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Old 22.01.2008, 15:37
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Tax on UK State Pension

I am working as a teacher(not well paid) and my husband is retired with a UK State Pension and a government pension. I pay tax at source.

I understand from a french speaking adviser that the UK State Pension needs to be declared. My french is not too good. After deducting our combined allowances he states that 100% of the pension is taken in tax. I said that no country takes a 100% tax rate and surely there must be a percentage reduction on the amount after allowances. A gallic shrug was the answer.

My husband will defer his state pension now to get around next year's tax but its estimated that he owes 416 Chf on a declared 2600 Chf for the 3 months of that years tax; an estimate of 1660 or so for a full year.

From a UK Inland revenue point of view on government pensions(not State), there appears to be no agreement between UK and Switz on double taxation. Therefore, it appears that this should not be taxable.

I'm sure this has been covered before but I just cannot find the thread. Can anyone help on the Swiss tax position for:
a. UK State Pensions
b. UK Govt funded pensions
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  #2  
Old 22.01.2008, 22:52
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Re: Tax on UK State Pension

My understanding is that if you are resident in Switzerland, income from pensions are fully taxable after deductions and that includes pension income derived from the UK. However if a UK pension income has UK tax already deducted at source you should be able to reclaim that through the double tax treaty as long as you are no longer tax resident in the UK. Here is a weblink you might find useful.
http://www.hmrc.gov.uk/cnr/app_dtt.htm.
The weblink says you can claim relief for pensions under the double tax treaty and doesn’t distinguish between state, government and private pensions and. It would surprise me if there was different treatment but you could always contact them to clarify that. Rebates under the treaty are not automatic so you have to actually make a claim. I think that by filing the right forms you might even be able to get your UK pension income paid gross as long as it is taxed in Switzerland. If you are having difficulty communicating with your current adviser it might be worth ringing round other fiduciaires to see if you can find an english speaking adviser. They are listed in the Swiss Yellow pages which is available online. Given the number of Brits in Villars I’m surprised if there isn’t one there. Alternatively you could try Montreux or Vevey where there are English speaking expat communities. If you do come across a good english speaking adviser please come back and let us know as there have been people asking for recommendations before. Alternatively you could go into your local tax office (I think that would be in Aigle for you) and talk through your questions on the swiss tax position.
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Old 22.01.2008, 23:03
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Re: Tax on UK State Pension

Heck, at least you get a pension, even if it's all taken away.
My country has abolished pensions and replaced with superannuation (which is being bled dry on the poorly performing stock market).
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Old 23.01.2008, 07:00
swissbob
 
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Re: Tax on UK State Pension

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I am working as a teacher(not well paid) and my husband is retired with a UK State Pension and a government pension. I pay tax at source.

I understand from a french speaking adviser that the UK State Pension needs to be declared. My french is not too good. After deducting our combined allowances he states that 100% of the pension is taken in tax. I said that no country takes a 100% tax rate and surely there must be a percentage reduction on the amount after allowances. A gallic shrug was the answer.

My husband will defer his state pension now to get around next year's tax but its estimated that he owes 416 Chf on a declared 2600 Chf for the 3 months of that years tax; an estimate of 1660 or so for a full year.

From a UK Inland revenue point of view on government pensions(not State), there appears to be no agreement between UK and Switz on double taxation. Therefore, it appears that this should not be taxable.

I'm sure this has been covered before but I just cannot find the thread. Can anyone help on the Swiss tax position for:
a. UK State Pensions
b. UK Govt funded pensions

I think you may be mistaking a 100% tax rate for 100% taxable ?

The pension is added to the annual income and tax is calculated in the normal way.
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Old 23.01.2008, 09:10
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Re: Tax on UK State Pension

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I think you may be mistaking a 100% tax rate for 100% taxable ?

The pension is added to the annual income and tax is calculated in the normal way.
Anyway the "advisor" has not got a clue what he is talking about. A foreign pension, where a double tax treaty exists, is treated simply as additional income. And as a resident in Switzerland with less than 183 days spent in the UK you can register for gross payment of pension, although with this change Switzerland are informed of your payments to avoid tax evasion... The relevant treaty changed mid December 2007 by the way...
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Old 23.01.2008, 09:24
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Re: Tax on UK State Pension

"However if a UK pension income has UK tax already deducted at source you should be able to reclaim that through the double tax treaty as long as you are no longer tax resident in the UK."

Thanks Nev and Swiss Bob for your prompt replies. The UK Inland Revenue position is very clear on Govt pensions and double taxation. " The terms of the Double Taxation agreement between UK and Switz, prevent a resident of that country, who is not also a Swiss National, from obtaining exemption from UK income tax for a Govt or Local Authority pension paid out of UK funds. You are not therefore able to receive exemption......."

I presume therefore there is no agreement between countries on this issue!

On the application of a % tax rate after allowances by the Swiss on the UK State Pension. If that was applied, then it would be a 25% + rate which is clearly way above the rates applied to a small salary.

Thanks P
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Old 23.01.2008, 10:32
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Re: Tax on UK State Pension

Quote:
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"However if a UK pension income has UK tax already deducted at source you should be able to reclaim that through the double tax treaty as long as you are no longer tax resident in the UK."

Thanks Nev and Swiss Bob for your prompt replies. The UK Inland Revenue position is very clear on Govt pensions and double taxation. " The terms of the Double Taxation agreement between UK and Switz, prevent a resident of that country, who is not also a Swiss National, from obtaining exemption from UK income tax for a Govt or Local Authority pension paid out of UK funds. You are not therefore able to receive exemption......."

I presume therefore there is no agreement between countries on this issue!

On the application of a % tax rate after allowances by the Swiss on the UK State Pension. If that was applied, then it would be a 25% + rate which is clearly way above the rates applied to a small salary.

Thanks P
Just goes to show you should read the post carefully

Basically and newly aritcle 18 of the new tax treaty effective April 6th in the UK and Jan 1st in Switzerland allows tax exemption on all pensions paid in one state where the recipient lives in the other state. However there is an exception covered in Article 19 paragraph 2.

This is also then quite clear. For pensions paid from a government pension for services performed for that state, the tax is only in the state issuing the pension unless the person receiving the pension is a citizen of the other state.

In other words Government pensions are only taxable in the state issuing the pensions as long as the person receiving the pension is not a Swiss citizen.

Note that Article 19 paragraph 2 has not changed from the original text from 1977... Thus the application of this is current.

So finally the tax advisor in Switzerland was barking up the wrong tree. Your government pension in the UK is 100% free of Swiss tax.

Here is the relevant Swiss law:
http://www.admin.ch/ch/d/sr/0_672_936_712/a19.html
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Old 23.01.2008, 12:34
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Re: Tax on UK State Pension

So finally the tax advisor in Switzerland was barking up the wrong tree. Your government pension in the UK is 100% free of Swiss tax.

Thank you Richard. Your references to the various articles extremely useful.

Am I reading Article 15 correctly? "unless employment is not undertaken in Switz. If employment is undertaken there, then remunerations are taxable in this other state."

Art. 15 Professions dépendantes
1. Sous réserve des dispositions des articles 1 6, 1 8 et 19, les salaires, traitements et autres rémunérations similaires qu’un résident d’un Etat contractant reçoit au titre d’un emploi salarié ne sont imposables que dans cet Etat, à moins que l’emploi ne soit exercé dans l’autre Etat contractant. Si l’emploi y est exercé, les rémunérations reçues à ce titre sont imposables dans cet autre Etat.

Therefore, if my husband is not working here and is a dependant, then his UK State Pension is also not taxable?

Thanks P
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Old 23.01.2008, 12:50
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Re: Tax on UK State Pension

Is there a way to express thanks(to the contributor) in a post other than to state it?
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