Moving to Germany before Brexit ?!?

36 posts in this topic

44 minutes ago, JonnyEnglander said:

Re Grundfreibetrag requires 90% income from Germany... I have never heard of this. I have just read the link to the actual legislation but not sure I fully understand how it applies to me.

 

It doesn't.

Nothing to do with your situation at all.

 

HEM was just alluding to the fact that if things were the other way round to your situation of a "Brit moving to Germany", i.e. if a German who draws a German social security pension moved to the UK, his German public pension would still be taxed by Germany, but Germany would no longer give him the 9,408€ income tax-free amount in his 2020 German tax return. This means that that German would have to pay German income tax starting on the first € of his German social security pension.

I then responded to HEM that that was true, but that there was a way around that, i.e. for that German to get that German 9,408€ income tax-free amount reinstated, as long as the sum of all his German income was at least 90% of his worldwide income.

 

So basically, HEM was saying that the UK is being much nicer to its citizens who move abroad, by still giving them the UK tax-free amount on their UK social security pension unconditionally.

While Germany has the default that it generally takes the tax-free amount away from anyone who moves away from Germany, and people then have to jump through hoops to get it back again (if they can get it back at all).

 

44 minutes ago, JonnyEnglander said:

I assume online sales would simply follow where residence is

 

Yes, they do for income tax, don't worry.

You will be resident in Germany from the day that you register your address here and will get the 9,408€ tax-free amount applied in your German income tax return automatically, just like any other resident of Germany does.

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Well, I've gone and done it, as of today, I am now a German resident.  Perhaps I should change my handle from Jonny Englander to Jerry Jonny  ;o)

 

Funny how life turns out. 20 years ago I would never have dreamed I would one day  emigrate.... but that's what happens when you chat up girls online.   ;o)

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Now I am working through moving all my financial affairs to Germany, and I have read PandaMunich's very  helpful replies but I still have some uncertainties about Pensions. 

 

I have today completed my my April 2018- March 2019 UK Tax return ( I currently do my own accounts without an accountant ) .  My income is up and down but that was a good year and I earned a lot and also paid a lot into my private pension. Basically everything I dont need to live off, I put in my pension.  Under the UK tax system if you earn 50,000 GBP and pay 15000 GBP into a registered private pension, then you are only taxed on an income of 35000 GBP. While those are not my exact figures they are in principle what I have been doing. Now I must tell the German authorities  how much I have earned. Using the above figures, for German purposes, would my income be considered 50,000 or 35000?

 

Does Germany have the same tax advantages that if you pay money into a private pension it is not taxed? When I say tax I mean Steuer,and Sozial Abgabe as well.  This is important to me as with the high level of taxation/ social costs in Germany it is relatively pointless earning 50,000 Euros pa. My pension savings are also relatively modest so it would be good to pay more than the basic Rentenversicherung .

 

If relevant I should say I have already qualified for the UK state pension ( requires 35 years , I have paid 36 or 37 years )

I also hope and expect that due to my profession I will be accepted into the Künstlersozialkasse (KSK). I will now stop paying into my UK private pensions but probably leave the existing payments in the existing pension schemes. 

 

 

 

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5 hours ago, JonnyEnglander said:

Under the UK tax system if you earn 50,000 GBP and pay 15000 GBP into a registered private pension, then you are only taxed on an income of 35000 GBP. While those are not my exact figures they are in principle what I have been doing. Now I must tell the German authorities  how much I have earned. Using the above figures, for German purposes, would my income be considered 50,000 or 35000?

 

 

Public health insurance, you're not in the KSK

If you are talking about the questionnaire in which you have to estimate your 2020 income for the public health insurance, estimate 35,000 GBP, converted into euro.

This is about your public health insurance contribution for 2020 and the public health insurer will anyway ask you in 2021 to submit your 2020 Bescheid (= paper you get after your German income tax 2020 has been processed) and will either:

  • if you estimated your 2020 profit too high: reimburse you a part of what you paid for public health&nursing insurance, or
  • if you estimated your 2020 profit too low: charge you extra for 2020 for public health&nursing insurance.

 

KSK (Künstlersozialkasse) questionnaire

Note: as soon as you join the KSK things are different, since the KSK doesn't do this retroactive settlement based on your real income during the past year like the public health insurances do.

With the KSK, if you estimated your profit too high, you will never get the amount that you overpaid for public health&nursing insurance and for public pension insurance back.

On the other hand, the KSK threatens you with a 5,000€ fine on all their questionnaires if you underestimate your profit.

 

So what should you do?

What all the other artists do: calculate your real profit every quarter and send the KSK your updated profit estimate every quarter, so that your estimated profit for that year will be very near your real profit that year.

 

 

5 hours ago, JonnyEnglander said:

Does Germany have the same tax advantages that if you pay money into a private pension it is not taxed?

 

Only if you contribute to either:

  • the UK state pension (but only as long as the UK is considered to be in the EU, i.e. in case of a negotiated exit at the end of January it is planned that the UK will be treated as being part of the EU until 31. December 2020 - so that should still be a viable solution for 2020, but no longer for 2021).
  • your German public pension (= Deutsche Rentenversicherung = DRV), or
  • to an eligible German private pension, i.e. to a Rürup pension 

do these contributions lower your taxable German income.

 

Please also read these threads attentively:

I would just continue paying into the UK state pension system for as long as possible.

 

5 hours ago, JonnyEnglander said:

When I say tax I mean Steuer,and Sozial Abgabe as well.  This is important to me as with the high level of taxation/ social costs in Germany it is relatively pointless earning 50,000 Euros pa. 

 

If relevant I should say I have already qualified for the UK state pension ( requires 35 years , I have paid 36 or 37 years )

I also hope and expect that due to my profession I will be accepted into the Künstlersozialkasse (KSK).

 

As long as you do not join the KSK, are not a teacher and do not earn over 83.3% of your turnover from just one client, you do not have to pay into the German public pension system.

 

 

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Thanks PandaMunich, you have been very very helpful. I was completely unaware of the way KSK estimates income. I would never have dreamed of such a bizarre system.    :rolleyes:

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8 minutes ago, JonnyEnglander said:

Thanks PandaMunich, you have been very very helpful. I was completely unaware of the way KSK estimates income. I would never have dreamed of such a bizarre system.    :rolleyes:

 

The KSK doesn't estimate income at all – you have to do that. Reread carefully what Panda has written.

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Evening, Jonny! You may or may not know it but Panda is now a fully accredited tax consultant and has offered fantastic advice for years on this forum so...just saying..many of us on this forum can only recommend her services.

 

I am also recommending her to our insurance clients.

 

Disclaimer: I´m ( still..but way to go ! ) a one-eyed independent insurance broker and authorized advertiser on Toytown.

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someonesdaughte

 

Yes, I understood that, I meant handles rather than estimates. I was reading what PandaMunich wrote very very carefully .. several times !  I'm relatively familiar with finance and financial rules in England but the German rules are all completely new to me

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On 20/12/2019, 00:38:28, PandaMunich said:

 

If your UK state pension is not a pension for government service, it would fall under article 17 (1) of the double taxation agreement and its monthly payouts would be taxed by Germany as soon as you become resident here.

 

 

The problem is that this is a 2-step algorithm:

  1. you get the pension pot at age ??
  2. you then use the pension pot to buy an annuity

The Finanzamt would immediately tax you at step 1, since at that point you can use that money from the pension pot as you like, e.g. you could take all the money and spend it.

They see it as your free personal decision that you then purchase an annuity with it, but they will first make you tax the pension pot.

 

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

 

Solution:

To avoid having the pension pot payout taxed by Germany, you could still do this:

  1. move to Germany, register your address here and get married to your German GF.
    This would ensure your residency right even if you move away from Germany after Brexit, as I propose in step no. 3. 
    Besides, being married also has tax advantages as long as both spouses don't earn exactly the same.
     
  2. let the UK house, so that you have somewhere to move back to in step no. 3.
     
  3. shortly before you are scheduled to get the UK private pension pots, move back to the UK into your house (don't forget to de-register your address in Germany when you move away!) and benefit from the more advantageous UK taxation rules.
     
  4. then move back to Germany, register again and live happily ever after.

I have a similar situation. I have been in Germany for 14 years with my wife and children. I want to start to take my UK private pension next year and can get 25% lump sum tax free if I am a UK tax resident. I have a house in the UK and can move back to it but my wife and children would need to stay here for schooling reasons. Can I achieve UK tax residency under such a situation? How long would I need to be in the UK? I would assume something like 14 months to span a full German tax year. Any comments much appreciated. Panda Munich seems quite knowledgable on this area....

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On 20/12/2019, 00:38:28, PandaMunich said:

 

If your UK state pension is not a pension for government service, it would fall under article 17 (1) of the double taxation agreement and its monthly payouts would be taxed by Germany as soon as you become resident here.

 

 

The problem is that this is a 2-step algorithm:

  1. you get the pension pot at age ??
  2. you then use the pension pot to buy an annuity

The Finanzamt would immediately tax you at step 1, since at that point you can use that money from the pension pot as you like, e.g. you could take all the money and spend it.

They see it as your free personal decision that you then purchase an annuity with it, but they will first make you tax the pension pot.

 

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

 

Solution:

To avoid having the pension pot payout taxed by Germany, you could still do this:

  1. move to Germany, register your address here and get married to your German GF.
    This would ensure your residency right even if you move away from Germany after Brexit, as I propose in step no. 3. 
    Besides, being married also has tax advantages as long as both spouses don't earn exactly the same.
     
  2. let the UK house, so that you have somewhere to move back to in step no. 3.
     
  3. shortly before you are scheduled to get the UK private pension pots, move back to the UK into your house (don't forget to de-register your address in Germany when you move away!) and benefit from the more advantageous UK taxation rules.
     
  4. then move back to Germany, register again and live happily ever after.

I have a similar situation. I have been in Germany for 14 years with my wife and children. I want to start to take my UK private pension next year and can get 25% lump sum tax free if I am a UK tax resident. I have a house in the UK and can move back to it but my wife and children would need to stay here for schooling reasons. Can I achieve UK tax residency under such a situation? How long would I need to be in the UK? I would assume something like 14 months to span a full German tax year. Any comments much appreciated. Panda Munich seems quite knowledgable on this area....

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On 12/20/2019, 9:43:35, Gambatte said:

 

My suggestion is that you don't bring UK car to Germany. It would be okish for a short period, but not recommended long term. Driving would be more difficult and less safe. Insurance costs of course higher too.

As someone who did bring a British car, I can say that turned out to be a bad choice. Seriously, sell it and buy a German registered one. A lot less hassle. As for changing the driving licence, at least that part was easy pre-brexit.

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On 12/20/2019, 12:38:28, PandaMunich said:

The problem is that this is a 2-step algorithm:

  1. you get the pension pot at age ??
  2. you then use the pension pot to buy an annuity

The Finanzamt would immediately tax you at step 1, since at that point you can use that money from the pension pot as you like, e.g. you could take all the money and spend it.

They see it as your free personal decision that you then purchase an annuity with it, but they will first make you tax the pension pot.

 

 

Panda, are you familar with UK SIPPs? These allow for income drawdown

https://en.wikipedia.org/wiki/Income_drawdown

 

Which in other words means it works like a pension, but you don't have to purchase an annuity. In effect you cash in the value of the pension in parts, say 4% to 5% per year.

 

The UK long ago gave up forcing people into high cost and low return annuities. Did I understand this correctly, the German tax office really treats all UK private pensions as 100% taxable income in the year in which you claim the pension? When you say 'tax' do you mean charge income tax or add the income to the Progressionsvorbehal?

 

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Be very careful, UK SIPP (= self-invested personal pensions) get treated as normal brokerage accounts in Germany, since you have total control over the investment. This means that you have to tax the profits earned in it every year, i.e. along the way, not just when you withdraw money from it. Plus tax the Vorabpauschale on any funds that you own in the SIPP.

 

Same with ISA (individual savings accounts) and LISA (lifetime individual savings accounts), they are not tax-free if you live in Germany.

 

Of course, there's the 801€ (1,602€ if you're a married couple) tax-free allowance for capital income, so as long as your total worldwide capital income is below that, you won't end up paying any German tax.

Above those 801€/1,602€, capital income is taxed with 25% Abgeltungsteuer + 1.375% Solidaritätszuschlag, so in total 26.375%.

 

The UK neglected to negotiate exceptions for the UK pension plans in the bilateral double taxation agreement between Germany and the UK, so there is nothing to override German tax law on this.

 

The USA on the other hand did negotiate these exceptions in their DTA with Germany (see article 18A) so the US pension plans, e.g. IRA (individual retirement accounts) only get taxed when people withdraw money from them.

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13 hours ago, PandaMunich said:

Be very careful, UK SIPP (= self-invested personal pensions) get treated as normal brokerage accounts in Germany, since you have total control over the investment. This means that you have to tax the profits earned in it every year, i.e. along the way, not just when you withdraw money from it. Plus tax the Vorabpauschale on any funds that you own in the SIPP.

 

Same with ISA (individual savings accounts) and LISA (lifetime individual savings accounts), they are not tax-free if you live in Germany.

 

I was going to use a shock emoticon but this forum doesn't seem to have one.

 

Where does a stocks and shares ISA fit in? I thought you'd just pay German capital gains when you withdrew something (i.e. sold units)..

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25 minutes ago, Dembo said:

Where does a stocks and shares ISA fit in? I thought you'd just pay German capital gains when you withdrew something (i.e. sold units)..

 

Think again.

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