Tuesday, 7 September 2010

QROPS Week - Day two

This is QROPS Week, on Financial Pages in Spain. An article will appear here daily dealing with different aspects of QROPS. Day two today deals with Guernsey and asks why it has become the dominant market for QROPS.

  • Income paid gross

  • Existing pensions expertise

  • Highly Regulated

I didn’t even mention that English is the first language of Guernsey. In addition it has a long standing prominent position as an Offshore Financial Centre and most of the Trustees, based in Guernsey have been educated and trained in the UK. You can be referred to an appropriate Guernsey provider through an authorised and regulated adviser in Spain if you email me.

In order to explain the advantage of having income paid gross, it is probably a good time to the position of ‘Residency’ in Spain. This is particularly important since it determines where you should be paying your taxes.

British expats in Spain fall into two clear and unambiguous groups;

  • Spanish Residents who are best described as people who have settled in Spain and spend 183 days or more per year in Spain. This group of people are required to pay their taxes in Spain.

  • UK Residents who spend less than 183 days per year in Spain. This group of people are liable, for their taxes, to HMRC in the UK.

The second group are unlikely to benefit from QROPS unless they intend to move away from the UK and become UK non-residents, in which case if they live in Spain, they will become Spanish Residents. To discuss this further, you may need to consult an authorised adviser and I can recommend one if you email me.

Consequently, a Spanish Resident with a QROPS in Guernsey will receive income without tax deducted and will declare the income on their Spanish tax return.

Long before QROPS were first enabled, in 2006, Guernsey had a pre-eminent position as a leading Offshore Financial Services centre. Guernsey’s trust based financial and legal framework makes it ideal for handling UK pension transfers which are also based on a Trust basis.

Investment, Pension and other financial products are regulated by the Guernsey Financial Services Commission (GFSC). The GFSC is a strong regulator and has an excellent reputation for managing compliant business in Guernsey. As much of Guernsey’s business comes from UK, the GFSC has forged close working links with Her Majesties Revenue and Customs (HMRC) and the Financial Services Authority (FSA)

There is also an Association of Guernsey Pension Providers which meets regularly and is in a position to pool expertise and to help adopt strict rules for pension business. Indeed, this organisation will be adopting a Code of Conduct to affirm high standards.

There is one other issue that I’d like to raise and it could be seen as either an advantage or disadvantage, depending on individual needs. Guernsey has a sterling based economy and all transactions are based on the UK pound (£). Therefore, for dealings in Euros there has to be a foreign exchange transaction. It is however possible once a UK pension becomes a QROPS, for this to be held in euros. This is certainly something to discuss with a regulated adviser. Please email me for a recommendation.

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Other jurisdictions for QROPS will be discussed later in the week.

If you have your own question, I’d be delighted to answer it. Those of you who live in Spain or intend to live in Spain should be very careful when choosing an adviser. Any adviser can advertise on the internet or in a newspaper but that does not guarantee that they are properly authorised and regulated.

You can write to me with your personal experiences or to be put in touch with my recommended adviser by sending me an email