Tax on Company Pension
Jun 10th 2009, 11:04 am
#1
Just Joined
Thread Starter
Joined: Nov 2008
Location: Oxfordshire. UK
Posts: 16
Tax on Company Pension
Forgive me for asking yet another question on paying tax. I have read many of the threads on tax but am still unsure of the right answer. I believe Italy and the UK have an agreement that if you pay tax in one country you do not need to pay it in the other. Having understood that, is it best to pay tax on a company pension in Italy (would you pay less) or would it be best to pay tax on the pension at source in the UK????? I do not reach 'state pension' age for another four years but the same question would arise.
regard from Mike
regard from Mike
Jun 10th 2009, 11:24 am
#2
BE Enthusiast
Joined: Nov 2008
Location: London. and visiting Italy when the Parmesan runs out!
Posts: 466
Re: Tax on Company Pension
Hi,
look up the Shengen Agreement (Treaty) & Double Taxation Treaty. The gist of the doule taxation treaty is that you pay whichever is the highest rate of tax (Italian) & the two countries, Italy & U.K., divide the spoils. We understand there to be limited exceptions to this whereby certain types of income that derive from the U.K. are taxed only in the U.K. i.e property rental.
Ernie
look up the Shengen Agreement (Treaty) & Double Taxation Treaty. The gist of the doule taxation treaty is that you pay whichever is the highest rate of tax (Italian) & the two countries, Italy & U.K., divide the spoils. We understand there to be limited exceptions to this whereby certain types of income that derive from the U.K. are taxed only in the U.K. i.e property rental.
Ernie
Jun 12th 2009, 5:51 pm
#3
Banned
Joined: Feb 2009
Location: Rome
Posts: 16
Re: Tax on Company Pension
Hi Mike,
We are currently exploring this very question. Taxation in Italy is fairly complex. You can designate through HMRC to receive income from a UK pension gross if you become resident in Italy but you need to satisfy HMRC that you are no longer UK resident.
UK pension income is paid normally net of 20% tax so if the tax on benefits in Italy is lower then you can take this option.
Pension income in Italy for an Italian scheme is now taxed on a much more favourable basis since 2007. It used to be that pension income was added together with other forms of income and then taxed up to a maximum of 43%. Since January 2007 there is a 15% witholding tax applied although it also appears that if the accumulation of the benefits occurred outside of Italy that there may be no taxation of the benefits. If this is the case then worst case scenarion may be a 15% witholding which is of course better than net payment from the UK.
According to a legal opinion we recently received, there is no actual case law that has gone before the Italian revenue and it may be that this is simply due to a lack of regulation.
There can be benefits for certain type of UK pensions to be transferred into QROPS (Qualifying Recognized Overseas Pensions) as these are paid gross with the onus on the individual to declare the income in their country of residence but these are not suitable for everyone, particularly if you have a government backed final salary scheme.
We are hoping to clarify this over the next few weeks and I will post back to this thread with more information.
We are currently exploring this very question. Taxation in Italy is fairly complex. You can designate through HMRC to receive income from a UK pension gross if you become resident in Italy but you need to satisfy HMRC that you are no longer UK resident.
UK pension income is paid normally net of 20% tax so if the tax on benefits in Italy is lower then you can take this option.
Pension income in Italy for an Italian scheme is now taxed on a much more favourable basis since 2007. It used to be that pension income was added together with other forms of income and then taxed up to a maximum of 43%. Since January 2007 there is a 15% witholding tax applied although it also appears that if the accumulation of the benefits occurred outside of Italy that there may be no taxation of the benefits. If this is the case then worst case scenarion may be a 15% witholding which is of course better than net payment from the UK.
According to a legal opinion we recently received, there is no actual case law that has gone before the Italian revenue and it may be that this is simply due to a lack of regulation.
There can be benefits for certain type of UK pensions to be transferred into QROPS (Qualifying Recognized Overseas Pensions) as these are paid gross with the onus on the individual to declare the income in their country of residence but these are not suitable for everyone, particularly if you have a government backed final salary scheme.
We are hoping to clarify this over the next few weeks and I will post back to this thread with more information.
