UK-UAE Double Tax Pact 'Opens Door To Tax-Free Pension Transfers'

By Hans Esser, for 05 April, 2017

The new double tax agreement between the United Arab Emirates and the UK could reportedly allow UAE residents to access their UK pension free of UK income tax.

David Denton, Head of International Technical Sales at Old Mutual Wealth, said the new treaty would be beneficial for British expats in the United Arab Emirates as well as those of other nationalities who have a UK pension.

"For UK expats, stripping money out of a pension tax-free needs to be balanced against future Inheritance Tax exposure and the need to ensure funds last throughout retirement."

"As one of just a few countries, in international terms, previously not having a DTA with the UK, it is a treaty of some significance and symbolism for the UAE."

He said: "Determining tax residency for the UK revolves around the Statutory Residence Test 2013, whilst an individual is deemed resident in the UAE if they are domiciled there, it is their habitual abode, or center of vital interests. For those that meet this definition of UK non-resident and UAE resident, and are interested in the impact upon their UK pensions, Article 17 specifies that 'pensions and other similar remuneration paid to a resident of a Contracting State shall be taxable only in that State.'"

Denton said: "This appears to have the surprising effect that, subject to the normal 55 age requirement, those in a UK scheme offering flexi-access drawdown courtesy of the 'freedom and choice' legislation in 2015, could access their pension fully and without tax. However, people need to take care to ensure they are not caught by the UK temporary non-residency rules."

"This is an interesting development which could persuade UAE residents to transfer their pension and take advantage of UK SIPPs (Self-Invested Personal Pensions) offering flexi access drawdown, and subsequently access the benefits in the UAE free of income tax."

The new DTA was negotiated and signed in 2016. It came into force on December 25, 2016, and became effective in the UK from April 6, 2017.

Tags: Court | United Arab Emirates | Wealth | Tax | Pensions | Double Tax Agreement (DTA) | Mining | Interest | Retirement | United Kingdom | Legislation | Gulf Cooperation Council | Tax |


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