Please register if you want to contribute!

Author Topic: Tax on pension  (Read 1376 times)

0 Members and 1 Guest are viewing this topic.

Offline Murphy123

  • Newbie
  • *
  • Posts: 38
Tax on pension
« on: January 31, 2019, 09:08:01 AM »
Morning all...can anyone help me...??? Do you have to pay tax here on your British OAP pension...????
Thank you...


Offline levissima

  • Administrator
  • Hero Member
  • *****
  • Posts: 2953
Re: Tax on pension
« Reply #1 on: January 31, 2019, 05:06:35 PM »
Interested to find out myself, now I’ve finally got there!

Offline Relaxed

  • Hero Member
  • *****
  • Posts: 530
Re: Tax on pension
« Reply #2 on: February 01, 2019, 01:25:11 AM »
Mah! This is not a simple question, and I cannot shed any light - beyond recounting that 'my ward' (who is now no longer tax resident in Italy) opted to have his OAP taxed in Italy. He had a substantial occupational pension (£40,000+) and I 'inherited' his option of electing for Italian taxation of his OAP (about £6,000).
I believe it is a fairly delicate decision, and depends upon your worldwide income, and the elements of that income which are 'electable'. (It seems that, for example, income generated in the UK from property rental must be taxed in the UK - but OAP income is not always considered as generated in the UK).
One snag which you will encounter, if you are tax resident in Italy, is determining just how much worldwide income you can have before you pay tax - and it is not much (nothing approaching the UK personal allowances).
You need accurate advice - but that is hard to come by, and not cheap, and not always reliable.
My first port of call would be the DWP, and then HMRC (because their advice is free), and then I'd probably ask an accountant with Italy/UK specific knowledge. I wouldn't trust an Italian commercialista to have any notion! And then there's Brexit ... (though I'm not sure that the EU are involved at all in cross border taxation).

Offline Murphy123

  • Newbie
  • *
  • Posts: 38
Re: Tax on pension
« Reply #3 on: February 01, 2019, 08:23:05 AM »
Thank you Relaxed and Levissima... it is indeed a very difficult question and a question I think only an accountant who specialises in these matters can hopefully shed some light... my husband is approaching pensionable age but when I can have mine in eleven years the rules will have probably all changed.... again...... 😫😫

Offline GeordieBorn

  • Sr. Member
  • ****
  • Posts: 395
Re: Tax on pension
« Reply #4 on: February 01, 2019, 12:51:24 PM »
I doubt it adds much to the answers, but the UK state pension is paid gross i.e. no tax is deducted. This is simply to avoid their having to get into any administration of deducting for tax and therefore any tax due is taking from your other income by way of tax code adjustments. So if your state pension is all you get then you would not pay tax in the UK (in any case any state pension would be way below the tax allowance – currently 11850). Where this might become a horrid factor regards this would be explaining to the Italian tax authorities that you have already paid tax on your state pension by way of a deduction on other income (e.g. a private pension or investments). If that was not convoluted enough explaining this is done by a tax code change would take some doing! I think it would not be surprising if any Italian accountant failed to get their head around it and with the AdE you have little chance.

Offline rometony

  • Full Member
  • ***
  • Posts: 180
Re: Tax on pension
« Reply #5 on: February 01, 2019, 10:20:34 PM »
Maybe it could depend on whether it is paid into a UK bank account first and then transferred here,if that is the case,or paid directly into an italian bank account?

For a small amount of rental income i receive in the Uk i complete a self assessment and pay no tax and the money ,for now,remains in the uk.

i suppose a difficulty could arise if i transferred the money here and i was questioned where it came from and if i had paid tax on it.
although i could prove no tax was due at source in the uk would it be classed as additional income here?
surely your first avenue should be the HMRC
T

Offline RedSauce

  • Newbie
  • *
  • Posts: 35
Re: Tax on pension
« Reply #6 on: February 06, 2019, 06:55:29 AM »
Can of worms and depends who is the interpreter of said can of worms ! Google translated version at the end. Clear as mud !

    Articolo 19
                          Funzioni pubbliche
(1) (a) Le remunerazioni, diverse dalle pensioni, pagate da uno Stato
contraente o da una sua suddivisione politica o amministrativa  o  da
un suo ente locale ad una persona fisica, in corrispettivo di servizi
resi a detto Stato o  a  detta  suddivisione  od  ente  locale,  sono
imponibili soltanto in questo Stato.
(b)  Nononstante  le  disposizioni  del  sub-paragrafo  (1)  (a)  del
presente  articolo,  tali  remunerazioni  sono  imponibili   soltanto
nell'altro Stato contraente qualora i servizi  siano  resi  in  detto
Stato ed il beneficiario sia un residente di tale altro Stato che:
(i) abbia la nazionalita' di detto Stato senza avere la nazionalita'
del detto primo Stato; o
(ii) senza avere la nazionalita'  del  detto  primo  Stato,  non  sia
divenuto residente di detto altro Stato al solo scopo di  rendervi  i
servizi.
(2) (a) Le pensioni corrisposte da, o con fondi  costituiti  da,  uno
Stato contraente o da una sua suddivisione politica od amministrativa
o da un suo ente locale ad una persona  fisica  in  corrispettivo  di
servizi resi a detto Stato o a detta  suddivisione  od  ente  locale,
sono imponibili soltanto in questo Stato.
(b) Nonostante le disposizioni del sub-paragrafo (2) (a) del presente
articolo, tali pensioni sono  imponibili  soltanto  nell'altro  Stato
contraente qualora la persona fisica sia un residente di questo Stato
e ne abbia la nazionalita'.
(3) Le disposizioni  degli  articoli  15,  16  e  18  della  presente
Convenzione, si applicano alle remunerazioni  o  pensioni  pagate  in
corrispettivo  di  servizi  resi   nell'ambito   di   una   attivita'
industriale o commerciale esercitata da uno Stato contraente o da una
sua suddivisione politica o amministrativa o da un suo ente locale.



Public functions
(1) (a) Remuneration, other than pensions, paid by a State
contractor or by a political or administrative subdivision or by
one of its local bodies to a natural person, in consideration of services
returned to that State or to that subdivision or local authority, are
taxable only in this State.
(b) Notwithstanding the provisions of sub-paragraph (1) (a) of the
this Article, such remuneration is taxable only
in the other Contracting State if the services are rendered in the said
State and the beneficiary is a resident of that other State which:
(i) has the nationality of that State without having the nationality
of the said first state; or
(ii) without having the nationality of the said first State, it is not
become a resident of that other State for the sole purpose of rendering you
services.
(2) (a) Pensions paid by, or by funds consisting of, one
Contracting State or its political or administrative subdivision
or from one of its local bodies to a natural person in payment of
services rendered to that State or to that subdivision or local authority,
are taxable only in this State.
(b) Notwithstanding the provisions of sub-paragraph (2) (a) of this
Article, such pensions are taxable only in the other State
contractor if the natural person is a resident of that State
and has its nationality.
(3) The provisions of articles 15, 16 and 18 of this
Convention, apply to remuneration or pensions paid in
payment for services rendered in connection with an activity
industrial or commercial activity carried on by a Contracting State or by a
its political or administrative subdivision or its local authority.

Offline levissima

  • Administrator
  • Hero Member
  • *****
  • Posts: 2953
Re: Tax on pension
« Reply #7 on: February 06, 2019, 10:37:39 AM »
One warning I’d give from personal experience.

I paid a tax I didn’t need to for three years. I then managed to prove I shouldn’t have had to pay it, stopped paying it and tried to claim it back. This brought me to the attention of the Guardian Di Finanzia, who investigated me. In the end they decided I’d not declared something from a year before the law came into force, had I declared it there was nothing to pay. I was fined a percentage of that nothing, against a code which did not exist, so I could not pay my zero fine. Because I did not pay my zero fine, I was fined €250. And I never got back the tax I’d overpaid.

I now avoid paying any tax unless I’m absolutely sure I owe it because it’s cheaper to discover you should have paid it and pay it late with a fine than be fined for over paying in the first place.

Offline Venatore

  • Full Member
  • ***
  • Posts: 196
Re: Tax on pension
« Reply #8 on: February 06, 2019, 12:26:59 PM »
A scenario worthy of  Samuel Beckett himself.
V.

Offline GeordieBorn

  • Sr. Member
  • ****
  • Posts: 395
Re: Tax on pension
« Reply #9 on: February 06, 2019, 01:08:22 PM »
Not that it makes any more sense RedSauce, but I thought I recognised the text... Ha! Not.. :-[ Just a good guess, it's the DTA with the UK and Italy, here is the English version, look at Article 19.

Offline RedSauce

  • Newbie
  • *
  • Posts: 35
Re: Tax on pension
« Reply #10 on: February 06, 2019, 02:57:24 PM »
What does it mean !??

 ??? ??? ???

Offline GeordieBorn

  • Sr. Member
  • ****
  • Posts: 395
Re: Tax on pension
« Reply #11 on: February 06, 2019, 05:21:48 PM »
I’ve looked at this document a few times before, very good if you can’t sleep! It is horrible as it’s written to be read in either country. It uses those awful terms "a Contracting State" and "the other Contracting State". I believe Article 18 covers the state pension and (think) it’s saying your UK pension is only taxable in the UK. If you can keep awake and read some of the other taxable assets it seems to be using the term "the other Contracting State" where income from the UK could be taxed in Italy if you are fiscal resident there. I think royalties and interest are good/easy examples.
Reference to Article 19 is down to “state employment” and covers government private pensions and some local bodies’ pensions. I’m sure I read somewhere before that this was originally used for the likes of embassy staff, forces etc. but was expanded to cover more than that at some point.
I’m sure this could be read differently by many and I certainly would hate to have to argue any of this with HMRC, let alone the AdE in Italy.

Offline RedSauce

  • Newbie
  • *
  • Posts: 35
Re: Tax on pension
« Reply #12 on: February 06, 2019, 06:19:16 PM »
G,

Thx for your thoughts..........

I have had two different commercialistas interpret this completely differently  ??? >:( :'(

RedS

Offline Murphy123

  • Newbie
  • *
  • Posts: 38
Re: Tax on pension
« Reply #13 on: February 06, 2019, 09:07:09 PM »
Thank you for trying to shed some light on this problem... still confused.... but thank you for your help everyone... 👍👍