HMRC recently removed all Cyprus based QROPS from its registered QROPS list, with providers baffled as to why
London, UK (Pryce Warner International) August 23rd, 2012 - It had previously been beleived that any QROPS scheme registered within an EU country would fall outside the jurisdiction of HMRC, but as Cyprus is an EU country, this no longer appears to be the case.
HMRC did not announce that all Cyprus QROPS were to be de-registered, it only becamse clear when they published their updated list of registered QROPS providers and all Cyprus QROPS had been removed.
Though HMRC has become more proactive in monitering QROPS in the past year, schemes have generally only been de-registered in cases where fraud was apparant, or there was a change in law that necessitated de-registration. In Cyprus however, neither appears to be the case, as the only pension schemes on the island were a few employee schemes for local companies.
It is possible that Cyprus may have fallen foul of the same QROPS condition that saw 310 Guernsey schemes lose their QROPS status earlier in the year. Provisions in Cyprus’s Income Tax Law 2002 (specifically amended articles 5(1) (d) and 5 (2) (c)) mean that a non-resident member of a QROPS, who had no historic employment connection in Cyprus would not be taxed on income, where as a resident scheme member would.
It has been suggested that this means Cyprus fails the recently established benefits tax relief test. The test reads: “Where tax relief in respect of benefits paid from the overseas pension scheme is available to members of the scheme who are not resident in the country or territory in which the scheme is established, the same or substantially the same tax relief must…also be available to members of the scheme who are resident in the country or territory…”
The de-registration of EU schemes has raised some doubts about the future of EU based QROPS, Global QROPS director Paul Davies commented: “The industry was under the impression that almost regardless of how a scheme was set up, because of European rules, HRMC could not discriminate against other country’s pension schemes. It certainly puts that little nagging doubt in the mind of the industry.”
Despite Cyrpus losing its QROPS, they are still available in several other jurisdictions. Malta is now becoming one of the most popular and secure destinations for QROPS and presently is compliant with all HMRC regulations. With Cyprus now no longer able to offer the overseas pension shceme, it seems Malta may see even more growth in its international pension sector.
By Aneil Fatania
Pryce Warner International Group
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