Introduction - Foleon
There are a number of issues that firms need to consider before becoming involved with overseas clients.
|Spring Budget 2017 – 25% overseas tax charge |
|The government announced a number of changes to the tax treatment of transfers of tax relieved pension savings to QROPS. Legislation will|
|be introduced in Finance Bill 2017. |
|From 9 March 2017, in addition to the checks that you make to ensure that an overseas transfer is a recognised transfer you will also |
|need to check if the overseas transfer charge applies. |
|The overseas transfer charge will apply on transfers to QROPS if your scheme member formally requested their transfer on or after 9 March|
|2017 and none of the following apply |
|they are resident in the country where the QROPS receiving the transfer is based |
|they are resident in a country in the European Economic Area (EEA) and the QROPS they are transferring to is based in another EEA country|
|the QROPS they are transferring to is an occupational pension scheme and they are an employee of a sponsoring employer under the scheme |
|the QROPS they are transferring to is an overseas public service scheme and they are employed by an employer that participates in that |
|scheme |
|the QROPS they are transferring to is a pension scheme of an international organisation and you are employed by that international |
|organisation |
|If your member formally requested the transfer before 9 March 2017, for example the member requested in writing for a transfer to be made|
|to a named QROPS but the transfer payment was not made until after 9 March 2017, the 25% overseas transfers charge will not apply. |
| |
Passporting
The FCA and in turn SimplyBiz have issued guidance in relation to advising clients who are resident overseas. Pensions for example would fall under IMD whereas if you were to give advice on investments, this would require you to opt into MiFID. SIPPs though conversely, whilst they are pensions, if they do hold an investment such as shares or OIECs would fall under MiFID also.
Passporting can be relatively easy where the members are from the European Economic Area (EEA) and a form can be completed - see the FCA link below.
However, firms wishing to carry on regulated activities (e.g. advising on investments) with or for residents of the Channel Islands and the Isle of Man, or indeed other non-EEA countries (e.g. Australia), may require appropriate authorisations from the relevant financial services regulator of the country into which such services are being provided. It is important to appreciate that the regulatory situation will differ from country to country, and firms may have to ascertain the regulatory stance of the relevant country prior to carrying on any regulated activities. There is also a potential impact on capital adequacy. Please refer to the compliance manual for detailed instruction.
Obviously, you will need to understand the client’s tax statuses and demonstrate good knowledge of the tax and benefits relating to the country in question etc. and any impact this may have on the client’s arrangements.
FCA’s CONNECT site should be used for all passporting applications. The FCA do not charge a fee for passport notifications, but the host state may charge a fee to register your firm (although we think this only currently applies to The Netherlands).
Timescales are about 28 days, slightly longer for MiFID.
Further details from the regulator are on the link below:
If you require assistance with completion please contact the Applications Team on 01484 439 123
Providers
Many providers will simply no longer transact business with clients who are now resident abroad. From a pensions point of view, we sent a survey to the major providers a few years ago to ascertain their stance – see results in the Surveys room on the Pensions tab of the website. In particular, the USA and Canada can be very troublesome. Check with the provider concerned.
PII
We strongly recommend speaking with your PI insurer about your intentions, as your PI policy, almost certainly has a Jurisdiction and Territorial Limits exclusion.
Some PII providers may not cover you when giving advice to overseas clients. USA and Canada often prove to be problematic. It is therefore worth checking that you do have cover with your current PI provider.
Malta QROPS – Tighter Regulations - from June 2019
The Malta Financial Services Authority (MSFA) has made significant changes to the Maltese pension regulations which will have a major impact on how advisers operate in the jurisdiction.
The new rules will also affect the way in which pension trustees administer both new scheme applications and existing members on a number of levels. It is estimated that in the UK alone, around 30,000 UK pensions have already transferred into a Malta-based Qualifying Recognised Overseas Pension Schemes (QROPS).
Advisers working with clients in Malta will be subject to much tighter requirements. According to the financial watchdog, it is no longer enough for the investment adviser to just be licensed. Now, the license must allow the adviser to provide investment advice to the Member.
All advisers have until 30 June 2019 to obtain the necessary licenses to continue providing advice to a client, although some aspects of grandfathering over, may apply to some. With effect from 1 July 2019, anyone not meeting the above requirements will not be permitted to carry on providing investment advice in respect of accounts held by a Malta Retirement Scheme.
The changes include:
• Tougher regulations further enhance client protections
• It is no longer enough for the financial adviser to only be licensed.
• An adviser’s license must also allow them to provide investment advice to the member.
• The adviser must also be regulated in the jurisdiction where the client is based.
• The Retirement Scheme Administrator is also expected to ensure that a member's investments are in line with the risk profile of each member.
QROPS
Clients can transfer UK pension schemes to overseas pension schemes but the scheme must be registered with HMRC. If the accepting scheme is not a Qualifying Recognised Overseas Pension Scheme, the payment could be treated as an unauthorised payment and taxed accordingly.
Remember, QROPS are not products, it is simply a piece of HMRC legislation and its intention was to allow Expats to move monies overseas. Any overseas scheme can register under the QROPS legislation and so accept transfers from the UK.
These pension schemes are worldwide and HMRC keep a list on the Gov.uk website:
Please be aware that not all QROPS may appear on the list to view. Schemes can elect not to be shown/listed so the only way to check is to contact the overseas scheme directly.
Further guidance on the QROPS legislation can also be viewed here:
Advisers should also be aware that we are unable to comment on the international taxation issues relating to QROPS.
Emigrated abroad and ready to start taking pensions income?
Pension payments are usually made in sterling and can be paid direct to an overseas account for those who have emigrated or living in another country at the time.
The double taxation agreement may allow the pension to be paid gross in the UK and taxed in the country of residence.
This is obviously an ideal choice if the tax regime in the country of residence at that time is more attractive than the UK. The member should complete the appropriate double taxation form (available from the Insurance Company) in duplicate and send it to the local receiver of Revenue in the country of residence. The UK arrangement paying the pension must deduct UK Income Tax until instructed to make gross payments.
Emigrating out to the USA – Want to transfer your pension there? Sorry!
Presently, no agreement exists between the UK and the USA relating to transfers. The IRS currently will not accept transfers from UK appointed arrangements into the US.
Although the IRS is reconsidering this, no timescale or implementation date is currently set. However whilst transferring benefits to the USA isn’t on the cards just yet there were some changes in 2004 when tax breaks arrived for those companies which transferred employees between Britain and the USA and whom wished to pay into schemes. The ‘Double Taxation Convention’ was designed to ease previous problems and seconded employees are now able to remain in their home country’s pension arrangement without suffering adverse tax consequences such as double taxation. Under the agreement USA employers are also eligible for tax relief on contributions to UK schemes.
QROPS Caution
Some unscrupulous companies have historically targeted UK residents, urging them to transfer pension funds to an overseas scheme with the promise of 100% of the fund being paid out as a lump sum. These emails and phone calls have been targeted at individuals who have no intention of emigrating or leaving the UK.
We have great concerns that any such payment will be treated as an unauthorised payment of course and will trigger serious tax changes to the client, as well as the loss of potential approval. HMRC have issued stark warnings that they will pursue the tax charge where this occurs.
National Regulators
Albania
Bank of Albania
Australia
APRA Australian Prudential Regulation Authority
ASIC Australian Securities & Investments Commission
Reserve Bank of Australia
Austria
Austrian Financial Market Authority
Bahrain
Central Bank of Bahrain
Bermuda
Bermuda Monetary Authority
Brazil
Securities and Exchange Commission of Brazil
Canada
Alberta Securities Commission
Bank of Canada
British Columbia Securities Commission
Financial Institutions Commission
Financial Services Commission of Ontario
L'Autorite des Marches Financiers
Manitoba Securities Commission
Nova Scotia Securities Commission
Ontario Securities Commission
Cayman Islands
CIMA Cayman Islands Monetary Authority
Chile
Comision Clasificadora de Riesgo
China
CBRC China Banking Regulatory Commission
CSRC China Securities Regulatory Commission
Czech Republic
Czech National Bank
Denmark
Finanstilsynet
Dubai
DFCA Dubai Financial Services Authority
Finland
Financial Supervision Authority
France
AMF Autorite des Marches Financiers
Bank of France
Germany
BAFIN Bundesanstalt Für Finanzdienstleistungsaufsicht
Deutsche Bundesbank
Gibraltar
Financial Services Commission of Gibraltar
Guernsey, Channel Islands
Guernsey Financial Services Commission
Hong Kong
HKMA Hong Kong Monetary Authority
SFC Securities and Futures Commission
India
SEBI Securities and Exchange Board of India
Indonesia
Capital Market and Financial Institution Supervisory Agency
Ireland
Irish Stock Exchange
The Financial Regulator
Isle of Man
Financial Supervision Commission
Italy
Banca d'Italia
CONSOB Commissione Nazionale per le Societa e la Borsa
Jamica
Financial Services Commission
Japan
Bank of Japan
Financial Services Agency
Securities and Exchange Surveillance Commission
Jersey, Channel Islands
Jersey Financial Services Commission
Luxembourg
CSSF Commission de Surveillance du Secteur Financier
Malaysia
Bank Negara Malaysia
Securities Commission, Malaysian
Malta
Malta Financial Services Authority
Monaco
Government of Monaco
Namibia
Namibia Financial Institutions Supervisory Authority
New Zealand
New Zealand Securities Commission
Norway
Kredittilsynet
Pakistan
Securities and Exchange Commission of Pakistan
Peru
Qatar
Qatar Financial Centre
San Marino
Banca Centrale della Repubblica di San Marino
Singapore
MAS Monetary Authority of Singapore
Slovakia
National Bank of Slovakia
South Africa
Financial Services Board
South Korea
Financial Supervisory Service
Spain
CNMV Comision Nacional del Mercado de Valores
Sweden
Finansinspektionen
Switzerland
Swiss Federal Banking Commission
Taiwan
Securities and Futures Bureau
Thailand
Bank of Thailand
Securities and Exchange Commission
The Bahamas
Securities Commission of the Bahamas
The Netherlands
Authority for the Financial Markets
De Nederlandsche Bank N.V.
Trinidad & Tobago
Trinidad & Tobago Securities and Exchange Commission
Turkey
Capital Markets Board of Turkey
Uganda
Capital Markets Authority
UK
FCA Financial Services Authority
US Virgin Islands
Financial Services Commission
USA
CFTC Commodity Futures Trading Commission
Federal Reserve Bank of New York
NASD National Association of Securities Dealers
SEC Securities and Exchanges Commission
US Federal Reserve
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