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Author Topic: Paying Tax on Private Pension  (Read 274 times)

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Offline Berti

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Paying Tax on Private Pension
« on: March 05, 2019, 12:26:20 PM »
Hi, we are thinking of becoming Italian residents and need to understand a little more about paying tax on private pensions. Do we still pay tax to UK or will all tax be payable to Italy? Many thanks


Offline GeordieBorn

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Re: Paying Tax on Private Pension
« Reply #1 on: March 05, 2019, 06:13:44 PM »
You need to read the DTC/DTA here on the subject. I reckon no pension is taxable in Italy, but likely they would do you at least (or try to) for the difference in tax i.e. no tax allowance in Italy and 23% tax rate up to circa 15,000 Euro (more above this). I certainly would not want to end up arguing the point with the AdE. If so, on a £20,000 a year UK pension you currently pay 20% on 3000+, about 630 in tax. In Italy, as far as I can tell if they try to get the difference, you would pay 23% of 20000, less what you’ve already paid in the UK. A whopping 2800+.
If it is a government private pension, then you may even have a better case, but again I would not want to argue it. Article 18 & 19 are the main bits…

Offline Relaxed

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Re: Paying Tax on Private Pension
« Reply #2 on: March 05, 2019, 10:39:53 PM »
What Geordie is saying is 'half the story'. (Here in Italy my only experience is with a UK occupational (non governmental etc) pension). So, I'm only commenting on that basis.
This occupational pension is taxed at source (like PAYE) in the UK, and the tax deducted by HMRC is 'credited against' the Italian tax due. Except that isn't so straightforward (IMO). HMRC deduct their (rightfully due) tax at basic rate, but when the income exceeds UK basic rate it becomes a complete wasps nest when the Italian tax authorities get their fingers on it. I don't see that there is any difference between a (non govermental) occupational pension and a 'private pension' - but maybe I am missing something here.
I do have a bit of (second hand, but trustworthy) experience about opting to 'cash in' (private) pension benefits from a UK cit who is an Italian tax resident, where the commercialista was saying 'prove it is pension stuff and you'll only have to pay 20%'.
It isn't a personal issue for me, (but as a guardian of a UK Italian tax resident until recently), I could give you the name of a quite esteemed cross border 'expert' firm - except that I won't, because I don't trust their advice.
To be quite frank with you - IMO nobody* can advise you accurately. (*honestly and knowledgeably).

Offline GeordieBorn

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Re: Paying Tax on Private Pension
« Reply #3 on: March 05, 2019, 11:06:32 PM »
It’s the whole story governess, honestly, as the AdE will be a law unto themselves – like HMRC.
The government private pension is not to be confused with the government state pension. I’m sure it is not being so here, but just to clarify… There is some agreement between states (to originally do with embassy staff etc I think), whereby any private pension earned can only be taxed in the country the pension is paid, this is for ex civil servants (inc only working in the UK), defence staff and some local authority staf pensions. Again I would stress I would NOT want to be arguing this position with the AdE even if you are in the right.

Offline Berti

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Re: Paying Tax on Private Pension
« Reply #4 on: March 06, 2019, 11:49:09 PM »
Thanks everyone for responses. I spoke with HMRC today and the advice they gave me was:
- Apply to exempt tax applied to UK occupational pension, pay tax at appropriate rate in Italy.
- Tax on small income from UK rental property, is payable in UK only.
- You are still entitled to claim UK personal allowance, against rental income.
Now whether that works in reality is anyone's guess!!

Offline Rustychain

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Re: Paying Tax on Private Pension
« Reply #5 on: March 07, 2019, 09:13:28 AM »
It may well have been too simplistic, but I've always worked on the basis that any income 'earned' (generated) in the UK is liable for UK tax, and any income earned in Italy is liable for Italian tax.
In Abruzzo since March 2013

Offline GeordieBorn

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Re: Paying Tax on Private Pension
« Reply #6 on: March 07, 2019, 11:06:51 AM »
Did they say they would put that in writing Berti  ;) Good luck whatever you do. Sometimes I think Levi's recent advice is spot on, but can leave you worrying.