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Posted Thu, 12 Sep 2024 21:30:28 GMT by Dominic Harper
Thanks Admin 25. I'll read through that. Dominic
Posted Tue, 22 Oct 2024 16:56:48 GMT by Bladerunner
Hello everyone, I have done all the hard work (so far) been in contact with RiA and “registered” to receive my German pension which will start in April 2027, yes it’s a bit of a way off yet but I like to be prepared. My UK state pension will start in July 2027 however I can defer the start date if I choose to. My UK state pension is likely to be greater than the grundfreibetrag rate so I will have to pay German tax on my German state pension however, if I defer my UK state pension for one year my German pension will be based on that years “income” so below the grundfreibetrag rate. Would this assessment be applied for the following years? How is German tax calculated on the German pension, I’m assuming there is no tax free allowance if income is above grundfreibetrag so would I pay tax on the full amount irrespective on how much income (UK state pension) I receive or is there a sliding scale on income amounts? Is that why they ask for proof of UK income? My forecasts are UK state pension £11,487.84 PA, German state pension 5,200.00 € PA. It will probably change when I get to claim it but I like to plan ahead. Bonus question:- I’d like to set up a Euro bank account (shouldn’t have closed my German one) anyone had experience in doing that to make it easier to pay in and out?
Posted Mon, 04 Nov 2024 17:06:41 GMT by Gary C
This is not an HMRC question and I am not sure that you have quite finished the "hard work" you mention. RiA is the German tax office and, unsurprisingly, deals only with tax, not claims for state pensions - that is dealt with by the Deutsche Rentenversicherung (DRV) Bund in Berlin, BUT if you are UK resident you claim that pension via DWP International Pension Centre in the UK. They send you a form CFN901, which, once returned, enables them to pass your claim and UK NI record to Germany. If you have at least 35 years of UK and German social security records, then you can claim your German pension at 63, albeit reduced by 0.3% for each month it is taken before normal pension age. All a question of maths... You might also find that your German pension will be higher than you think because of how their pension system interacts with the EU regulations on pensions but that depends on your work/non-work history and is for DRV to explain. I fear also, that you have misconstrued the German tax rules. The starting point is that you are subject to limited liability taxation as a non-resident. This means that 100% of your income arising in Germany is taxed without recourse to any allowances or reliefs, other than a Werbungskostenpauschal für Rentner of 102€, i.e. the Grundfreibetrag is irrelevant as you do not qualify to get it. The 102€ will be deducted automatically from the taxable element of your pension when your tax assessment is issued each year. Deferring your UK pension is, in my view, generally not a good idea as you forego 100% for the deferral period in return for 1% more pension per 9 weeks of deferral going forward. Again, a question of maths but payback is the best part of 17 years... As far as German tax is concerned, there is a special rule which says that if at least 90% of your income is German-source, OR your income that is not subject to German taxation is less than the Grundfreibetrag, then you can elect to be treated as if you were tax resident in Germany (a tax fiction) and thus gain access to all allowances and reliefs. However, this is an annual election based on your income in each German tax year, which is of course January to December, not April to April. Also, all of your UK income would then feed into the rate at which you pay tax on your German-source income, even though it would not be taxed, and it uses up the Grundfreibetrag in the process, so any tax saving can be tiny. You only need to prove your UK income if you are making this election because it is otherwise of no interest whatsoever to the German tax authority. So, whatever it is you think you may gain by deferring your UK pension to somehow gain an advantage looks to me like a complicated and potentially fruitless nightmare. Subject to the aforementioned election, Germany has no interest in your UK income and simply takes the taxable element of your pension, deducts 102€ and sticks the balance into their tax calculator. There are plenty of German tax websites that give you tax calculators but as a non-resident, you have to add the Grundfreibetrag to the taxable part of your pension for them to work - the same goes for the official tax office calculator on their website. This is because the German tax tables assume you have access to the Grundfreibetrag, even if you don't. I would respectfully suggest you have another read of the RiA website (the German version is more comprehensive but the English version gets better every year) to understand the tax issues you will be facing. I would also suggest having a chat with the International Pension Centre to move you forward in terms of the hard work... As to your bonus question, the answer is "it depends". A Euro account is good if you want to spend some of the money in Euros, or want to manage when you convert it to pounds but neither has a bearing on your tax.
Posted Sun, 24 Nov 2024 18:32:15 GMT by Nick G
I have read the comments on this forum with interest (and many thanks to Gary C for being so helpful). Am writing with several Qs, because my wife reaches retirement age next year and when we lived in Germany between 1991 and 2011, she built up points in the state pension system and also made payments to the Pensionskasse Rundfunk (PFK). We now live back in the UK: 1. If she chooses to take a Kapitalzahlung in place of the monthly pension from the PFK, will she have to pay German income tax on this? It amounts to ca €21,000 so if she gets no benefit from Grundfreibetrag, this could be quite a chunk lost in tax. 2. On the state pension, we will clearly have to pay tax on this, but don't have a German bank account (we closed our Commerzbank account because of the high monthly fees). If anyone reads this and is currently paying the RiA in Euros from the UK to pay their taxes, can you recommend the best bank to use to avoid stupid fees and/or penal exchange rates? Starling used to offer € accounts but are no longer doing so, and HSBC seems unreliable. Any comments from any UK residents gratefully received.
Posted Mon, 25 Nov 2024 16:29:38 GMT by Anette Lorimer
Question for Gary C as you seem to be very much in the know regarding the German tax authorities and I have read through some very helpful posts of yours. I have been receiving my German pension since Oct 23 ,have finally sorted out my German tax and received my tax statement for 2023/2024 a couple of months ago. I didn't expected the tax amount to be that high but as I am not a German resident I am not entitled to the Freibetrag. I have got the documents from Germany to set up a SEPA Direct Debit Mandate with them but it seems not every UK bank excepts these mandates from Germany . Have you had problems with getting this set up ? I am also thinking of setting up a Euro account to reduce some of the exchange rate losses but seem to have a problem sourcing the UK bank which will set up a current account and a Euro account . Is your Euro account a stand-alone account ?
Posted Tue, 26 Nov 2024 15:54:04 GMT by Gary C
NickG 1. Re the lump, I guess it comes back to the question of whether your wife paid into the scheme for more than 15 years and got tax relief on her contributions that has not been clawed back etc. (Article 17(3) of the treaty) but leave HMRC to pronounce on how the treaty applies to lump sums from schemes that are not the state pension, so under Article 17(1) or (3) but not Article 17(2). (I am assuming here that the job in Rundfunk does not constitute Government Service under Article 18...). Other than tax in one year and therefore the rate of tax, if taxed in Germany, would it make much difference whether she takes a lump sum or monthly pension? 2. I am in the same position as you and also closed my account with the same bank but managed to open a € account before they stopped offering them "temporarily". Other people use e-money firms like Wise or Revolut to undertake £/€ transactions but I have no experience of those firms. I understand you get an IBAN and then simply make an online payment but you would need to research that one...
Posted Tue, 26 Nov 2024 15:58:48 GMT by Gary C
Anette, As mentioned to Nick, I managed to get a Starling € account and that works well. The e-money firms that I mentioned may provide SEPA D/D as they do give you an IBAN. My understanding is that HMRC accepts payments from them, though I don't know whether the NI Team allows D/Ds to be set up via them to pay voluntary NI. Perhaps HMRC can confirm. But if they do, I would see no reason why RiA would not allow you to set up a D/D with the likes of Wise or Revolut. Perhaps something to ask them, either by sending the form and a covering email, or just as a direct question?
Posted Sun, 01 Dec 2024 18:03:06 GMT by Nick G
Many thanks, Gary. Only reason for the first Q was because I fear we loose out more from the higher tax rate, if we take the amount as a lump sum. But you are right, it is not a huge difference. Starling don't make it very easy to contact them, so I will assume that "temporarily" suspended means permanently, and will go with Wise which looks like it is straightforward to use. Thanks again for all your insights!

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