German income tax

[happiness]

I have been receiving a small German State Pension since 2010 as I worked in Germany from 1970 to 1993, although I did not work every year. Today I received a tax claim from the German tax authorities for the years 2010, 2011, 2012 and 2013. I have been resident of the UK since 1993. I did not work in the UK when I returned in 1993 until I turned sixty, eleven years ago, because I was in ill and in receipt of Sickness Benefit for several years and then my very small English State Pension started when I turned sixty. My German State pension started when I turned 65.

I am currently in receipt of English State Benefits including Housing Benefit, Council Tax Benefit and Guaranteed Pension Credit. I do not pay Income Tax as my German pension and benefits are well under the ceiling set by the tax authorities. The letter from the German tax authorities is a bit confusing and I am not sure what to do. Can anyone help?

[maths]

This is primarily a question of German taxation.

I have had a cursory look at the UK/Germany double tax agreement.

If your pension is payable by the German government under their social insurance legislation it appears that this is taxable in Germany but not taxable in the UK.

If this is correct then it would seem that they may have being paying the pension without deducting any German tax and now, for some reason, are seeking to collect tax which they assume you owe.

Do you know if they have paid your pension "gross"?

Have they not contacted you before about tax owed?

[Taliskerplease]

My situation is similar to that of happiness:

I started receiving my Germany pension on 1st Jan 2011 - paid gross, nothing deducted.

I received a letter from the Finanzamt 2 days ago saying they would be taxing me on the 2011 - 2013 elements and offering me the chance to become unbeschränkt Steuerpflichtig (subject to unlimited tax liability) - so, thank you but no thank you for that guys. This is the first time I have ever been contacted about this issue.

Problem is, I have been declaring the full amount on my UK tax returns - as German State Pension and paying my UK tax demands, and no-one at HMRC has ever raised the possibility / probability of this being the wrong way to go about it!

I too have read the German & English versions of the double taxation agreement and it seems reasonably clear to me now that the German State Pension can be taxed by them.

I've written to them and am awaiting their reply about what to do now.
(A further element contributing to the general confusion is that the only document HMRC issues confirming your being up-to-date with your tax in the UK is a rather bland "certificate of residence" - which makes no mention of what you paid, for what, and when). If you look at the German website there is a document "Bescheinigung EU / EWR" which, as to be expected from German tax offices, nails you to the cross on all details required for a proper tax evaluation - what you received, for what, etc, etc.)

Obviously I'm concerned that the tax already paid on this German pension by me to HMRC (ca 2,000pds p.a.) get's acknowledged as having fulfilled my obligations - or, should I be forced to settle a German tax demand, gets returned to me by HMRC.

Does anyone have experience of such repayments by HMRC?
Do these these take place as an offset deal between the 2 Tax offices - or am I always pig-in-the-middle?

[Taliskerplease]

I have now received my Tax Demands from the Finanzamt Neubrandenburg - all well laid out as you expect and well-detailed.

They are also requesting back interest to be paid on the (unpaid) sums - not a lot but EUR600 or so in total.

Does anyone have knowledge / experience of getting the interest payments returned / paid by HMRC?

[Taliskerplease]

I have been receiving a small German State Pension since 2010 as I worked in Germany from 1970 to 1993, although I did not work every year. Today I received a tax claim from the German tax authorities for the years 2010, 2011, 2012 and 2013. I have been resident of the UK since 1993. I did not work in the UK when I returned in 1993 until I turned sixty, eleven years ago, because I was in ill and in receipt of Sickness Benefit for several years and then my very small English State Pension started when I turned sixty. My German State pension started when I turned 65.

I am currently in receipt of English State Benefits including Housing Benefit, Council Tax Benefit and Guaranteed Pension Credit. I do not pay Income Tax as my German pension and benefits are well under the ceiling set by the tax authorities. The letter from the German tax authorities is a bit confusing and I am not sure what to do. Can anyone help?

Happiness,

I have just received my detailed tax demand from Germany and it confirms a telephone discussion I had about 10 days ago with a staff member there (Finanzamt Neubrandenburg).
He told me that my German Pension, as it was close to being under the lower limit of the Grundtarif (and therefore non-taxable), would be INCREASED by them to ensure that I would pay tax!

Example:
In 2012 I had a BRD Pension of €10,901 which then translated to a Stuerpflichtiger Rente of €6,808 (after the age-related benefit aspect is taken into account).
As that is less than the lower limit for taxation, they then added €8,100 (Personal Allowance) bringing it up to a theoretical €14,836 - on which tax of €1,345 is due!

I have no idea what law allows them to bump this up like this and I'm trying to find out more. If I do find anything worth mentioning then I'll post here again.

[tatort]

Very interesting posts! I'm probably in a similar situation although I haven't been contacted by Neubrandenburg yet. I am a UK national and resident and started receiving my German state pension of around €6000 per year in 2010 (untaxed at source as seems to be the norm) for my work as a teacher in Germany from 1972 - 1984 and the amounts in question ( 90% of the actual amount received) have been duly entered on my UK tax return since then and naturally taxed by HMRC. As I understand it, the German tax authorities will be demanding tax on my pension for the years 2010 - 2013 as from what I've understood they add around €8000 just to make sure no one is actually under the tax threshold. What I don't understand is why HMRC expect you to enter the German pension at all if they know it is taxable in Germany. If they had pointed this out clearly a lot of people would have been spared a lot of aggravation. It's hard to imagine they didn't know! Whether they will actually refund the tax will be a very interesting question but of course they should as the agreement between the two countries is to avoid double taxation. I only mentioned 2010 - 2013 because these seem to be the only dates that seem to come up in people' s queries but what is the situation for the following years? No one seems to have mentioned any years after 2013. Hope to hear from someone soon!

[neubrandenbum]

talisker
I also have letter from NeuBrandenburg giving notice of tax assessment on German pension 2011-2013.

I then obtained letter from HMRC confirming payment of tax on German pension from 2011 to date.
NB reply is an extract from HMRC internal manual, confirming German social security pensions taxable only in Germany. This appears to apply from 30 December 2010 as if payments of pension started before then, there appears to be an option to continue to be taxed solely in UK.

that doesn't help me but it may you.

[tatort]

I started to get my German state pension in May 2010 so from what I've understood, it was correct for it to be taxed in the UK in that year. Am I to understand that if I started to pay UK tax before 30. Dec. 2010 it was OK to continue doing so but should I have informed Neubrandenburg that I had opted to continue having the pension taxed in the UK? This would have been a lot to expect of people who knew nothing about it. I'm guessing that this will turn out to be a tricky question. Re the demand received by Happiness, why are they asking for tax for 2010 when the taxing of German pensions in Germany only came into force from 30 Dec 2010 when they would only have been able to claim tax on one day's pension i.e. 31st December? It's really becoming a bit of a farce.
Another question for Neubrandenbum, is HMRC going to repay the tax you have paid so you can pay the German tax authorities and what is the situation for 2014 onwards?

[Taliskerplease]

I've had quite a run-around these last few days from the HMRC on this issue.

Firstly, there was the call from the HMRC "Foreign Pensions Specialist" (he called Sat morning, after I had tried the helpline and been advised their specialist would call me within 4 weeks), who said I should have completely ignored the Foreign Earnings section of my Self-Assessment form and should have entered nothing there. He advised me simply to write claiming a refund of UK tax paid on these payments.
This I did.
A few days later I received a form "DT-Individual", which was entitled: "Application for relief at source from UK income tax and claim to repayment of UK income tax".
Needless to say this was HMRC's pathetic misreading of my letter (it was very clear and very correct), it was the wrong document, was completely inappropriate and completely useless.

Yesterday I then contacted an organization called: Tax Help for Older People (http://www.taxvol.org.uk/) who seem quite switched-on and have certainly been helpful - so far.
They claim to have the use of a direct Hotline to specialists at the HMRC and, having explained my problem, I was put through to an HMRC tax specialist who was polite, seemed intelligent and understanding. She went away and checked my file etc, came back and apologized that her colleagues had obviously misunderstood my letter.
She has undertaken to look into my claim and get back to me.

I've also requested HMRC pay the interest demanded by Neubrandenburg (about €610) as well as the 6,000pds UK tax wrongly paid.

One thing I would say is that dealing with the German Tax Authorities, whether Neubrandenbrug or local Finanzamt level, is much more straightforward and "humananized" than dealing with HMRC. Getting competent advice, explained in a polite and straightforward manner is the Norm in Germany.

I'm pretty disgusted at the obvious deficiencies I've experienced so far in HMRC's public dealings.

If taxvol.org.uk do manage to help me on this I'll make a donation - they are a charity staffed by volunteers.

[tatort]

Thank you very much for such a long post and sharing your information with us all. I'm sure we all look forward to hearing how it all goes. I've written to HMRC to ask them what I need to do if I get the letter I expect. Actually I don't know if I will be affected as I started to receive my pension in May 2010,( before the apparently key date of 30 Dec ) when it appears it was correct to have the pension taxed in the U.K. and it was possible to opt to continue to do so. That is at least what one of the contributors to the forum has suggested although I have grave doubts as to whether this is actually the case and even it is, I expect I should have informed Neubrandenburg to this effect. I say "should have" but of course I knew nothing about it like nearly everyone else and if I were to ask 4 different tax inspectors, I expect I would get 4 different answers. HMRC have definitely made a mess of the situation but equally the German tax authorities made no attempt to inform people that the pensions are taxable in Germany. When we receive our Rentenbescheid every year, why couldn't they have made sure there was an additional note advising pension recipients of the tax situation? So great teamwork on the part of the UK and German tax authorities! Your combined incompetence has caused countless people a lot of inconvenience to put it mildly - a truly great advert for harmonisation within Europe!