nigel.b

I haven't had to use the DTT yet. Can you clarify, perhaps? If someone has global income from say:

lettings in Portugal
cash in a Jersey account
state pension
govt pension
a house rented out in the UK

how does the DTT decide what tax is paid where? My understanding (based on hearsay) was that if you had paid tax on some of this in the UK (where you are not tax-resident) this could be set against your PT tax bill (where you are tax-resident) via the paperwork you mention. But I am very possibly wrong. All this stuff is complicated...

Mitzyboy

Whats has been written above is the gist of it.

Basically your worldwide income is declarable in Portugal. The exception would be your Government Pension, which is taxed at source in the UK.

John and Cath briefly described what should be done. I dont know if it is the sme in Portugal but the FD form is completed (in two languages) taken to the tax office in Portugal and that is forwarded to the Tax office in the UK to then ensure you are "zero rated" for tax in the UK

The Double Tax treaty actually ensures you are not taxed twice on the same income. That doesnt mean that if you pay tax on it in the UK, you shouldnt declare it in Portugal, or that you can choose where you pay your tax.

EsuriJohn

Where does this someone live for more than 90 days a year. What is his nationality compared where he lives the majority of the year. Where is he domiciled.

miramar

The first rule on Portuguese taxation is: Portugal taxes all residents on WOR
LDWIDE Income.

IF your country of origin has a double taxation treaty (most do) that means that you declare all income to Portugal and get a tax credit on your taxes to the UK, or elsewhere. Our tax firm said you still fill out a tax form for your country of origin and receive a credit on taxes paid in Portugal. There is no double taxation, but ALL income must be declared to Portugal, first, and those taxes are credited against whatever taxes you would have paid in your country of origin.

This includes rental property (abroad) pensions, both public and private, etc.

We hired the international tax firm Deloitte and they consulted tax attorneys in Lisbon and that's what we were told.

EsuriJohn

They either did not know the rules on Government or Crown Pensions as opposed to State Pensions or your case is very specific and does not include either Government or Crown Pensions.

Mitzyboy

Ditto with the last poster. You have it very wrong on Government pensions. They are taxed at source under the agreement, and in many cases they are not taxed at all because of the allowances.
As I said elsewhere, if you ask the Hacienda in Spain for instance or a tax gestor about declaring it on a tax return they will tell you not to bother as the tax office is not remotely interested

nigel.b

It may be that Portugal and Spain have rather different double taxation agreements with the UK. Living in Portugal, I wouldn't want to be too dogmatic about the tax system in Spain.

Mitzyboy

I'm not being dogmatic about the system in Spain, I was mentioning that as an example because thats where I am situated

I already stated elsewhere that the system may be different, but it is unlikely having looked at all the information available

However, I am pretty certain that the viewpoint on Government pensions is the same, because a government pension is taxed at source in the UK, end of story

Does this help?
http://www.hmrc.gov.uk/manuals/dtmanual/dt15667.htm

nigel.b

My apologies, Mitzyboy. The link you quote shows that what you've been saying all along is correct.

The reason I've been doubtful is that up till now you have not provided any evidence to back up what you're saying. But I was unquestionably wrong in the end. Sorry!

Mitzyboy

It's no problem at all, honestly
I have been through the process you see and I remember looking into it when it happened. It was of course Spain for me, but I sort of remembered that most of the EU countries were exactly the same on Govt pensions

sunshineforever

Hi, sorry I havent replied sooner, I have been thinking how to word my response without seeming to advertise or step on forum rules. I am not a referrer or business person, I just want to share a way out of the taxation rules you are all encountering, and discussing here.

I am a former UK police officer, and moved abroad 4 years ago. My pension fund was tied up until retirement, however that is some years away :P. I was recently approached by a London company who stated they could release the entire fund TAX FREE for me to have access to, on a tax free basis.

I am happy to say this was true and that this is not any type of QROPS or other pension scheme. Following release of the funds I lead a better life in the sun.

How does this work?
the fund was released into a trust which is handled and set up by the company (i wouldnt have had a clue how to do this myself), but no funds ever left the UK. The way the trust is structured allows for tax free access to funds according to , and compliant with, UK law. This system is entirely legal, has full disclosure to HMRC and works for any pension. It is not tax avoidance, and I believe it may not be something any of you have considered There is no dual tax involvement, and yes, the company (or any company doing this) does charge to set all this up, but it is very professional and I never had a problem.

You can live anywhere in the world with the same benefits, the pension just has to be a UK one. I almost forgot to add that the trust can be used for all your assets, not just your pension...think about that!

the one rule, is that you cannot already be drawing down on your pension fund.

(hope this was all ok, and has stimulated your thoughts )

Mitzyboy

It's an interesting one ... sounds like something that Winchcombe were doing, setting up a company (for about £6k) and then transferring the funds to it.

People doing it now need to look at the more recent investigation that is taking place into how pension funds are moved into tax free areas. The QROPS way for instance looks more dodgy than it was before, because HMRC dont like the idea that you get the tax free money into your fund all those years and then try to move it out of the tax system when you take it.

Who knows, all I would say is that you need good advice from an independent financial adviser who doesnt sell things like this, before you risk moving all your saved money. Dont want to end up with a huge tax bill for instance

sunshineforever

all I can say in response to this is that it is approved by HMRC, full disclosure is given, no monies leave the UK and the opinion of learned council Robert venables QC was sought and he said that the planning is effective and legitimate (off the company leaflet given to me)

The new qrops still seems viable, but I wanted full access to the full amount.

I am not a financial advisor, they couldnt give me any advice on this subject, it wasnt in their scope of business, but I did check out the company and do my due diligence.

edited to add that Winchcombe is not the company i went with, I have never heard of them.

EsuriJohn

Both Mitzy and I are in exactly the position to know since we both have both GP & SP and have both researched independently on both fora and HMRC sites to be absolutly sure that with very few exceptions HMRC want a cut of any GP they are paying.

EsuriJohn

Winchcombe are an advisory company that advise you to set up a UK COMPANY to own your house in Spain at a cost of several thousand pounds as an IHT AVOIDENCE mechanism this also has ongoing costs of company maintenance. Your scheme would not work for Civil Servants in the PCSPS since there is no fund to move and I doubt Local Government would cooperate either since their funds are in deficit so a number of people taking their money out in bulk would bankrupt a few funds to the detriment of the majority.

I did have a small Private Pension fund and recent changes in the law did allow me to take the whole fund as a lump sum without tax in UK since I have an FD9 arrangement and added to my state pension in Spain I was still under the Spanish personal allowance of about E11200 fo a pensioner.