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Taxation of UK Pension & rental Income

9 posts in this topic

Posted

I am retired and receive a UK company pension. I also own a flat in the Uk and receive an income from it, which is taxed in the UK along with the pension.

My understanding is that the pension income is covered by the UK/DE Double Taxation treaty and so is not considered for tax here in DE. And I am sure I have read somewhere that UK rental income is also not taxable in Germany

Is that correct?

And, in a similar vein, my health insurance (with the TKK) is based on a % of my UK company pension (before it is taxed in the UK). Should the the Uk rental income also be included in TKK's calculation, or should it be ignored (as per the Tax calculation)?

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Posted

And, in a similar vein, my health insurance (with the TKK) is based on a % of my UK company pension (before it is taxed in the UK). Should the the Uk rental income also be included in TKK's calculation, or should it be ignored (as per the Tax calculation)?

Sorry, but they are right.

Public health insurances base your public health insurance contribution on your worldwide income, no matter where you taxed it.

The only thing they wouldn't consider as income would be a scholarship, since scholarships are income tax free under German tax law.

And the fact that they calculate it according to your gross rental income (i.e. before income tax) is normal, think about it, employees also pay public health insurance contributions based on their gross salary.

*********************

Regarding your UK pension, normally a UK company pension would have to be taxed where you reside, i.e. in Germany, see article 17 section 1 of the double taxation agreement (DTA) between German and the UK.

However, if, in acordance with art. 17 (3) of the DTA, it is based on you having paid in for at least 15 years contributions that:

  1. did not form part of the taxable income from employment, or
  2. were tax-deductible, or
  3. were tax-relieved in some other way
then it is taxed in the UK

*********************

The UK rental income is taxed in the UK, see article 6 of the DTA.

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Posted

Many thanks for the quick reply. Much appreciated

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Posted

Panda: a random thought. You state that "And the fact that they calculate it according to your gross rental income (i.e. before income tax) is normal, think about it, employees also pay public health insurance contributions based on their gross salary."

- yes, that is true, but surely the Income Tax is calculated on your income less the health insurance contributions , i.e. the health Insurance contributions are tax deductible. In my case, i pay income tax on the full amount AND health insurance on the full amount!

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Posted

- yes, that is true, but surely the Income Tax is calculated on your income less the health insurance contributions , i.e. the health Insurance contributions are tax deductible. In my case, i pay income tax on the full amount AND health insurance on the full amount!

Yes, if it were taxed by Germany.

In your case, the UK taxes it, so you have to take it up with them!

Just convince them that you should have to pay less UK income tax since you have to pay German health insurance... ;)

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Posted

Was that a pig I saw flying past my window!!

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Posted

Out of interest - A Local Government or Civil Service pension from the UK

should be taxed in the UK according to the DTA (or so I have been told)

because it is equivalent to a German "Beamterente".

UK state pensions payable in Germany should be taxed in Germany - despite

UK tax offices sometimes changing your tax code so you pay tax on it in the UK

along with other UK taxed income.

The cure for this is a document in English and German you can print off

from the HMRC website and which needs to be signed and stamped by your

local Finanzamt to certify that you pay the appropriate income tax in Germany.

This needs to be sent to your UK tax office and your PAYE code will

be changed appropriately.

It's an advantage being taxed on separate parts of your income in both countries

as you benefit from two personal allowances.

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Posted

Yes, i agree about spreading the "load" and maximising the use of personal allowances in both countries

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