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Double taxation agreement Germany

Practical Issues
Paultry
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Double taxation agreement Germany

#393364

Postby Paultry » March 7th, 2021, 3:40 pm

In 2016 I started to receive a pension from Germany for the time I spent there from 1977-81.

I've paid UK tax on the pension but have just received notification from the German tax authorities that I must submit an EU/EEA form listing the income that my wife and I received for each of the last four years. We've filled these in and will forward them to Germany once we receive them back, stamped and dated by HMRC.

I presume, if I had to pay tax in Germany, that it would only be on the German pension and that I would then be able to claim a UK tax refund.
Is this correct?

I'm a little surprised that there has been such a delay between receiving the pension and being contacted by the German tax office. When I first received the pension payment the correspondence said that I was responsible to pay any taxes due in the UK, implying that Germany would not tax the pension at source.

I'd appreciate any feedback from experts or folk in a similar position to myself. Thank you, Paul

bluedonkey
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Re: Double taxation agreement Germany

#393420

Postby bluedonkey » March 7th, 2021, 6:46 pm

Is the German pension State or private?

scrumpyjack
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Re: Double taxation agreement Germany

#393443

Postby scrumpyjack » March 7th, 2021, 7:32 pm

If you have to pay tax in Germany on the pension, I think you would only get credit in the UK for the amount of UK tax paid on the same income. ie if the German tax rate was higher you would not get all of it back against the UK tax liability.

GrahamPlatt
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Re: Double taxation agreement Germany

#393477

Postby GrahamPlatt » March 7th, 2021, 10:54 pm

And you do have to pay tax on your German pension in Germany - it’s a general rule of thumb; pensions and income from property/fixed assets are first taxed in the country of origin. Not sure why the Germans would want to know about the rest of your affairs. There’s an oddness there. If e.g. the German pension is below their tax thresholds*, and they pay it to you gross, yet in doing so it causes you to pay tax on it in the UK, the German State is “subsidising” the UK....

*I have no inkling of the German system,

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Re: Double taxation agreement Germany

#401677

Postby bofh » April 4th, 2021, 5:39 pm

GrahamPlatt wrote:...it’s a general rule of thumb; pensions and income from property/fixed assets are first taxed in the country of origin


I'm only (sort of) familiar with the double taxation agreement between Hungary and the UK, yet I see the headline pension treatment is the same in the Germany/UK DTT.

Article 17

Pensions, annuities and similar payments

1) Subject to the provisions of paragraph 2 of Article 18, pensions, other similar remuneration or annuities arising in a Contracting State and paid to a resident of the other Contracting State, shall be taxable only in that other State.


Source: https://assets.publishing.service.gov.u ... _force.pdf

To me, that is saying the exact opposite of what you are stating is a general rule of thumb.

I'm definitely not an expert on this topic and would welcome input.

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Re: Double taxation agreement Germany

#401679

Postby scrumpyjack » April 4th, 2021, 5:51 pm

i thought what normally happened was that any income is only taxed in the country of residence, though investment income often suffers withholding tax in the originating country.

That is why Portugal's tax free income scheme for foreigners coming to live in Portugal generated such an uproar. Pensioners from high tax Nordic countries were retiring in large numbers to Portugal where they they paid no tax on the generous index linked pensions from for example Finland or Sweden. Those countries were outraged at having to pay gross pensions on which they then got no tax. Eventually Portugal had to close the scheme to new retirees!

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Re: Double taxation agreement Germany

#401680

Postby PinkDalek » April 4th, 2021, 5:53 pm

bofh wrote:
Article 17

Pensions, annuities and similar payments

1) Subject to the provisions of paragraph 2 of Article 18, pensions, other similar remuneration or annuities arising in a Contracting State and paid to a resident of the other Contracting State, shall be taxable only in that other State.


Source: https://assets.publishing.service.gov.u ... _force.pdf

To me, that is saying the exact opposite of what you are stating is a general rule of thumb.

I'm definitely not an expert on this topic and would welcome input.


My underlining:

Article 17
Pensions, annuities and similar payments

1) [As above]
2) Notwithstanding the provisions of paragraph 1, payments which are made in
accordance with the social insurance legislation of a Contracting State shall be taxable only in
that State.


Confusing isn't it but I think that's why bluedonkey asked the OP (who sadly hasn't responded):

bluedonkey wrote:Is the German pension State or private?

GrahamPlatt
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Re: Double taxation agreement Germany

#401715

Postby GrahamPlatt » April 4th, 2021, 8:39 pm

Yes, I meant pensions paid from the public purse (state pension, public service pensions [civil service, nhs, teachers, police &c]) are taxed in country of origin. OTOH private pensions will be taxed where resident.

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Re: Double taxation agreement Germany

#401734

Postby mc2fool » April 4th, 2021, 9:53 pm

GrahamPlatt wrote:Yes, I meant pensions paid from the public purse (state pension, public service pensions [civil service, nhs, teachers, police &c]) are taxed in country of origin. OTOH private pensions will be taxed where resident.

Well according to https://www.litrg.org.uk/tax-guides/migrants/national-insurance-migrants/what-uk-tax-do-i-pay-my-overseas-pension it seems to be inconsistent. Search the article for French and German to see. However, the wording seems to say that "usually" state pensions are taxed in the country of residence and Germany is a bit of an exception....

"If they fall under the Pensions Article, then usually they will only be taxable in the UK. However, some treaties (such as the UK-Germany double tax agreement), specifically state that such pensions are only taxable in the country which makes the payments. Again, you must check the wording of each agreement carefully."

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Re: Double taxation agreement Germany

#401746

Postby GrahamPlatt » April 4th, 2021, 10:43 pm

I will stop digging then!
Seems there’s a need for experts after all.

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Re: Double taxation agreement Germany

#477974

Postby Paultry » February 2nd, 2022, 9:51 am

Sorry for the delay in responding to all of the excellent comments and ideas to my original post, and I am truly sorry to know that some of you are sadly no longer around to offer advice. There seemed little point in replying earlier because I had no new news. But now....

Up until today the EU/EAA certificates have not been processed by the UK tax office. However, I very recently received tax demands from the German tax office that can only have been calculated based purely on the German pension payments I receive.

Briefly, the pension is from my employment within the state, not private. It is 2,200 Euro per annum at present but started at somewhat less. The payment is dependant on the exchange rate, the most recent payment being £158 for January. I receive no other overseas income.

Because of the German pension I am obliged to submit a UK tax self assessment form and pay 20% of the German pension in tax.

The German tax demands are asking me to pay, on average, 255 Euros for each of the last five years, payable by 22nd March 22.

I did get in contact with HMRC this morning, hence me knowing that the EU/EAA forms have not been dealt with. I was also reassured that any money I paid to Germany would be rebated in the UK.

It just seems odd that when I received the pension payment in 2016 I was told to pay tax only in my country of residence, the UK, and now I need to pay tax in Germany even though I use none of the services and support of the German government.

I'm also unsure how the German tax has been calculated in the absence of the EU/EAA forms, and how it might alter once they receive them.

I'll keep you posted if any new insights come my way. Thanks again for your comments and thoughts. Paul

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Re: Double taxation agreement Germany

#478066

Postby Charlottesquare » February 2nd, 2022, 2:06 pm

Paultry wrote:
I did get in contact with HMRC this morning, hence me knowing that the EU/EAA forms have not been dealt with. I was also reassured that any money I paid to Germany would be rebated in the UK.



Be careful with HMRC, whilst offset of tax paid to Germany ought normally be available against your UK tax liability on the same source of income, there are strict time limits re amending earlier year UK tax returns and HMRC telling me on the phone it will all be alright would not reassure me as they may not have twigged the time delay re the earlier years that will be requiring correction. I would prefer an assurance in writing that given delay by German authorities UK will permit earlier years correction that may be out of time.

For instance normally you have a year from its lodging deadline to correct an Income Tax Return, so tax year 2019/2020 was due in by 31/1/21 and window to amend was up to 31/1/22.

After that you may have overpayment relief which covers up to 4 years from the end of the year of assessment in question, but it sometimes can be somewhat frustrating to get HMRC to agree and may involve you seeking professional help, but with only 250E a year at stake this is likely not cost effective.

Paultry
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Re: Double taxation agreement Germany

#478251

Postby Paultry » February 3rd, 2022, 11:41 am

charlottesquare

I did specifically ask about the time limit. It seems the situation is sort of unprecedented because lots of cases are arising exactly as mine has, rumoured to be due to Brexit. Because of this I was told that the overpaid tax would be able to be reclaimed even from 2016.

I am glad you told me of your concern because I'm getting a call back from HMRC tomorrow and will ask for reassurance in writing if possible.

I can't simply ignore the German tax demand, so I'm stuck between a rock and a hard spot.

Thanks, Paul

Paultry
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Re: Double taxation agreement Germany

#486955

Postby Paultry » March 16th, 2022, 3:03 pm

I did receive a call back from HMRC where it was pointed out by a very well informed chap that I should not have paid UK tax on my German pension in the first place. Of course this was contrary to the advice from every previous conversation that I had had with HMRC staff.

Apparently double taxation relief was amended, or at least first published on a HMRC internal manual, on 20th May 2016 where it clearly states that German pension income is taxable only in Germany, as pointed out by some contributors to this thread. Obviously this new information never filtered down to all HMRC staff.

The outcome is that I have been instructed to write directly to HMRC requesting a tax refund for the amount of UK tax paid from 2016 onwards, that arose from declaring the German pension. I have meanwhile paid the tax which was requested by the German tax office.

Quite separately the EU/EAA forms were returned, exactly one year from the date HMRC received them, but they were unable to be authenticated because I had completed each one with my data on the left hand panel and the wife's data on the right hand panel. This would have been correct for every other country, but for UK residents the data has to be submitted on two forms, one for me and one for the wife. To be fair it is an instruction at the top of the form but seemed oddly counterintuitive at the time when I filled them in.

I am still not sure of the purpose of the EU/EAA forms apart from declaring residency. If the German tax people ever receive them and it alters my tax liability I will let you know.

Paul

Paultry
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Re: Double taxation agreement Germany

#576468

Postby Paultry » March 17th, 2023, 6:26 pm

It is one year and a day since I last updated this thread.

The saga continues.

On Feb 15th 2022 I was instructed to write a letter to HMRC asking for the £1775.45 that I had paid to them to be refunded. I was told that within ten days of receipt of the letter I would be reimbursed. I have still not received this money.

I have written and spoken to HMRC on several occasions in the last twelve months and each time I was told that I will be reimbursed within the next ten working days.

I am writing today because of the phone conversation that I had on 3rd March with HMRC where I was categorically reassured that all would be dealt with by the 16th March, which has not been the case.

I do not know what more I can do other than just repeat the process.

One suggestion I had from a retired HMRC officer is to write a formal letter of complaint to HMRC and send a copy to my MP.

Any suggestions would be gladly received.

Paul

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Re: Double taxation agreement Germany

#576470

Postby Alaric » March 17th, 2023, 6:40 pm

Paultry wrote:One suggestion I had from a retired HMRC officer is to write a formal letter of complaint to HMRC and send a copy to my MP.


With many organisations, a letter may have a better chance of getting to someone either competent or authorised to resolve a problem. Those answering the phone may well be chosen for their tact and diplomacy without being able or allowed to deliver on whatever they promise.

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Re: Double taxation agreement Germany

#576480

Postby richlist » March 17th, 2023, 7:33 pm

* Presumably they should pay you interest on the money owed ?
* Would having it dealt with by an accountant result in a faster response ?
* You could write to one of the National newspapers.....Jeff Prestridge of the Mail on Sunday deals with these sorts of problems, there are others.
* Small Claims Court ?

Paultry
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Re: Double taxation agreement Germany

#643004

Postby Paultry » January 27th, 2024, 2:58 pm

I'm writing this as a sort of conclusion to my original post that arose from the demands for income tax from the German tax office and HMRC on a pension that I receive from Germany.

Briefly, I was asked in January 2021 to pay tax on a German pension by the German tax office. I contacted HMRC who told me categorically that I should only pay them, HMRC.

I contacted HMRC again in February 2022 and actually received an apology from a chap who really knew what was going on. He told me that their earlier advice was incorrect. I was instructed to pay tax to the German tax office and that HMRC would refund the £1775.40 that I had erroneously paid to them within a few days.

The refund did not appear, so I phoned and sent letters as requested, and waited. Then in May 2023 I received a payment of £1132.96, but this was based on quite erroneous calculations, I just needed a refund. I contacted HMRC over the shortfall, again many phone calls and letters.

I had sort of given up but to my surprise a payment of £607.02 appeared in my bank account this week, I've no idea how this was arrived at but going from previous experience smoke and mirrors will be in evidence.

I know this is a shortfall of £36.02 but I don't have the energy to pursue the problem anymore.

Thanks for all the hints and tips suggested earlier on in this thread.

Paul

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Re: Double taxation agreement Germany

#643114

Postby Charlottesquare » January 27th, 2024, 8:53 pm

Paultry wrote:I'm writing this as a sort of conclusion to my original post that arose from the demands for income tax from the German tax office and HMRC on a pension that I receive from Germany.

Briefly, I was asked in January 2021 to pay tax on a German pension by the German tax office. I contacted HMRC who told me categorically that I should only pay them, HMRC.

I contacted HMRC again in February 2022 and actually received an apology from a chap who really knew what was going on. He told me that their earlier advice was incorrect. I was instructed to pay tax to the German tax office and that HMRC would refund the £1775.40 that I had erroneously paid to them within a few days.

The refund did not appear, so I phoned and sent letters as requested, and waited. Then in May 2023 I received a payment of £1132.96, but this was based on quite erroneous calculations, I just needed a refund. I contacted HMRC over the shortfall, again many phone calls and letters.

I had sort of given up but to my surprise a payment of £607.02 appeared in my bank account this week, I've no idea how this was arrived at but going from previous experience smoke and mirrors will be in evidence.

I know this is a shortfall of £36.02 but I don't have the energy to pursue the problem anymore.

Thanks for all the hints and tips suggested earlier on in this thread.

Paul


Typical introduction to dealing with HMRC, one of the reasons I retired from part time practice in 2019 was HMRC, I understand they are these days even worse- the consensus view on sites like Accounting Web is HMRC is just not fit for purpose.

Anyway congratulations getting nearly all of the funds returned, that took tenacity.

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Re: Double taxation agreement Germany

#643178

Postby Gersemi » January 28th, 2024, 10:18 am

Charlottesquare wrote:

Typical introduction to dealing with HMRC, one of the reasons I retired from part time practice in 2019 was HMRC, I understand they are these days even worse- the consensus view on sites like Accounting Web is HMRC is just not fit for purpose.


That's what happens when you cut funding to the bone, get rid of all the experienced staff and pay most of your staff minimum wage. They even had to abolish the lowest grade, so they could pay the next grade up minimum wage instead. This is the grade that mans the phone lines.


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