Tax on UK pension

67 posts in this topic

What a great link... Thanks PM.

 

What started this for me is that through my Nortel company pension I can access it at 50, I could take a 25% UK tax free lump sum and forthwith a monthly payment...

 

It all sounded great until I found out that here in Germany the tax free lump sum would end up being taxed and not only that, the KK would also want their pound of flesh :-(.

 

This was supposed to be a down payment on a house, I am really beginning to think it would not be a great idea to go ahead with this plan and just wait until I retire completely. By then I would either be back in Blighty or inherited and purchased a property with that money, later on in life. Unless the Erbschaftsteuer would also work against me :-/

 

Just hate when a plan ends up going down the swanny :-(

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Dear forum members,

 

I hope you an be of help regarding my mother’s tax situation here in Germany. My mother moved to my home in Germany November 2017 at the age of 81 and has the following running pensions since she was 60:

  • UK company pension paid into UK account
  • UK State pension paid to German account 
  • A small German pension paid in German account

We were under the impression that because she has been receiving the UK pensions for over 15 years in the UK that they must stay taxed there (Bundesgesetzblatt II Nr.33, Artikel 17, para 3) and therefore we have never made a Steuererklärung here in Germany.

 

We have now received a letter from the Finanzamt Neubradenburg asking many questions concerning when she arrived and if my mother has other sources of income. I presume they only see the small German pension and believe she must have another form of income.

Will my mother now have legal problems because she never made a tax return for 2017, 18 and 19?

Can my mother simply fill out a tax return back to 2017?

Is it correct that the tax requirement remains in the UK?

Can the Finanzamt see all the pensions in the UK?

They are requesting that reshow a ‘Certificate of Residence for the purpose of tax relief according to the Double Taxation Convention’, Where do we get this certificate? 

 

Finally, can someone recommend a UK competent Tax advisor in the Bodensee area?

 

Many thanks for any helpful comments

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Manonlake... any update on your Mum?

 

In regards to my issue with the 25%, I have found a Steuerberater who I think might be able to help me in my matter... Still hoping that I wont have to fork out to much from the pot...

 

Eitherway, I'll keep you updated...

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On 5/22/2020, 10:50:28, Manonlake said:

 

We were under the impression that because she has been receiving the UK pensions for over 15 years in the UK that they must stay taxed there (Bundesgesetzblatt II Nr.33, Artikel 17, para 3) and therefore we have never made a Steuererklärung here in Germany.

 

 

I've checked Article 17, Paragraph 3, of the DTA and I don't think it says what you think it says; it talks about "contributions for over 15 years", not  "collection of the pension for over 15 years".

 

I would think that according to Paragraph 1 ("Subject to the provisions of paragraph 2 of Article 18, pensions, other similar remuneration or annuities arising in a Contracting State and paid to a resident of the other Contracting State, shall be taxable only in that other State.") the UK company pension is taxable in Germany, and according to Paragraph 2 ("Notwithstanding the provisions of paragraph 1, payments which are made in accordance with the social insurance legislation of a Contracting State shall be taxable only in that State.") the UK state pension would be taxable in the UK.

 

I'd think the German pension would be taxed in Germany regardless of it coming from the DRV or any other fund.

 

 I am not a tax expert, so I don't know if there are any if and buts, but any German Steuerberater should be able to sort this out and help you answer the Finanzamt questions. 

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The UK State Pension is taxable only in the UK.  I can't remember whether for a resident of Germany, subject to taxation on their worldwide income, it still feeds into the Progressionsvorbehalt but pretty sure it does.

 

The German State Pension is taxable in Germany of course.

 

The UK company pension is potentially covered by Article 17(3). 

 

3) Notwithstanding the provisions of paragraph 1, such a pension, similar remuneration or annuity arising in a Contracting State which is attributable in whole or in part to contributions which, for more than 15 years in that State,

    a) did not form part of the taxable income from employment, or

    b) were tax-deductible, or

    c) were tax-relieved in some other way shall be taxable only in that State.

This paragraph shall not apply if that State does not effectively tax the pension, other similar remuneration or annuity, or if the tax relief was clawed back for any reason, or if the 15 year condition is fulfilled in both Contracting States.

 

Were the contributions tax deductible for more than 15 years in the UK and not also tax deductible for that length of time in Germany? In essence, did the person work only in the UK and for at least 15 years? Was the tax relief clawed back?

 

These are all questions of fact but if the conditions are satisfied, the pension would be taxable only in the UK but again, will almost certainly feature in the Progessionsvorbehalt - oh the joys of the German tax system...  

 

@PandaMunich will correct my errors...

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