According to expert opinion – however, you are advised to consult a CPA on this matter. Under the Treaty between UK and USA the “Pensions Article” 17.1, Sub-paragraph (b), determines the tax treatment of pension distributions. Article 1.4 (the Savings Clause) – which might otherwise cause US citizens to be assessed for tax on the lump sum – does not apply. It is excluded by Article 1.5 which makes an exception of pension distributions from pensions recognized by USA. These include pensions issued by a “contracting State” – i.e. a country which has a Treaty with USA. If such a pension distribution is intended to be exempt from tax in the country of issue, had the recipient been resident in that country, then it will remain exempt from tax in any other country in which the recipient resides. This includes USA. This also applies to the Treaty between the UK-approved jurisdiction of Malta and USA.
Alconbury Trust LLC cannot provide legal or tax advice – for information only.