Sweden/UK Double Taxation Agreement for UK Pensions
If you are a British expat who is moving to work in Sweden or if you are a Swedish expat who has worked in the UK and returning to Sweden, you will need to think about what to do with your UK pension pot.
Do you leave it in the UK or transfer it to Sweden or are there any other options to reduce your tax bill?
Do you leave your pension in GBP or transfer it to EUR, USD or SEK?
“We will show that a QROPS in Malta may be the winning solution in many cases for large pension schemes for tax efficiency and offshore pension planning.”
Are there are QROPS in Sweden? Whilst there are 7 QROPS listed for Sweden on HMRC’s website, the options are more limited than moving to a more flexible pension plan in Malta, particularly if you want to invest in other currencies or are unsure of your final retirement destination.
It may be preferable to keep the pension in the UK or transfer to a QROPS in Malta. Both Malta and the UK have a Double Taxation Agreement with Sweden.
Is a UK Pension Taxed in Sweden?
Sweden and the UK have a Double Taxation Agreement, but how you are taxed depends on a number of factors such as your residency and where you own houses.
If you have a home in Sweden AND the UK, you may get taxed in the UK or Sweden. You would get taxed where you have the most economic interests, e.g. if you have a job in Sweden and a house in Sweden, you would likely be taxed in Sweden.
If you live in Sweden, but have a company in the UK and income paid into the UK, you would likely be taxed in the UK.
If it cannot be determined where your interests lie, you will likely be taxed in the UK.
If you have a home only in Sweden, you should be taxed on a UK pension in Sweden.
This is covered by “article 4” on the Inland Revenue’s site concerning the Sweden UK Double Taxation Agreement.
Article 4 of the Sweden-UK DTA
(2) Where by reason of the provisions of paragraph (1) of this Article an individual is a
resident of both Contracting States, then his status shall be determined as follows:
(a) he shall be deemed to be a resident of the State in which he has a
permanent home available to him; if he has a permanent home available to him
in both States, he shall be deemed to be a resident of the State with which his
personal and economic relations are closer (centre of vital interests);
(b) if the State in which he has his centre of vital interests cannot be determined,
or if he has not a permanent home available to him in either State, he shall be
deemed to be a resident of the State in which he has an habitual abode;
(c) if he has an habitual abode in both States or in neither of them, he shall be
deemed to be a resident of the State of which he is a national;
(d) if he is a national of both States or of neither of them, the competent
authorities of the Contracting States shall settle the question by mutual
Sweden has higher taxes than the UK, so it may be beneficial to leave your pension in the UK, it also under “flexible pension rules” which allow you to drawdown as much as your pension whenever you want in retirement.
We will now look at keeping your pension in the UK, but transfer to EUR for pension income stability and also the tax advantages of moving to a QROPS.
Moving UK Pension to a UK SIPP in EUR for Swedish Residents
For Swedish residents, e.g. Swedish expats returning to Sweden and British expats living in Sweden permanently, it may be advantageous to move your pension to a UK SIPP which keeps your pension in the UK, but you can move your pension from Pounds to SEK.
This will reduce any currency fluctuations as well as still allowing the new pension freedoms allowed by HMRC from April 6th, 2015.
Obviously, this will depend on where you get taxed. Under a UK SIPP denominated in EUR, your pension will still be taxed on death after 75 and could be taxed in the UK depending on your residency status and where your core economic interests are.
You will either be taxed in the UK or taxed in Sweden on income. You would be taxed in the UK upon death if tax is due.
Moving a UK Pension to a Malta QROPS for British Expats in Sweden
Sweden and Malta signed a Double Taxation Agreement on 9th October, 1995. The Sweden/UK DTA on income tax is covered under “article 21”; other income.
Income tax would be taxed in Sweden only, not in the UK or Malta. There would be no tax on death as long as you don’t return to live permanently in the UK.
The advantages of moving to a QROPS in Malta
- No tax on growth
- No tax on income in the UK
- No tax on death in the UK or in Malta as long as you remain abroad
- Income tax is due in Sweden only
- Due to the Malta/Sweden DTA, you only pay Swedish income tax at retirement age
- Tax on a Malta QROPS for Pensioners in Sweden
Income Tax Rate in Sweden ON PENSION INCOME
Chargeable Income (kr) Rate (%) Approx GBP (2014)
>from 0 kr to 18,800 kr 0 0 to £1,564
>from 18,800 kr to 433,900 kr 31% £1,564 to £36,115
>from 433,900 kr to 615,700 kr 51% £36,115 to £51,247
>from 615,700 kr+ 56% £51,247+
For British expats working in Sweden and Swedish expats returning to live in Sweden, a Malta QROPS can be a tax efficient way of reducing your tax bill, so that not only is there no tax on death in the UK if you remain abroad, but also no income tax in the UK. You would just pay Swedish income taxes.
If you still work for a UK company and have a UK home and a Swedish home, you may be better off leaving your pension in the UK as the income taxes would be lower, although you may be subject to a tax on death.
It is prudent to at least look to moving your pension to SEK, EUR or USD or leave it in GBP, but look at better investment opportunities.
With a QROPS in Malta, you can move all your pensions into one place offshore in EUR, GBP, USD, SEK or the currency of your choice and invest in the mutual funds, shares, unit trusts or ETF’s of your choosing with 100% of the pension pot left to your nominated beneficiaries upon death tax-free.