Tax on pension living abroad

Discussion in 'Armed Forces Pension Scheme' started by lifesabummer, Aug 12, 2013.

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  1. Quick question. If I lived in Germany I would pay Uk tax on my pension but would I still recieve my tax allowance or would I have to pay 20% on the whole amount. Thanks.
  2. I live in Qatar and as an expat have non-tax status for my earnings here. However I do have to pay tax on my MoD (Army) pension and my total allowances are held against this income. Its just a case of speaking to the tax office to make sure they do this.
  3. Your Armed Forces pension will be taxed at source. If you tell HMRC it is your main income, you will receive the UK tax allowance on that. If you are working in Germany for a German company, you will pay German taxes but, at the end of the year, the German tax man may add up both incomes and charge you tax less the amount you have paid in UK. If your Army pension is under the UK tax threshold and you pay no tax, you may find Germany will tax you on both incomes.
    This is due to an agreement Cameron signed with other EU countries earlier this year (or late last year).
    Here, in Spain, the government pensions didn't have to be declared as they were taxed at source but it's all changed this year. Although I paid 20% on my pension after the UK tax allowance and paid nothing in Spain. This year, due to the allowances in Spain being less, I now pay about €250 a year to the Spanish taxman as well.
    Of course, if you are working temporarily in Germany for a UK company, both incomes will be added together and only one tax allowance will be given.
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  4. @Michaelo,
    According to your first link there is a posability under the double taxation agreements in 100 county,s to be exempt paying tax on pensions.

    I am currently looking into this as i am about to leave a tax free job in Germany and start work on the German market.

    My pension goes at the moment into a local santander account which i wont have access to when this camp closes.

    so i am hopeing to get it sent directly into my German account(Tax-Exempt) and pay only the local tax on it.

    As i do not have a UK address i cannot open another uk bank account an believe that this is the only way to solve my problem.

    I would appreciate anybody else s input on this.
  5. Good CO

    Good CO LE Admin

    The Steuerberater gave me the answer at the start of the year on this after fairly extensive checking, although he has not yet signed his name on it on the actual tax return that I will shortly submit:

    Military and civil service pensions are normally taxed at source.

    I have a medical pension / war pension and they are tax free and I don't know whether that makes the taxation issue different from yours, or whether it's simply that mine are taxed at source at 0% from a German perspective. Despite dual taxation treaties, I think it's the latter (ie. the bad news below also applies to you).

    The Germans respect the taxed-at-source bit of course, but apply something called "Exemption with Progression". What that means is that my German tax rate is calculated as if I earned that pension money on top of any other income (as you probably know it's a curve on which the overall tax rate % gradually increases with income, then that % is applied to the whole sum). This is where double taxation creeps in, as actually I will pay more tax as a result of my tax free pension - not that much, but frustrating nonetheless.

    I recommend that you do some searching for "Exemption with Progression", but beware anything more than a year or so old as this sort of intra-European stuff is constantly changing.
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  6. As my UK pension is my only uk based income I pay no tax on it at all as it is under the threshold.

    However the German FInanzamt being the tax man and thus the children of Beelzebubs eviler brother they have a thing called "progressionsvorbehalt" which means they can add the amount of your pension to you annual income in Germany and they then tax you on that amount.*

    All of which means that some bastard tax office gets some of your money.

    *it is somewhat more complicated than that so that they can get around any double taxation agreements

    Beaten to it again.
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  7. Good CO

    Good CO LE Admin

    .... and ask a Steuerberater. There is Munich based company called Expattax who are often recommended on ToyTownGermany. I am currently using them and am happy enough, although I may change to a local adviser once the initial questions are answered and the first tax return in.
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  8. Good CO

    Good CO LE Admin

    @lifesabummer, This is "Exemption with Progression" in case that isn't obvious. @Steven has exactly the same issue as me.
  9. Absolutely agree.

    Unless your tax situation is very complicated you should only need to use one every 5 years or so to update anything strange, otherwise you can use the ELSTER system to do your own tax return on line.

    If you have an income from overseas (ie a military pension) then you have to do a tax return every bloody year.
  10. Good CO

    Good CO LE Admin

    I think you're going to have to come clean (edit: reading your post again - I think you were probably intending to anyway!). The general advice I've come across numerous times when reading about this over the last few years is that "Don't ask don't tell" is not a wise idea when dealing with the Finanzamt. Also European financial systems are gradually getting more organised - Germany has recently replaced the old Steuernummer with a TIN, Taxation Identification Number. Note the change in language - I don't know the details but the latter is clearly intended for international use and my UK banks have asked for it when I've informed them of my German address.
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  11. Probably ditto the above for the rest of Europe too.
    Under EU rules and various Double Taxation Agreements, if you get a Government pension, it has to be taxed in the country paying it.
    If it is a private or company pension then you pay tax where you are ordinarily resident.
    You cannot be taxed twice on the same income in different countries and looking at, for example, France I would be liable to nearly 30% plus Social taxes on top.
    It is therefore better to be paying the UK 20% tax.
    Be careful if working though, most countries seem to count your pension in their calculations even though it is not taxed.
    This can have the effect of bumping what you do earn up into the 50 and 60% bracket or more (in Scandinavia) on your earnings, not very nice.
  12. @Good CO, Yes i was never intending to try to buck the system.Its just my situation is about to change,
    No more tax free job,(In Germany),When i decide to leave it.
    No more access to a UK Bank account,(On a camp which will be closed within the next 18 months or so)
    My first steps into the German Arbeitsmarkt.(I have a possible job offer starting next month)
    On top of which the complications of tax.

    I can do with all the help and advice on the subject that i can get,
    I have also heard all the leave your money in a uk account and just don't tell them stuff from first hand.
    It may work for a while maybe a few years but if and when cought out the pain would be immense.
  13. I too had a Santander account, but the local branch closed just before JHQ did. I couldn't be bothered with yet more internet banking so I closed that account. My RAF pension is taxed at source and that cannot be changed, however the State Pension can be drawn free of UK tax and then taxed in Germany. More info and applications forms here:
    For those living in Germany a Lohnsteuerhilfeverein is a good idea, it's a lot cheaper than a tax consultant, but does give qualified advice and help. A UK bank account can be opened without a UK address, it got a bit involved but now that it is up and running I have no further problems.
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  14. Just as info the Lohnsteuerhilfeverein can only help if you earn under a certain amount each month.
    Not sure how much but it is not for those with a "high" income

    Just reading up on the rules again and the above might be a load of rubbish.
    Last edited: Aug 8, 2014