Foreign Pensions - Double Tax Agreements

thankyou. But if a payment is a dta art. 17.2 lump sum then it is only taxable in UK, meaning exemption with progression would apply in austria, not credit method. However it seems that ´Lump sum´ (english) ´may´ be interpreted as different from ´einmalzahlung´ ( word used in the german text of the dta - literally ´one time payment´ ). This would make 17.2 from an austrian perspective only apply to an entire pension pot in one go. This suggests that dta art. 17.2 is not really reciprocal . Your comments ? thanks

Hi Jon Carter,
Under the terms mentioned, the pension is only liable in the UK.
As you are not a UK resident you would need to check with the Austrian tax authorites to ascertain if they still wish the income to be referred to when you submit a tax return.
Had the situation been the reverse, under UK details, you would not declare the income but make reference to receiving it and that it is tax free and refer to the particualr article of the dta.
Thank you. 
 

Hi I have a private pension in the UK that I can withdraw as a lump sum when I reach 55. I have lived in Australia for 18 years and so am a non resident of the UK. Will I pay tax on the lump sum in the UK when the money is paid out? I had planned to leave the money in a UK bank account and not transfer to Australia.

Hi,

Yes, tax will be automatically deducted on the pension. You can see guidance here:

Tax on your UK income if you live abroad

Thank you.

Thank-you very much for your reply to my previous question. I find that I need your help on a further point: Art 17 deals with Pensions. Art 17.5 and Art 17.3 seem between them to define what a ´pension´ / ´pension scheme´ is, for tax purposes in the host state. Am I correct in assuming this definition sits outside the fact that the uk is no longer a member of the eu/eea ? If not, and a uk private pension is therefore not recognised as art 17 Pension in the host state , then ``other income`` would seem to apply , with the host state having sole taxation rights. Thank-you.

Hi Jon Carter,
The DTA came into force in 2018 which is prior to the date UK left the EU/EEA and as such has no bearing on the comment and the previous reply stands.
Thank you. 
 

Thankyou for your reply . Just to be clear , as I interrpet your answer to my question, If the host state (eg. austria in eu) in 2024 no longer gives tax relief on personal contributions, from a resident there, to a uk private pension, the pension nevertheless remains a ´pension scheme´ as defined in article 17.5 . This is because the article effectively preserves the status of the uk private pension as an art. 17.5 ´pension scheme´ because the pension met the art.17.5 definition at the time the double taxation treaty was put in force in 2019. Am I correct ? Very many thanks

Hi Jon Carter

Yes that is correct.

Thanks

I have lived in Canada since 2009. I had 2 small private pensions in the UK. In 2021 I released the funds as 2 lump sums and brought them to Canada. That was the whole amount, the pensions have been closed in the UK. They were taxed by HMRC, they have also been taxed by CRA. HMRC and CRA are both insisting it is taxed by them.. I am still trying to sort this out nearly 3 years later, and have still paid tax on this money twice. After much back and forth CRA has told us it is taxed at 10% in the UK according to Article 17 sectn 2. We applied to HMRC for a refund quoting Article 17 section 2 - it does mention "Annuity" not pension being taxed at 10%, and seems to indicate in Section 1 that a "pension" should be taxed in the UK..? We just received a letter from HMRC stating that pension lump sums are NOT covered by the double taxation treaty. I thought ALL income is covered one way or another? This lump sum must be covered somewhere. Can you please tell me definitively whether this whould be taxed in the UK or Canada, and the Aricle / section that applies. I would like to get the double tax returned.

Hi,

You can see guidance here:

DT4605 - Double Taxation Relief Manual: Guidance by country: Canada: Notes

Thank you.

Thank you HMRC Admin19. Looking at that link the guidance seems to say the Pension lump sum should be taxed at 10% in the UK? But when I read the treaty Section 17 says under Section 3 and 4, both Annuity and Pension "... does not include any payment under a superannuation, pension or retirement plan in settlement of all future entitlements under such a plan ..." The pension money I collected was the whole amount, so full setttlement, no more entitlement under that plan. This would suggest that the pension lump sums I took should be taxed as regular income in the UK?? The letter I just recieved from you says that the lump sum payments I received are NOT covered by the treaty. So which is the correct interptretation please?

Hi,

Article 17 of the UK / Canada tax treaty, coveres pensions and annuities. As the article does not mention pension lump sums in any way, this means that lump sums are not covered by the tax treaty and as they are not covered by article 20A 'other income' either, there is no tax relief available. For this reason, the lump sum is taxable in the UK, as well as in Canada.

Please have a look at article 21(1)c, the elimination of double taxation. This suggests that to prevent double taxation arising, you should claim a tax credit in Canada for the tax paid in the UK. 

1978 Canada/UK Double Taxation Convention

Annuities, not purchased as part of a pension plan, are taxed at 10% in the UK under the DTA.

Thank you.

I am tax resident in Austria. Could you confirm which article(s) in the current austria / uk double taxation treaty relate to income from the following uk sources: 1. The uk state pension 2. An lifetime pension annuity purchased in the uk many thanks

Hi,
The UK / Austria tax treaty can be found at UK/Austria Double Taxation Agreement.  Article 17 covers private pensions.  
State pensions are covered under article 20 - other income.  All article are reciprocal, meaning they apply equally in both directions.
Thank you.

Hello, I was born in England and spent the first 49 years of my life there. I have lived in Germany for the last 25 years, so a non-resident as far as UK tax is concerned. While living in England I took out a private pension. I made monthly contributions from 04.1987-05.1994. Since then the pension pot has been accruing. I cashed in the pension as a lump sum in December 2023. The pension company paid out 25% tax free with the rest being subject to UK tax using an emergency code. I tried to reclaim that tax using the DTA Individual claim form, arguing that I should not pay any UK tax as the DTA HMRC Guide Pension (Germany/UK) states: "See provisions in article 17(3). In summary, relief from UK tax is available for pension or annuity payments and trivial commutation lumps sums only where they are attributable to UK tax-relievable contributions made for 15 years or less" Is it correct that the remaining 75% of the pot should be free of UK tax? Unfortunately the UK tax office subsequently lost my claim forms so I have to resubmit them. As I understand it the whole pot should be declared in my 2023 Steuererklärung. Would the 25% be considered as Steuerfrei by the German tax authorities?? I have another pension pot which I plan to cash in. This is a Pre 1995 Personal Pension Plan-Rebate only. The NICO contributions were made from September 89-July 94. According to the pension company, I can cash in 25% Tax-free before my 75th birthday in January 25. The remaining 75% must be taken in draw-down payments and be subject to UK tax. Should this 75% also be UK tax-free because of DTA Article 17(3)

Hi,
The 25% tax free lump sum applies to the whole pension pot, so you will still be liable to tax on any cash left in the pension when you withdraw it.
You will need to check with the German authorities as to what you need to report to them.
Future withdrawals will only be tax free in the UK if agreed following your DTA application. Any new sources of pension will need a new application.
Thank you.

You should of course check this with a German tax adviser but my understand is that where Article 17(3) does not apply to override Article 17(1), i.e. you have not paid into the pension for at least 15 years, etc etc, the full pension amount is taxable in only Germany by virtue of Article 17(1) and reportable on Anlage R-AUS to your German Tax Return - Germany does not recognise the concept of a tax-free pension lump sum, irrespective of how the UK may choose to tax pensions. If Article 17(3) would apply because you have paid into the pension for more than 15 years, etc etc my understanding is that Germany would still consider that test to be failed, and therefore retain its taxing right,s if you have taken a 25% lump sum. This is because the UK exempts that 25% from tax, meaning the pension as a whole is not "effectively taxed", i.e. not subject to tax. It would be interesting know if the UK considers that the Article 17(3) conditions would not be met in those circumstances, meaning the UK has to give relief on the full pension, or whether the UK position is that the lump sum and the remaining 75% are treated separately for treaty purposes - this is a hot topic on some forums I read and the view of German tax advisers is that Germany would consider that Article 17(3) does not apply in those circumstances to override Article 17(1), i.e. the pension must be viewed as a whole and is part is exempted from tax by the UK then the effectively taxed test is failed.

Hello, Thanks. DTA HMRC Guide Pension (Germany/UK) states: "See provisions in article 17(3). In summary, relief from UK tax is available for pension or annuity payments and trivial commutation lumps sums only where they are attributable to UK tax-relievable contributions made for 15 years or less. Is the above advice correct? I.E. Should the 75% cash left in the pot be relieved of UK tax because my UK tax-relievable contributions were made for less than 15 years? Or could you please explain how Article 17 Pension DTA affects my payouts, with the contributions having been made for less than 15 years?

JohnMunich, My understanding is that if you have made contributions for less than 15 years, Article 17(3) does not come into play to override Article 17(1). This means the full amount of your pension will be taxable only in Germany - both the 25% lump sum and the regular pension from the remaining 75%. Germany does not recognise the concept of a tax-free pension lump sum, so you simply receive a large taxable amount in one year (the lump sum) and small regular payments falling into the tax years in which they are paid...

Thanks Gary C. My interpretation of Article 17 is that the whole pension pot(s) should be free of UK tax but subject to tax here in Germany. I'll update as soon as the insurance company get their act together to send a copy of the original payment details, and when I get a ruling on my claim from the UK tax office. It could be a few months...