Double Taxation UK/Germany

Dear Forum, My question is about double-taxation between the UK and Germany. I lived and worked in Germany for 15 years, returning to the UK 15 years ago. I receive a pension from my former employer in Germany and up until now this has been paid gross and included on my tax return and therefore taxed here in England but not in Germany. My former employer now tells me that from 2024 they will have to deduct income tax in Germany. If I include all the information about my German pension and the tax deducted in the ‘foreign’ section of my tax return and all the information about my other (English) pensions in the main section will this automatically deal with the double taxation issue or would I need to do anything else? Many thanks in anticipation

Hi 

At this time, article 17 of the UK / Germany double taxation agreement advises non government pensions arising in Germany, paid to a UK resident, are taxable in the UK and should be included in a self assessment tax return.  
As we are not aware of any impending changes, we are unable to advise of the actions to take, until those changes are known.

Thank you

Thank you for that. My question is, were the German non-government pension to be taxed in Germany, by giving details of that pension in the ‘foreign’ section of the UK tax return, including the tax paid in Germany and putting a cross in the ‘Foreign Tax Credit Relief’ box, would that effectively reduce the taxable amount due by the amount of the foreign tax paid, hence negating the ‘pension taxed twice’ issue, or would anything in addition to that be required? Many thanks for your help.

Hi C Price,
That is correct.
If calculating the tax due yourself, also include an entry on box2 on the foreign page F1.
If you want HMRC to calculate, leave blank.
Thank you. 

Hello Forum, I would be grateful for your clarification regarding filling in the ‘foreign’ section of the tax return, specifically in relation to a pension paid from my former employer in Germany, none of the other sections apply to me. In the ‘foreign notes’ on page FN9 under ‘claiming an exemption’ it says: If you’re claiming FTCR – put in column F, the amount in column B, minus the exemption – remember to put an ‘X’ in column E. If you’re not claiming FTCR – put in column F, the amount in column B, minus the exemption and less any amount in column C. On the ‘foreign’ page of the actual tax return it says at the top of page F3 under ‘F-taxable amount’: F Taxable amount – if you’re claiming Foreign Tax Credit Relief, copy column B here. If not, enter column B minus column C These statements seem at odds with each other, could you please clarify this for me? I thank you in advance for your help.

I am curious why you are pursuing the FTCR route. Article 17 of the DTA is quite clear that pensions are taxable ONLY in one country, or the other. The starting position is Article17(1), which awards taxing rights over pensions to the country of residence, i.e. the UK in this case. This may be overridden by 17(3) but you have not mentioned that. "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." Surely, there is a process in Germany, akin to that in UK, to receive confirmation from the German Finanzamt, for the pension payer, informing them that the pension should be paid gross? I am not sure whether your Tax Office, should you end up with one, would be Neu Brandenburg (RiA) (they certainly deal with the taxation of German state pensions for those who are not resident) but that could be a good place to start.

Thanks for that Gary, but it doesn't answer my question. In the foreign notes it refers to 'the exemption', wheras what is on the form makes no mention of such. That is what I asked for clarification on. I actually don't understand what is menat by 'the exemption', let alone understand why it is mentioned in one place but not the other?

I realise that my comment does not answer your question, though I am not sure what you are concerned about re column F but leave you and HMRC to sort that. My point is, where is your pension taxable? It can only be either Germany, or the UK as the DTA uses the word "ONLY", not "MAY" in terms of who can tax pensions. If it's Germany then you would put a note in the other information box of your UK return as set out on FN8 - Germany would then be correctly proposing to deduct tax on payment and you would need to get set-up with the German tax office. If it's the UK, then Germany should not be deducting tax as they have no taxing rights and you would need to sort it out with them. Given that you were in Germany for 15 years, it seems to me that Article 17(3) may be in point to allocate taxing rights to Germany by overriding the normal position in 17(1), which is what HMRC describe (they are silent on the question of 17(3). If 17(3) does not apply, then the pension would be taxable only in the UK and you have an issue to resolve in Germany to stop them incorrectly withholding tax. There is a useful forum where you could ask your question about the German end of things. There are some knowledgeable Steuerberater (Tax Accountants) who participate and help people with this sort of question. It is toytowngermany.com/forum/forum/181-finance (if HMRC is happy to allow a pointer to external sites if they are not links)

Thank you very much for that, Gary, Most helpful!

Hi,

You will complete as follows:
 
Column B – gross pension (in sterling)
Column C – any German tax deducted (in sterling)
Column D – leave blank
Column E – only tick if you have an entry in column C
Column F – the same figure as column B

Thank you.

 

Thank you very much for that, HMRC Admin 19, now I know what to do!

Hi 
We only provide general advice in this forum.
If you need detailed advice, you will need to contact our Income Tax helpline (0300 200 3300) so that more information can be obtained and time taken on your query.
If your interpretation of the DTA, confirms your pension is taxable in the UK, you would declare it in the foreign section Self Assessment Tax return.
If you've paid tax on the overseas income, you may be able to claim FTCR.
Double taxation agreements are reciprocal so  the terms 'contracting state' and 'other state' are interchangeable between the UK and the other country.
We cannot advise how the German tax authorities would deal with the matter.  
Thank you. 
 

Hi Gary Coombs,

We only provide general advice in this forum.  
If you need detailed advice, you will need to contact our taxes helpline (0300 200 3300) so that more information can be obtained and time taken on your query.  
If your interpretation of the DTA, confirms your pension is taxable in the UK, you would declare it in the foreign section self assessment tax return.  
If you've paid tax on the overseas income, you may be able to claim FTCR (Foreign Tax Credit Relief).  
Double taxation agreements are reciprocal so the terms 'contracting state' and 'other state' are interchangeable between the UK and the other country.  
We cannot advise how the German tax authorities would deal with the matter.  

Thank you.

Thank you Admin 20/25. My comments were directed at C Price. My German pension falls within 17(2), so the position is beyond doubt. All I was seeking to do was to point C Price at Article 17(3), which can, if the conditions are met, override the default position.

Hi C Price,
We cannot advise what the exemptions are, as it would be based on the double taxation agreement and the source of income in question.
Thank you. 

Like many in this chat, I am unclear how to respond to the letter from the Neubrandenburg tax office from early August. I worked for just over 15 years in Germany and returned to the UK in 2000. I have received a German state pension since February 2020. It was taxed as foreign income in my 2020/21 UK and 21/22 tax returns along with other income for self-employed work done for German companies during these periods. I contacted HMRC, as advised by the letter from Neubrandenburg. HMRC instructed me to write to the Double Taxation PAYE and SAI department with info on my German pension, German pension number etc. and they would notify Neubrandenburg so that I would avoid double taxation. Two weeks ago I called HMRC again to check progress. Receipt of the letter on 21 August was confirmed but was told that due to a backlog my case wouldnt be dealt with UNTIL DECEMBER 17th. I am naturally concerned that the German tax statement comes before this time. Is this procedure correct? why such a long delay? What else can I do sort out this issue?

Hi Terry Osborn,
Sorry, it is not clear from your question exactly what you require clarification of (in relation to your German state pension).
If you call our Self Assessment  helpline and ask to speak to a Technician, they should be able to provide the guidance you require.                               Self Assessment: general enquiries
Thank you.
 

Hi Terry Osborn, According to Article 17(2) of the DTA, the German state pension is taxable ONLY in Germany, so should not have featured on the foreign pages of your UK returns - FN8 in the notes makes that clear. Neubrandenburg will therefore, correctly, be sending you tax assessments for 2020, 2021 and 2022 and you'll have to pay them in full to avoid interest at a pretty penal rate. You then need to claim back any UK tax incorrectly paid. As HMRC say, you'll need to speak to their experts on that. As far as I am aware, tax credit relief in Germany for the incorrectly paid UK tax is not an option, unless that letter suggests otherwise, so I would contact Germany and get the process sorted there, setting up email correspondence, electing for them to do the assessment in the absence of a tax return (Amtsveranlagung) and setting up a direct debit (Lastschriftmandat) to ensure you don't miss any payment dates - if your German tax exceeds 400€ per year, you will be put on quarterly payments on account!

Hi Our client is making pension payments to a German pension provider. Do we include this information on the tax return, if so please advise? Thank you

Hi
Yes.  The payements to the overseas pension scheme should be declared on the tax return.  Have a look at Claiming tax relief on your contributions to overseas pension schemes