German tax implications of UK Premium Bonds

27 posts in this topic

Hi,

 

Does anyone know what the tax position is on UK Premium Bond wins? I did a quick forum search but could not find any relevant posts. So far, I have received conflicting advice; Premium Bond wins are treated as lottery wins and therefore are not taxable, only the interest received on prizes would be taxable in Germany or prizes are treated as one off gains and are taxed accordingly. As tax information is shared across the EU I assume keeping quiet would be rather risky. No big wins yet I'm afraid... just in case!

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The real question is your permanent residence and primary location for tax declaration. Both Germany and UK tax their permanent residents on their worldwide income. Neither country taxes lottery winnings (but will tax the consequences, and therefore interest arising for example). Assuming you declare permanent residence on one country or the other, then no tax is payable on the winnings. It is declarable, however. Consequential income depends on where you declare your tax. If you normally declare your income in Germany and already have other taxable earnings in UK then you must declare the winnings there (no tax should be payable) and include the declaration on your German return (still no tax to pay). Bear in mind that if a win is immediately invested then the interest becomes immediately liable for tax and therefore declarable in either or both countries depending on your circumstances. Again, tax should not be applied twice.

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This is a very interesting poser - one I'm not sure the tax authorities in either countries, nor the EU bods in Brussels have contemplated. It would be interesting to hear opinions from various TT tax oriented boffins. As a complete non-expert, I could imagine that while national lottery winnings may be covered somehow EU wide, things like prizebonds - which are in effect investments in the national government, may not be understood. I would be surprised if the German tax authorities had a strategy on such things, although as a complete amateur, I stand to be corrected.

 

Where it could get complicated is when the money hits your German bank account. As the banks in Germany appear to be subservient to the Finanzamt with regard to reporting, I could imagine that a large deposit to your German account may cause lots of Steuerberater fees to explain away.

 

However, as I say, an interesting poser! Over to the experts.

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Thanks, YorshireLad6 and colinmanning. Reading your replies made me question if premium bonds were regarded as a lottery in as much that ‘stake money’ is not lost after every draw. This seems as far as the UK definition is concerned, a lottery.

 

"Premium Savings Bonds were officially launched by Harold MacMillan, Chancellor of the Exchequer, in his 1956 budget. Savers were offered a chance to participate in a lottery for dividends (monthly prize draw)"

The advice mentioned in my post was in fact obtained from Steuerberaters through contacts so it was unpaid for and unofficial. However, I don’t think I can be the only Brit in Germany with premium bonds! And, unfortunately I don’t have a problem with large deposits appearing in my German bank account but hope that changes with the next draw.

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With Premium Bonds your stake money is the notional interest from the previous month, so it is lost if you don't win.

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Where it could get complicated is when the money hits your German bank account. As the banks in Germany appear to be subservient to the Finanzamt with regard to reporting, I could imagine that a large deposit to your German account may cause lots of Steuerberater fees to explain away.

I do not believe that a German bank reported to the Finanzamt that a load of money has hit your account. They report any interest gained on capital without reporting the total sum. However IF the Finanzamt starts to investigate you (for whatever reason) then the bank would deliver more info...

 

 

Again, tax should not be applied twice.

Slightly OT but I wish this were true - I declared dividends gained in UK & provided evidence that std UK tax was withheld but the German Finanzamt came up with the idea of only recognising a small fraction of the UK tax saying "you can challenge us in the courts if you like"...

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Banks are required to report movements in excess of €10,000 to the authorities, and in theory at least any transfer into he country over €10,000 should be reported by the recipient (although in theory this is for "statistical" purposes). Transfer texts are typically annotated by the bank with "Wir verweisen auf die Meldepflicht gem. §§ 59FF AWV" to warn you of this requirement...

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What YL6 says is my understanding as well. Amounts over €10,000 are automatically reported. My Steuerberater certainly put me through the ringer to get all the details of a payment my father gave me last year as a sort of installment on my inheritance (my step-mother is only three years older than me, so if he waited on nature, I could have gone out "leer").

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So these premium bonds in the UK or Prize Bonds in Ireland. Do you have to pay tax in Germany if you win a small amount say 50 quid

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I realise this post is from last year but....

 

 

Neither country taxes lottery winnings (but will tax the consequences, and therefore interest arising for example). Assuming you declare permanent residence on one country or the other, then no tax is payable on the winnings. It is declarable, however.

 

The last sentence - where is this (the winnings) declarable? I do not recall seeing any place for this in the recent Steuereerklärung.

 

Tax on gains from the capital is clear of course...

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So HEM do you think what it means is that if you win you don't need to pay tax on it but if you lodge the money into you bank account for example you need to pay tax on the interest. What if you just spend it would you still need to declare the winnings?

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Lottery winnings are not liable for tax.

Interest or any other form of gain from using the winnings is taxable.

 

Thats why there is nowhere on the tax form to put in how much you won.

 

This is the way it was explained to me anyway.

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So HEM do you think what it means is that if you win you don't need to pay tax on it but if you lodge the money into you bank account for example you need to pay tax on the interest.

 

Exactly.

 

 

What if you just spend it would you still need to declare the winnings?

 

I don't believe thats its forseen ANYWHERE to declare such winnings.... I have certainly not been aware of such a section in the Steuererklärung.

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On UK Premium Bonds / Irish Prize Bonds. Has anyone provided their tax information to the Bond company?

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Our FA has decided thse are to be treated as taxable income. In 2007 we had winning of ca. €1400 which has been reported by NS&I to the German tax authorities. Like all TT`s we had hoped/assumed these were not taxable income. Here is their reply.

 

Das Finanzamt ist der Auffassung, das die N&SI Premium Anleihe keine Lotterie im herkömmlichen Sinne ist.

Die Gewinne werden nicht aus Einsätze ausgezahlt, sondern aus eingesparten Zinsen. Daher entsprechen die

ausgezahlten Gewinnanteile der Verzinsung des Kapitals und sind daher auch steuerpflichtig.

 

At least the amount was not huge, if I had been I guess we would be appealing but for the amount of extra tax it is not worth it.

 

So please be warned, the tax authorities are getting better each year in informing each other.

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Das Finanzamt ist der Auffassung, das die N&SI Premium Anleihe keine Lotterie im herkömmlichen Sinne ist.

 

I suppose you could try getting a statement to the contrary from the Premium Bond folks - after all it is their scheme & for the German Finanzamt it could well be a case of Not Invented Here - we don't know it so we'll come up with a rule that suits us.

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Not great but I suspect the german tax authorities have the right answer. Premium bond wins are not treated as lottery winnings in the UK - they are non-taxable under a specific provision. Premium bond holders, like other UK tax-free investments, are subject to limits on the amount you can hold. ISA interest or NS+I savings certificates would be taxable if you kept them on going to Germany.

 

If 'wins' from notional interest foregone were generally non-taxable and there was no tax on interest foregone, it would be trivial for banks to construct 'lotteries' to take large savers' interest income out of tax.

 

PS there is no tax withholding on UK dividends, the tax credit is purely notional.

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[adminmerge][/adminmerge]

Does anyone know if UK Premium Bond prizes are taxable in Germany?

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You live in the UK (sez your profile) - do you plan on telling the DE Finanzamt that Ernie has come up in your favour?

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