
  2.       You are resident in the European Economic Area and the QROPS used 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

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

When discussing moving a pension for UK or other European Economic Area citizens who have moved to enjoy the lifestyle offered by Spain (also EEA), 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. (I will discuss why to use Malta in a future article).

What does that mean to a Spanish tax resident who came originally 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 therefore flies in the face of the headline 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!

Got a question? Then ask our expert Sandy on the details below:

Sandy Paterson DipFA, CeMAP, MLIBF – International Financial Adviser

Blacktower Financial Management (International) Ltd – Mallorca Office

Tel: 971 42 59 86

Email: [email protected]


Blacktower Financial Management (International) Limited is licensed in Gibraltar by the Financial Services Commission. Licence 00805B and is registered by both the DGS and CNMV in Spain.

Blacktower Financial Management Limited is authorised and regulated in the UK by the Financial Conduct Authority.

Sandy Paterson

Olive Press Financial Columnist, Local Financial Adviser to Expats and Yacht Crew. Lover of all things about our Island Paradise (even if we do have Magaluf to put up with). Resident of Esporles, keen cyclist, café junkie and foodie.

Enjoying work and life balance of Mallorca with my partner Lesley and our pooch Coco.

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