Tax liabilities on Pension when retiring abroad

twister_teddy

 Hi experts
I have a private pension pot to which I contribute through my employer. If I choose to retire and reside outside of UK will my pension withdrawals will be subject to retirement country or calculated as per income tax rates in UK.
Secondly, if the pension withdrawals are calculated as per the country of residence which particular countries allow better return whilst reducing the withdrawal tax and charges overhead.
I am looking to reduce the amount of tax on pension withdrawal so any other ideas would be appreciated. 

Dox

Where will you be domiciled for tax purposes after the move?

Johnnyboy11

Have a look at Portugal's Non Habitual Residency Scheme, it has very favourable tax terms for 10 years (including zero Portugese or UK tax on non-government pensions). I read somewhere however that scheme entry may be ending at some point (due to the incoming socialist Government). Madeira looks nice...

macman

Panama has a fairy relaxed approach too...

twister_teddy

Dox said:

Where will you be domiciled for tax purposes after the move?

Retirement is still a few years away so although there are few countries in mind (including Portugal) however haven't quite decided yet. Great to learn about Portugal's Non Habitual Residency Scheme, are there similar or better schemes for Asian countries. 

[Deleted User]

You’ll be taxed in a country where you reside for tax purposes.  Residence is determined based on a range of factors, not least where you spend the most time. 

twister_teddy

Deleted_User said:

You’ll be taxed in a country where you reside for tax purposes.  Residence is determined based on a range of factors, not least where you spend the most time. 

I understand that' the rule however I want to understand how this works.
Is the tax calculated and collected by the UK tax man since the pension pots are in UK OR calculated and taxed by residential country rules.  
If these are collected by the residence country then does the pension pot needs to be transferred to residence country or they can remain in UK ?

Johnnyboy11

Many countries have a double taxation agreement with the UK, aimed at taxing your income only once. The agreements vary from country to country and set out the applicable rules (Here's the UK/Portugal agreement https://www.gov.uk/government/publications/portugal-tax-treaties ). As posted above, your UK Residence status is important, as is the Residence status in the country that you move to. This is a complex area and needs some research on your part and probably some specialist advice from a professional that understands the tax rules in both countries.

[Deleted User]

HMRC will allocate a NT tax code to you, (when you tell them you are no longer tax resident), the pension payments will be paid gross normally to a UK bank account (for the main SIPP providers), and as others have said you will have to pay tax in the country of tax residency.

NedS

Deleted_User said:

HMRC will allocate a NT tax code to you, (when you tell them you are no longer tax resident), the pension payments will be paid gross normally to a UK bank account (for the main SIPP providers), and as others have said you will have to pay tax in the country of tax residency.

So is there anything stopping someone retiring to Portugal and taking up tax residency there, withdrawing the full amount of their SIPP tax free (paid into a UK bank account), and then later moving back to the UK and thus completely avoided paying any tax on their SIPP withdraws? For those with larger SIPPs, the tax savings alone would probably pay for a little place in Portugal. Can't be that simple can it?

twister_teddy

NedS said:

Deleted_User said:

HMRC will allocate a NT tax code to you, (when you tell them you are no longer tax resident), the pension payments will be paid gross normally to a UK bank account (for the main SIPP providers), and as others have said you will have to pay tax in the country of tax residency.

So is there anything stopping someone retiring to Portugal and taking up tax residency there, withdrawing the full amount of their SIPP tax free (paid into a UK bank account), and then later moving back to the UK and thus completely avoided paying any tax on their SIPP withdraws? For those with larger SIPPs, the tax savings alone would probably pay for a little place in Portugal. Can't be that simple can it?

That's a great question. Apart from Portugal what other countries have relaxed tax rules for UK retirees pension withdrawal.