ARE YOU RESIDENT IN THAILAND AND DO YOU HAVE A UK PENSION?

UK TAXATION IF YOUR PENSION REMAINS IN THE UK

INCOME TAXShould your pension remain in the UK, payments from it would generally be taxed as earned income. From 6 April 2006 a single set of rules came into effect. Under this system, the tax treatment for all types of approved schemes, including occupational schemes, small self administered schemes, personal pensions, self-invested pension plans and retirement annuity contracts has been amalgamated into the rules for registered pension schemes.

Generally, non UK residents are subject to UK income tax on UK source income. Therefore on payment of a UK pension, income tax is charged at the individual’s marginal UK tax rate (current top rate 45%), but this could be different if you are resident in a country that has a Double Tax Agreement with the UK, which Thailand has (see overleaf).

UK TAXES ON DEATHFrom the 6th of April 2011 lump sum death payments out of registered pension schemes to dependants aged below 75 are no longer subject to UK Inheritance Tax (IHT). Instead:

• lump sums paid after age 75 or after draw-down has started will be taxed at 55%1 but there is no further liability in the form of IHT,

• post-75 draw-downs that are not spent and remain in an estate on death will suffer a 40% IHT,

• lump sums paid out on death before age 75 where no draw-down has been made or lump-sum taken, are not taxable at all.

There are other tax charges that can apply to various payments made from registered pension schemes.

IF SO, AND YOUR PENSION REMAINS IN THE UK, YOU SHOULD BE AWARE OF YOUR UK TAX OBLIGATIONS AND LIABILITIES. YOU SHOULD ALSO BE AWARE THAT OPPORTUNITIES EXIST TO TRANSFER THESE PENSION FUNDS OUT OF THE UK TO OTHER SECURE JURISDICTIONS UNDER HMRC’S FAVOURABLE QUALIFYING RECOGNISED OVERSEAS PENSION SCHEME (QROPS) REGIME.

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1On 19th March 2014, the UK budget announced that the 55% rate is to change. At the Conservative Party conference in September 2014 the changes were confirmed and are due to take effect from 6th April 2015 (Taxation of Pensions Bill). In essence, tax free up to lifetime allowance if death occurs before age 75, 45% tax charge on lump sum death benefit if death occurs after age 75, with beneficiaries drawdown taxed at their marginal rate. Th

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THAILAND

QROPS

IF YOUR UK PENSION IS TRANSFERRED TO A QROPS IN:

1. GIBRALTARThe QROPS pension payments to you would be taxable in Gibraltar, currently at a rate of 2.5%.

No UK income tax if not UK resident.

No Gibraltar Inheritance Tax.

Protection from UK IHT.

Protection from 55%1 UK lump sum death payment charge, if not UK resident (and not UK resident for last 5 years before payment).

Thailand has no DTA with Gibraltar.

2. MALTAThe QROPS pension payments to you would be taxable in Malta, currently at rates of up to 35%.

No UK income tax if not UK resident.

No Maltese Inheritance Tax.

Protection from UK IHT.

Protection from 55%1 UK lump sum death payment charge, if not UK resident (and not UK resident for last 5 years before payment).

Thailand has no DTA with Malta.

THAI TAX POSITION

Currently Thailand does not impose net wealth, gift or inheritance taxes on pensions. Therefore the only tax exposure that the pension fund is likely to trigger in Thailand would be in relation to personal income tax as pension payments are considered assessable income for personal income tax purposes under the Thai Revenue Code.

Individuals resident in Thailand will generally be taxed on income earned both inside and outside of Thailand. However, for non-Thai nationals resident in Thailand, foreign pension payments are only subject to Thai personal income tax if the individual remits the pension income into Thailand in the same tax (i.e. calendar) year as the income arises.

An individual is considered tax resident in Thailand if he/she resides in Thailand at one or more times for an aggregate period of 180 days or more in any tax year.

Non-Thai residents are only subject to Thai personal income tax on Thai source income and therefore they are not liable to Thai tax on any foreign pension income, even if remitted to Thailand. However, if the foreign pension income is relevant to and/or in connection

with employment in Thailand, such pension income may be taxed in Thailand.

If the foreign pension income is subject to tax in Thailand, the applicable rates are progressive rates, currently from 5% to 35% (possibly 0% to 37% from 2015) and the individual is required to file an annual return of income. No foreign tax credit would be available in Thailand for any Gibraltar or Maltese tax paid on the pension income. Furthermore, even though there is a DTA with the UK because there are no pension income or other income provisions in this DTA, such pension income is outside the scope of the DTA and, consequently, no relief for double taxation applies to this income. Therefore if UK pension income is remitted to Thailand in the year it arises by a Thai resident but non-Thai national, the income is taxed in both countries (up to 80% tax).

There is no difference in Thai tax treatment between a personal pension scheme and an occupational pension scheme.

Currently, Thailand has 56 DTAs (i.e. 55 countries and 1 Special Administrative Region, Hong Kong).

BEST OPTION FROM A TAX PERSPECTIVE: On this basis, transfer to a Gibraltar QROPS is favourable. For non-UK residents, UK income tax on any income payments (up to 45%) can be saved and replaced with a much lower 2.5% tax in Gibraltar on such payments, no Gibraltar IHT, protection from the 55%1 UK lump sum death charge for long term (5 + years) non-UK residents, with no tax in Thailand if the member is Thai resident but non-Thai national and doesn’t remit the pension income to Thailand in the year it arises, or is non Thai resident.

UK/THAILAND DOUBLE TAX AGREEMENT (DTA)

There is a DTA between the UK and Thailand, however it does not provide any relief from UK tax on pensions received from UK sources. Therefore payment of a UK pension to a Thai resident remains liable to UK income tax (current top rate 45%). It may also be subject to tax in Thailand with no foreign tax credit relief available, so the income could be taxed twice (see Thai tax position below). There are separate provisions for Government pensions.

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GIBRALTAR

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1On 19th March 2014, the UK budget announced that the 55% rate is to change. At the Conservative Party conference in September 2014 the changes were confirmed and are due to take effect from 6th April 2015 (Taxation of Pensions Bill). In essence, tax free up to lifetime allowance if death occurs before age 75, 45% tax charge on lump sum death benefit if death occurs after age 75, with beneficiaries drawdown taxed at their marginal rate.

THAILANDQROPS