Foreign Pensions - Double Tax Agreements

Hi,
Article 17(1) advises that a UK pension paid to a resident of Germany is taxable only in Germany. Article 17(3) however, states that where you paid into the pension for 15 years or more, then the pension remains taxable in the UK and not Germany.
Germany: tax treaties
Thank you

Indeed - that is what we have been saying, albeit that JohnMunich's pension has been paid into for less than 15 as I understand him, so 17(3) is simply not in point and the pension would be taxable only in Germany. Can I resurrect my question from a few days ago? If Article 17(3) would apply because a person has paid into a pension for more than 15 years, etc etc my understanding is that Germany would still consider the 17(3) test to be failed, and therefore retain its taxing right, if the person has taken a 25% tax-free (from the UK's perspective) 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. Since asking that question a tax adviser in Germany has suggested that Germany's view may differ depending on the nature of the pension arrangement, e.g. a lump sum from, say, a DB pension may mean the test is failed (or the overriding "effectively taxed" clause in Article 23(1) for a government service pension lump sum) because the pension is viewed as a single thing, whereas a lump sum taken from a SIPP would be tested independently from the remaining 75%. It would be interesting know how HMRC views the "effectively taxed" clause in Article 17(3) (and in Article 23(1)) when a tax-free lump sum has been taken from a pension. Does HMRC consider the pension as a whole is/is not effectively taxed, despite exempting 25% from tax, or does HMRC consider the 25% and the remaining 75% are tested separately, so the 25% would fail the test but the 75% would pass it?

Thanks HMRC Admin 34. That is also my interpretation. So in my case as I only paid into the pension fund for around 6 years, the whole pension is subject to tax in Germany and the pension should be free of UK tax. I look forward to eventually getting a UK tax refund, when my DTA Individual claim is finally processed. Then of course, I shall declare the pension lumps sums in my German Steuererklärung. My DTA Individual tax relief claim form will have already seen by the local Finanzamt, as it has to confirm on the form that I am a resident of Germany for tax purposes before I can send it to HMRC.

Hi ,
 

Each case would need to be looked at for its own particular circumstances and as such cannot be anwered on this forum . Thank you .

Hi, I am tax domiciled in Germany (dual British / German Nationality). I contributed to a UK company pension for 15 years and 3 months. Would this mean I am liable solely to UK tax on this pension? I was thinking of taking a UK tax free lump sum of 25% from the company pension. If this pension is solely liable to UK tax, would this "tax free" lump sum be considered "tax paid" in Germany under the DTA? Thank you for your help.

Hi
Please refer to guidance at Tax on your UK income if you live abroad

Not sure if I'm posting this in the right place - my first time here! I'm a UK citizen with German nationality about to return to the UK after living in Germany for many years. I am retired.I have a German state pension, a UK state pension and a UK Teachers' Pension. I understand that when I return to the UK, I will pay tax on the German pension (but will lose my tax-free personal allowance with them) directly to the German tax authorities. At the moment, the German tax people tax me on my UK pensions. My question is: will they still tax me on these UK pensions or do I pay tax on those pensions to the UK tax authorities? Grateful for any help on this!

Thank you for the Link "Tax on your UK income if you live abroad". Unfortunately this doesn't answer the question regarding contributing to a company pension for 15+ years and the tax liability in the UK (DTA 17 (1) and 17 (3). Under these circumstances, must I pay UK tax, or can I opt out and apply for relief at source from UK Income Tax and pay Income Tax in Germany instead? There was also no answer to the second part of my question: If, I have to or if I choose to pay UK income tax, would the "tax free" lump sum be considered "tax paid" in Germany under the DTA? I look forward to your response. Thank you.

Hi judetin,
You will pay tax on the UK income once you return. The German state pension is only taxable in Germany. You should therefore let HMRC know when you return to have your record updated.
Thank you.
 

Hi AliGermany,
It depends on the type of pension. If a government or local authority pension, they remain taxable in the UK. If a private pension then you can apply for it to be tax free in the UK.
Thank you.

HMRC - surely, if the person has German citizenship then a government or LA pension reverts to being taxable only in Germany under Article 18(2)(b)? ALiGermany has German citizenship. The pension they mention is a company pension into which they have paid for more than 15 years. Article 17(3) would appear to apply making it taxable only in the UK as long as it is "effectively taxed", which I understand to mean "subject to tax". Given that a tax-free lump sum would be tax exempt and thus not "effectively taxed" my understanding from a German tax adviser is that Article 17(3) would be failed in Germany's view and taxation of the whole pension would revert to them. Is that how HMRC view Article 17(3)? AliGermany - the German tax people will not view a lump sum as being tax paid. They (and HMRC) will either view the payments as taxable only in the UK, or only in Germany. If they are taxable only in the UK, you will have to report the amounts on Anlage R-AUS with your German tax return, so that the amounts feed into the rate at which you pay tax on your income that is taxable in Germany (Progressionsvorbehalt). This is provided for in Article 23 (1)(d) of the treaty - "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."

HMRC - I am still looking for an answer as to whether my company pension (not private) into which I have paid 15 years and 3 months, under Article 17 (3) MUST be taxed in the UK, or whether, according to Admin 21 I can apply for it to be tax free in the UK. Also, how does citizenship (dual British/German) and resident of Germany affect this? GaryC - thank you for your helpful information. We have as yet not got a definitive answer from either a German tax advisor or the Finanzamt as to whether the tax free lump sum would be tax exempt in Germany. Again, how does HMRC regard this with Article 17 (3)? GaryC - If a pension is only taxable in Germany, which Anlage does it go on? I thought a foreign pension went on Anlage R-AUS whether it was taxed in the UK or not (Zeile 23). Thank you.

Hi,
We are unable to review personal matters in this forum.  For an answer to a personal question of this nature, you would need to contact our self assesment helpline on:
Self Assessment: general enquiries
or contact our webchat facility at:
Contact HMRC.
Thank you.

AliGermany, 15 years and 3 months seems to me to be "more that 15 years", so it would seem that it falls under Article 17(3) and, subject to the other conditions in that Article being met, especially the "effectively taxed" conditions, then the UK would get the tax rather than Germany. Not sure why HMRC cannot say that, hmm... I too would love to hear how HMRC considers the tax-free (in the UK) lump sum should be treated for pensions falling under Article 17(3). My understanding of the DTA is that citizenship is relevant only to the treatment of Government Service pensions in Article 18(2)(b) but not in any shape or form to Article 17. If your UK pension IS taxable in Germany then my understanding is the same as yours that it would go on Anlage R-AUS. And in the case of a company pension, in row 23. However, if it IS NOT taxable in Germany, and thus feeds only into Progressionsvorbehalt to inform your rate of tax in Germany, then my understanding is that you use Anlage AUS, row 36+ in the section " Einkünfte i. S. d. § 32b EStG". If you were to enter it on Anlage R-AUS it would, I believe, be recognised as taxable, which would be incorrect. Your German tax adviser really should know this.

Hi I have a UK Civil Service Pension, so Government pension, I have moved to Jersey, CI. Where do I pay tax? I believe the DTA means I pay tax in Jersey and get relief in the UK, is that correct?

Hi nic,
Please see guidance at:Tax if you leave the UK to live abroad.
Also: Jersey: tax treaties
Thank you.