UK Tax-exempt MD pension, but living in Germany

Discussion in 'Finance, Property, Law' started by Good CO, Oct 2, 2011.

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  1. Good CO

    Good CO LE Admin

    Has anyone any experience of the taxation of tax-exempt medical pensions for ex-pats in other EU states? I'm specifically asking about Germany and want to know if my pension, tax-free here, would be taxed there. I'm assuming that medical insurance will be based on total income including the pension, but hopefully income tax may not be.

    Surprisingly the usually helpful veterans agency gave an utterly useless 'no comment' answer even though this question must have come up many times over the years.
  2. Have you tried the FPS? they know everything, even more than stacker...
  3. Mr_Fingerz

    Mr_Fingerz LE Book Reviewer

    Try giving HMRC a call. They should be able to point you in the right direction. Failing that (if you're still in the UK) try the German Embassy.
  4. Good CO

    Good CO LE Admin

    Thanks for the responses. Labrat that link is about double taxation. That's not an issue as the UK doesn't tax my pension. It's actually single taxation I'm worried about in this case and nothing I've read in double taxation treaties seems to deal with tax that's not paid in the home country.
  5. this other forum has the answers sort of

    Medical Pension Question and Forces ExPats

    basically keep it paid into your uk bank account and it stays tax free, if you shop around for a bank in the uk that offers you a cash point card whith a zero widrawl fee you can also avoid the expensive iban transfer costs
  6. Good CO

    Good CO LE Admin

    Thanks nanotm, but I also found that one and it doesn't answer the question.

    Regarding your point about a UK bank account, just because your income, of whatever sort, is kept in one country it does not exclude it from tax in your country of (tax) residence. That is a complex subject, but my understanding is that if you spend most of your time in XLand, own a house in XLand, your kids go to school in XLand, then you'd be on weak ground when trying to justify YLand as your tax residence. My question was not specific enough about that perhaps, but I have no doubt that my tax residence would be Germany.

    Also I think the "don't tell" advice when dealing with issues between EU states, especially fairly switched on ones, is not a good idea. For example German medical insurance requires disclosure of all income and lying to your health insurance company then getting caught out when it matters would not be ideal.

    The answer I want may be deep in EU law somewhere, but I expect the answer is "cough up, Herr Good CO"
  7. Good CO

    Good CO LE Admin

    Good idea - I will do that tomorrow
  8. So it's not just medics who get you by the nuts and say "cough", then?
  9. Spanish_Dave

    Spanish_Dave LE Good Egg (charities)

    If you can pm me details no names blah blah I will ask SPVA in Tedworth House next week
  10. Your best bet would be advice from a German tax-advisor but normally, as a German resident, you will be assessed for tax on your worldwide income (including income from investments) by Germany. IF you have income in the UK then this would first be assessed by the UK Inland Revenue and then assessed by the Germans on any amount left over, which may mean paying some to Germany (eg: UK rate is 15%, German rate is 20% then you'd pay 15% in the UK and 5% in Germany). Your income in the UK is taxed but at 0%, which means it may attract tax from Germany BUT there may be a deal between the UK and Germany that such non-taxable awards in the UK are also treated at 0% in Germany. Note that EU countries (including the UK) share bank account information.
    I'll see if I can find out anything here (I live in Germany) about your particular type of income.
  11. Good CO

    Good CO LE Admin

    Offer appreciated, but I've already had a somewhat useless answer from SPVA - "I can only advise you regarding UK tax laws". It's not clear from the letter where that came from within SPVA though. Still think it's worth a stab through your connection there?
  12. Good CO

    Good CO LE Admin

    That would be really appreciated. The answer would probably be valuable to quite a few as Germany is a reasonably common place for ex-military to settle. I'm sure the "don't tell" approach has been used by many, but I think this is less and less sensible as time goes on and financial information flows ever better between states. I don't doubt that someone will be caught out sooner or later and face a large tax bill.
    • Like Like x 1
  13. Your normal military pension which is taxed at source (even if at 0%) will fall under the "progressionsvorbehalt" in that it will be added to your yearly income and your tax band will be based on the total amount. This is how the miserable Finanzamt gets round the double taxation treaties.

    If you have a tax free income and you declare it to them then I would think that it would be treated exactly the same way.

    Just thought I would add that if you commute your pension then the lump sum is also subject to the progressionsvorbehalt and if you have a taxable income in Germany in the year you get your lump sum then you will end up paying them some of it in tax - despite it being a tax free grant in the UK

    Cost me a few Euros in court fees to find that out.
  14. No such thing however if you have to pay the Tax of the Country you are residing in and retain your main residence in the UK and therefore pay tax on any income, you can ask for TAX BACK at the point of taxation e.g. Germany in your case. This is irrespective of the type of income. The same applies to EU citizens in the Uk you generally find the Polish asking for TAX BACK in the job centres as their retain their home residence in Poland.

    Basically you have to relinquish your residence status here otherwise you pay tax for both countries.

    I find the other EU countries are not so favourable in giving tax back other than the UK, Good luck !

    P.S. Don't put in public forums that you are not paying tax. I pay tax on my army pension and despite it being well below the allowance, the only difference is I choose to have a proportion of my taxable allowance on my pension and not my salary. Remember nothing is exempt tax in the EU including the UK. So watch what you put on here.

    P.P.S. Mine is an MD Pension and I get taxed as well, suggest you keep quiet if you are not paying tax on it, but I suspect it is below the allowance threshold and depending on your age your taxable allowance could be as high as £9,000pa and you are still not exempt but just not paying tax because it's too little MD pension. The other thing is are you declaring all your income?

    P.P.P.S. There are many variables involved in Income Tax, but the rule is if you not paying Income Tax be careful it could be a large repayment you have to make in either country as taxation now travels the borders of the EU including Switzerland, because their will catch up.

    P.P.P.P.S. This winter the HMRC are taking on over 2,500 extra tax inspectors to go after ex pats and other non domociles (and not just the rich and famous) who do not pay taxation to this country but have residential status. You will find many ex servicemen falling into that category who have settled particularly in Poland and the former East Germany since the integration of both countries in the EU, unless you have relinquished your residential status in this Country. You have been warned.

    An ex HMRC Inspector.