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Where Taxpayers and Advisers Meet

German Pension taxed in the UK

Dorothea
Posts: 2
Joined: Wed Sep 06, 2017 8:42 pm

German Pension taxed in the UK

Postby Dorothea » Wed Sep 06, 2017 8:59 pm

My Head is spinning from trying to read the German Notification from their Tax Office about having to pay Income tax to the German Tax authorities because like other Members of this Forum (which I am reading today for the first time) , I have been paying my Tax to the UK Tax Office as I am a British National and thought I was doing the right thing.
Why, I wonder are we all receiving letters after all these years. I fear I am a Brexit casualty. I am brave enough to admit I did not vote to come out. I was born in Germany in 1947, worked there for 7 years and became a UK National in 1970. I can still read German but nothing too official. I am now starting the Ball rolling by writing to my Tax Office who according to Germany should never have taken the Tax as apparently a new Law came into force in 2010 and I did not receive the Pension until 2012.
There must be quite a few of us as I was invited by Letter to come to the German Embassy by appointment to talk to German Tax Officials especially flown in to advise me and others of the amount of Pension we would be receiving.
I shall watch this page closely and share my experience. If anyone can tell me what the Title of this 2010 new Law was I can at least study it. The amount of tax does not warrant the expense of a Solicitor or Tax Adviser, so have to struggle on.
signed Dorothea

darthblingbling
Posts: 252
Joined: Wed Aug 02, 2017 9:09 pm

Re: German Pension taxed in the UK

Postby darthblingbling » Wed Sep 06, 2017 10:58 pm

If it's a German state pension then it's taxable in Germany and not the UK. Technically that's a pretty good position to be in as you're likely to also get some kind of personal allowance in Germany and this will likely be your only German income.

I'm guessing the 'law' they're/you're referring too is the Germany/UK Double Tax Treaty that came into force in 2010:

https://www.gov.uk/government/uploads/s ... d_2014.pdf

darthblingbling
Posts: 252
Joined: Wed Aug 02, 2017 9:09 pm

Re: German Pension taxed in the UK

Postby darthblingbling » Wed Sep 06, 2017 11:02 pm

Also this has nothing to do with Brexit :mrgreen:

Dorothea
Posts: 2
Joined: Wed Sep 06, 2017 8:42 pm

Re: German Pension taxed in the UK

Postby Dorothea » Sun Sep 24, 2017 7:38 am

Thank you for the additional information. I have now received the Bills payabale by 20/11/17 and yes, it looks like things changed in 2010 as People in receipt before 2010 could elect to continue paying their Tax in the UK but after that( mine started 2012) there was not a choice. As my Tax Office demanded I declared and paid them the tax annually. I have written to them requesting a refund, but no reply as yet as I have to wait and worry. I am in the process of doing my current Self-Assessment Tax Return and if it is not complete it will be automatically rejected as it is scanned. If I enter the Pension again I will be taxed. Covering Letters are separated from the return before scanning and are read later as everything is stockpiled. So I have to wait to see if a refund is made. Surely I am not the only one, so the Tax Office will do no doubt do their own research. Something has gone wrong as this should not have happened. Strange so, that it took the German Tax authorities all that time as they always had my current address. signed Dorothea

darthblingbling
Posts: 252
Joined: Wed Aug 02, 2017 9:09 pm

Re: German Pension taxed in the UK

Postby darthblingbling » Wed Sep 27, 2017 11:43 am

Is your German state pension above or below €8000?

If you've been declaring this in the UK you should be due a refund, but you will need to make the correct treaty claims on your return.

If the pension is below €8000 then likely you'll also have no tax to pay in Germany as this will be your only taxable income in Germany and it will be below the personal allowance that you are entitled to. I have no idea if they require a return to be filed or not for this.

If paid assistance is out of the question then you should hit up http://taxaid.org.uk/ as treaty reliefs can be a bit complex for some.

Ultimate outcome of all this is that you should get a refund for some of the delinquent returns, and going forward the German state pension is 'effectively' tax free income. You just need to make sure the correct forms are filed.

mfs2710
Posts: 7
Joined: Thu Sep 28, 2017 4:32 pm

Re: German Pension taxed in the UK

Postby mfs2710 » Thu Sep 28, 2017 5:27 pm

This does indeed have nothing to do with Brexit; there has been talk for some time that the "people in Neubrandenburg" (where the relevant German tax office is domiciled) are in the process of toughing up chasing German Tax on pensions received by "Steuerausländer" (non-residents for tax purposes).

Dorothea's case matches mine almost exactly: it looks like she, like I, was born in Germany in 1947 or perhaps a couple of years later - I believe German women of our generation can still get their pensions at 63 - and came to the UK many decades ago. Like her, I paid UK tax on 90% of my German state pension from 2012 onwards (though I never figured out where to enter this on the self assessment - I simply wrote it into the notes). And I now got a tax demand from the Germans. Still have to figure out how possibly to claim back the overpaid UK tax in 2012/13, 13/14, 14/15 and 15/16!

Darthblingbling, however, is not correct with his assertion that pensions under €8000 would not be taxed in Germany. German personal allowances (other than a small "Werbungskostenpauschale" - an expenses allowance) are not applied unless the tax payer has elected to have *all* his/her income taxed in Germany ("unbeschränkt steuerpflichtig"). And that is only possible if all non-German income is either less than approx. €8000 (depending on the year) or constitutes less than 10% of total income.

Nevertheless, at least for relatively small pensions like mine, it is still advantageous to have them taxed in Germany. In Germany, a considerable proportion of very old pension rights like mine and Dorothea's is deemed to have had tax paid on the contributions and is now tax free. In my case, it turns out that for the three years for which they sent me assessments so far, the German tax is about 11% of the gross, compared to 18% in the UK (20% basic rate on 90% of the pension).

Now my question:

Whereas a German pension may not be taxable in the UK, does this mean that we can simply "forget about it" (i.e. treat the income similar to ISA interest), or do we still have to add it into the taxable amount to determine the "tax bracket" and then take it off again? In other words, assuming a total UK income of £38000 and a German state pension of €10000, does this result in being a Higher Rate Taxpayer or not?

My personal parsing of the wording of various documents, particularly where they state flatly that "German social security pensions are ... not taxable in the United Kingdom" - see https://www.gov.uk/hmrc-internal-manual ... ief/dt7909, would indicate that in this case one would remain a basic rate payer.

This may seem a moot question, as the total tax payable might for many end up the same, but it becomes important once you have considerable income from savings interest, where the allowance drops from £1000 to £500 once you are a penny over the basic rate limit, costing you up to £200 in tax. Also, the UK government seems set to make that income boundary more and more important in the future: we might soon lose our bus passes and Winter Fuel Allowance for that one extra penny of income!

darthblingbling
Posts: 252
Joined: Wed Aug 02, 2017 9:09 pm

Re: German Pension taxed in the UK

Postby darthblingbling » Fri Sep 29, 2017 3:39 pm

Thanks for clarifying the German 'personal allowance'. I just went off some facts I saw on Google.

This income does not form part of your UK taxable income, so it won't have an effect on your tax bands.

You're still able to amend your 2015/16 return. For the rest you will need to write to HMRC to make an overpayment relief claim and give details of how much you overpaid and why.

mfs2710
Posts: 7
Joined: Thu Sep 28, 2017 4:32 pm

Re: German Pension taxed in the UK

Postby mfs2710 » Sat Sep 30, 2017 9:40 am

Thank you, that's very helpful! I'll keep reporting how I get on.

It turns out that my question was, as far as I am concerned, somewhat academic: even with my trifling German pension, I am not getting above the Higher Rate threshold! :cry:

robbob
Posts: 2800
Joined: Wed Aug 06, 2008 4:01 pm

Re: German Pension taxed in the UK

Postby robbob » Sat Sep 30, 2017 10:35 am

Fascinating thread here.

Just out of interest - does anyone know if this German arrangement of not having to declare German pension income to the UK authorities is very unusual? are there any/many of other situations like this where similar types of income simply don't need to be reported to the UK tax authorities?

Thanks in advance.

darthblingbling
Posts: 252
Joined: Wed Aug 02, 2017 9:09 pm

Re: German Pension taxed in the UK

Postby darthblingbling » Sun Oct 01, 2017 12:02 am

I don't know about not reporting. I usually put a note in the return to say what the income is, where it's sourced and the treaty articles that exempts it from UK tax.

But it's quite common for pensions, usually it's taxable in the country of residence or in some 'lucky' situations the country of source. More common for social security pensions to be taxed in the country of source only than private pensions.

Hong Kong is another country off the top of my head that has a similar treaty.


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