Double Taxation UK/Germany

Hello If you are UK domiciled but German resident for income tax purposes, are you taxed in the UK or Germany on a portfolio of UK GILTS/government securities held in the UK? Thank you

Hi,
You are taxed on your UK income when you are domicile but only need to report any foreign income that is remitted:
Paying tax on the remittance basis (Self Assessment helpsheet HS264
Thank you.

Surely, if the person is not UK resident, i.e. resident in Germany, then they will be taxed on their worldwide income by Germany, subject to the DTA changing who gets the tax. UK Domicile is not relevant, or have I missed somehting?

I am a UK national living and now retired in Germany and I am in receipt of a UK Government Teachers' pension and I pay my tax to the UK Government. In these circumstances can my UK Government Pension be taken into account by the German tax authorities to determine how much tax I pay in Germany?

Yes - it's called Progressionsvorbehalt, governed by §32b of the Einkommensteuer Gesetz. Article 23(1)(d) of the UK/Germany double tax treaty says: "Germany, however, retains the right to take into account in the determination of its rate of tax the items of income and capital, which are under the provisions of this Convention exempted from German tax." You need to enter any UK income that is not taxable in Germany on Anlage AUS, line 36.

Hi Roger Williams,
No, government pensions remain liable in the UK unless you are a National and a resident of Germany.
Thank you. 

HMRC Admin 25, While what you say is correct, you need to read what Roger Williams actually asks, "In these circumstances can my UK Government Pension be taken into account by the German tax authorities to determine how much tax I pay in Germany?" That is not the same as "Can my Teachers' Pension be taxed by Germany?" The answer to his question is "yes", because of Article 23(1)(d) in the DTA, and section 32b of the German Income Tax Act, which I quote above. Germany does not tax the income but takes it into account when setting the rate of tax on the income they do tax. I know of a number of people who have found themselves "in correspondence" with their German tax office for failing to report UK income that is exempted from tax in Germany by the DTA - a potentially expensive mistake! For example, if a German resident (without citizenship) had income of 50,000€ arising in Germany, then for 2024 they will pay 10,906€ tax - an effective tax rate of 21 .81% (the German system is not a slab system like the UK's). If, instead, they had 30,000€ arising in Germany and a 20,000€ UK Government Service pension, taxable only in the UK, their 30,000€ would NOT be taxed at the rate applicable to 30,000€ (14.82%) but at the rate applicable to 50,000€ (21.81%). They would therefore pay tax of 6,543€, not 4,446€ - a difference of 2.097€. This is not the same as taxing the income in Germany: it is the German government saying that a person's tax rate should be measured by reference to their worldwide income, even if some of that income is exempt from tax under a double tax agreement. This is why the income is reported on a special Annex to the tax return. In reality this is a matter for Roger to take up with his German tax adviser, or the German tax office, as Germany is doing no more than the DTA and their domestic legislation provide for. I cannot post links but he may like to search his tax authority website for "Progressionsvorbehalt-Rechner" (it is certainly on the Bayern Tax Office site) where he will be able to see the impact on his German tax rate of having a UK Government Service pension, or UK property rental income, or a UK State Pension for that matter...

To HMRC and Gary It seems that what Gary says is correct and it raises concerns for me in that I assumed that the DTA was a reciprocal agreement German citizens in the foreign income section of their tax return do not have to declare their income instead they have to tick a box indicating they receive a Government Pension from Germany and are invited to give some details of the nature of that pension in the space provided. In Germany the UK pension is not directly taxed but your pension income is used in a calculation to arrive at a new assessment of your income tax paid on your German income which in my case means higher income tax in Germany as a result. Firstly I think this this disappointing, (a common euphemism used in the UK by politicians when election results are not good - much "disappointment on the horizon I think) in that although this may be in the letter of the DTA but it is not in its spirit. Secondly I would suggest that HMRC needs to consider whether this difference in treatment between UK and German nationals is something that needs closer examination. Certainly I feel there needs to be much more publicity given to the situation facing UK nationals choosing to live and work in Germany than is currently available. From my research I discovered that under this reciprocal agreement UK Government Pensions were not taxed in Germany and that German nationals were not required to declare their Government Pension in the UK.

Hi HMRC, I'm a freelancer (UK resident and UK taxpayer), working on a project in Germany. The company have asked me to invoice for a higher amount than I will receive, as "The cash register will then deduct taxes from the gross fee because of the double taxation agreement between Germany and Great Britain" So they are saying that my invoices will be for a higher amount than they will transfer into my bank account, and I will be getting taxed in Germany and then the UK? Is that correct? I thought as I was a UK taxpayer I wouldn't be paying tax twice on this amount? I would prefer that the amount I invoice is the same as the amount I receive into my bank, for my own records. Can you offer any advice on this? Many thanks.

Roger Williams, I can understand your frustration but the wording in Article 23 is common across many DTAs and is explained in detail in the commentary to the OECD model DTA on which most DTAs are based. If you search on that you can read the reasoning. Each country has its own domestic tax legislation and Germany's determines your tax rate by reference to your worldwide income, irrespective of whether that income is exempted by one or other DTA they have with other countries. Similarly, lump sum pension payments or ISA interest that are tax exempt in the UK are not recognised as such under German legislation and are fully taxable. You really would need to lobby German political representatives to change such laws.

Hi bethanywells,
Please refer to the following Guidance - Tax on foreign income.
Thank you.

Hello, I am a resident in the UK, with an investment fund in Germany. I have recently sold some shares, on which I have paid capital gains tax in Germany. Per the DTA, article 10, it looks like I can choose in which country to pay the taxes, correct? As they are already taxed in Germany, do I now still have to fill out the self assessment for the UK? If so, how can I make sure that I will not be taxed twice? Thanks in advance!

Hi Kerstin,
If you are resident and domiciled in the UK you are liable on your worldwide income and would still need to declare the gain here.
You can then claim Foreign Tax Credit Relief for the tax paid in Germany  to reduce yor UK bill.
Please see guidance here:
Relief for foreign tax paid (Self Assessment helpsheet HS263).
Thank you. 

My pension is transfered germany. I am born in UK and have a german passport. The German tax authorities are using my pension to push me into a higher tax rate (progression) This men's in effect that pension is taxed in Germany. I this covered by the double tax treaty

I am a UK resident, receiving a German pension based on 20 years' employment in Germany. I have been sent five tax statements to pay tax for years from 2017 to 2021 (dated 27.11.24). I was slow to realize that I might apply to be treated as subject to unlimited tax liability in Germany. But I could still appeal within one month. (Whatever happens, I do have to pay the tax by 27.1.25.) It seems to me that I might pay tax in Germany on my pension both now and in future, and I could set off that German tax. Could I also set off the current five years' demand? I cannot decide whether to consult a German tax accountant. My British former tax accountant who I wrote to at end of October has not yet found time to advise me. Who do I contact at HMRC to start things?

Hi,
German State Pension is no longer liable in the UK and as such should not be declared here. If you have reported this in your tax returns, you can write to us for your retuns to be amended:
HMRC,
PAYE & Self Assessment,
BX9 1AS 
Thank you.

Thank you very much. I have a second question. In future I believe I can set the German tax off on my UK tax declaration. What about the past? I have been charged tax for five years from 2017 to 2021. If I pay that in December 2024 to January 2025, which I must, can I record that payment on my 2024-2025 tax return as that is the date of payment? Or does it relate back to those past years? (Obviously I will mention that when I write to you).

CMH, Unless you are resident in Germany, or have elected to be treated as if resident for tax purposes, you will be subject only to limited liability tax treatment and progression is not applied. If you are subject to unlimited liability because you are resident in Germany then Germany reserves the right to set your tax rate by reference to your worldwide income, even if they do not tax some of it because it is exempted under the tax treaty. This is in Article 23 (1)(d) of the treaty. It is not taxing your income that is exempt from Germany tax.

Margaret Marks, You can only elect for unlimited liability treatment in Germany if either 90% of your income arises in Germany, OR, your income that is not taxable in Germany, i.e. your worldwide income apart from that German income, is less that the German Personal Allowance (Grundfreibetrag) of, currently 11,784€, or about £9,800. If you can make an election then you are treated as though you are resident (a tax fiction) but remain taxable only on your German income. You get access to the Personal Allowance and other allowances, but are also subject to Progressionsvorbehalt and your UK/world income "eats up" the personal allowance before your German income, so the nearer your UK /world income is to the total of your allowances, the less beneficial the election. If you remain subject to limited liability treatment, then you just pay German tax on the taxable element of your German state pension and any other income arising in Germany that remains taxable there under the treaty.

Thank you - I know that, the German authorities sent me all the details, but I have yet to speak to them on the phone. I could qualify for unlimited treatment now, or last year, but not for the five years they've sent me statements for. What I don't know is if I want to do that. I have a mini UK pension and no other income in Germany. I will try to understand whether the election would be beneficial. If I can claim the German tax set off against my UK tax, it would not make much difference. The problem is that I only have about 2 weeks left to elect.