New UAE UK treaty allows expats tax free transfers from pension savings schemes

Published:  6 Apr at 6 PM
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A new double tax treaty (DTA) between the UK and the UAE aimed at personal tax matters is now in force, and may result in big savings for expats with pension savings funds.

The DTA treaty applies to UAE-resident British expats over the age of 55, allowing them to withdraw their full pension funds on a tax free basis, although certain circumstances will apply. It’s hoped the new law will prevent UK expat induviduals and businesses from being taxed twice on earnings as well as freeing up labour movements and building closer trading relations.

The benefits to older UK expats in the UAE seem immediately obvious, with the treaty applying to both UK citizens and GCC nationals with UK pension savings schemes. However, offshore experts are warning careful planning will be needed, especially if a rush to withdraw pensions funds causes the new rule to backfire, and expats should understand that only those with UK non-residency will be able to apply.

Given the majority of UK expats working in the UAE are under the qualifying age of 55, the major beneficiaries of the scheme are expected to be Gulf State nationals with pension savings schemes acquired whilst working in Britain. It’s expected they will be able to access their savings tax-free on their retirement within the GCC region.

Pension transfer specialists working with expats in the UAE believe the move by HM Revenue and Customs is linked to new clampdowns on transfers into qualifying recognised overseas pension schemes, (QROPS). The latest HMRC-initiated change is the 25 percent tax charge on moneys withdrawn by expats living outside the European Economic Area encompassing the EU, Liechtenstein, Iceland and Norway.

Financial advisors serving UK expats in the UAE are warning care should be taken when withdrawing funds, as even a temporary return to the UK may result in attempts by HMCE to claw back tax on the withdrawals, even although they took place in a GCC country.

Investors are also being warned to avoid unscrupulous UAE-based IFAs taking advantage of the new rules by using them to lure pension savers into transfers to overpriced offshore bonds such as those touted by Isle of Man and Channel Islands offshore insurance companies.

Source: The National, business news
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