# Tax on Pensions



## Dave 1874 (Sep 27, 2015)

Hi. I am retired and moving to the Algarve in about 18 months and am ware of the 10 year window of tax exemption on Pension income. However what I would like to understand is what the tax situation is after the 10 year period, i.e. what rate of tax would UK pension income be taxed at and are there any personal tax allowances as a Portuguese resident. Appreciate any information.
Regards
Dave H


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## SpiggyTopes (Feb 1, 2015)

I'll have a go at this, ready to be corrected....

If the pension income arises in the UK then it should be declared and taxed there if necessary.

Then, the proof of payment of the UK tax if it arises is submitted to the Portuguese authorities with your Portuguese tax return .....

I think, but am not sure, that if the pension is above a certain sum then Portuguese tax is payable at the difference in the UK / PT tax rates ......... if you are taxed at 20% in the UK and the rate here is say 25% then you pay 5% tax.

It doesn't sound very convincing when I write it down so let's see what others have to say.


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## Dave 1874 (Sep 27, 2015)

Many thanks Spiggy, appreciate your help. Interesting to see what others may say.
Dave.


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## TonyJ1 (May 20, 2014)

SpiggyTopes said:


> I'll have a go at this, ready to be corrected....
> 
> If the pension income arises in the UK then it should be declared and taxed there if necessary.
> 
> ...


Not quiet correct:

The general rule is that you pay taxes in your country of residence. The country of residence may give credit for taxes incurred on the income if it is from a foreign source.

Portugal taxes income on this basis, however:

Pension income depends - if from civil service, police, military, etc - i.e. directly from government coffers, the paying country generally taxes the income, and that is the end of the story, though, in the country where it is received, generally it must be declared so that the taxes on other income will incur taxes at the higheest rates

Private pensions are generally taxed in the country of residence.

Please see the Portugal - United Kingdom double tax treaty . see the articles on pensions.

Portugal currently has a scheme in its law that foreign pensions will be tax free in Portugal for a period of 10 years, provided some conditions are met, these basically are:
1. Application is made to get on this scheme timeously - no late applications whatsoever are condoned
2. Not subject to submit a Portuguese tax return for the last 5 years prior to making application to get on this scheme
3. The source of the pension income was not deducted for Portuguese tax purposes at any time.

Problems often arise in 1 and 2 of the above

There are further benefits in the case of private pensions (purchased annuities) which are not generally well known which are limited in their taxation


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## TonyJ1 (May 20, 2014)

*Taxes on Pensions*



SpiggyTopes said:


> I'll have a go at this, ready to be corrected....
> 
> If the pension income arises in the UK then it should be declared and taxed there if necessary.
> 
> ...


Not quiet correct:

The general rule is that you pay taxes in your country of residence. The country of residence may give credit for taxes incurred on the income if it is from a foreign source.

Portugal taxes income on this basis, however:

Pension income depends - if from civil service, police, military, etc - i.e. directly from government coffers, the paying country generally taxes the income, and that is the end of the story, though, in the country where it is received, generally it must be declared so that the taxes on other income will incur taxes at the higheest rates

Private pensions are generally taxed in the country of residence.

Please see the Portugal - United Kingdom double tax treaty . see the articles on pensions.

Portugal currently has a scheme in its law that foreign pensions will be tax free in Portugal for a period of 10 years, provided some conditions are met, these basically are:
1. Application is made to get on this scheme timeously - no late applications whatsoever are condoned
2. Not subject to submit a Portuguese tax return for the last 5 years prior to making application to get on this scheme
3. The source of the pension income was not deducted for Portuguese tax purposes at any time.

Problems often arise in 1 and 2 of the above

There are further benefits in the case of private pensions (purchased annuities) which are not generally well known which are limited in their taxation


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## In 2 bikes (Apr 18, 2013)

It may be of interest to know that you cannot have the 10 year tax break from both countries if your pension is a UK Government pension as HMRC won't let go of it. I've done my time for H.M. The Queen, professionally that is, and I've looked at this exemption thing and HMRC were most.........errrrrrrr........specific, to be polite..


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## TonyJ1 (May 20, 2014)

In 2 bikes said:


> It may be of interest to know that you cannot have the 10 year tax break from both countries if your pension is a UK Government pension as HMRC won't let go of it. I've done my time for H.M. The Queen, professionally that is, and I've looked at this exemption thing and HMRC were most.........errrrrrrr........specific, to be polite..


Unless you are talking about civil, military, police pensions, etc - your observation is not correct. People who qualify for it and get adequate advice do get the double deduction.


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## Dave 1874 (Sep 27, 2015)

Many thanks all.

Dave


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## In 2 bikes (Apr 18, 2013)

TonyJ1 said:


> Unless you are talking about civil, military, police pensions, etc - your observation is not correct. People who qualify for it and get adequate advice do get the double deduction.


Tony, I am, indeed, referring to H.M Government civil, military, police pensions which would in turn make my statement correct. Thanks for your observation and many apologies if you thought I was referring to office based U.K. H.M. Government employees. Although I fail to see how a government pension which has to be taxed in the U.K. by UK law via the HMRC, only, is any different whether it be earned by front line individuals or desk jockies.? Is there something your South African back ground can add to United Kingdom legislation?


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## TonyJ1 (May 20, 2014)

*Pensions etc*



In 2 bikes said:


> Tony, I am, indeed, referring to H.M Government civil, military, police pensions which would in turn make my statement correct. Thanks for your observation and many apologies if you thought I was referring to office based U.K. H.M. Government employees. Although I fail to see how a government pension which has to be taxed in the U.K. by UK law via the HMRC, only, is any different whether it be earned by front line individuals or desk jockies.? Is there something your South African back ground can add to United Kingdom legislation?


There is no difference - it is in the definition. Government pensions are normally taxed by the paying country. There are however a lot of inconsistencies, varying from country to country on what exactly are government pensions. e.g. in the UK doctors working for the NHS used to fall under this definition, however this is no longer so for most of them - they are kind of contractors to the NHS. 

In the SA case, as well in Portugal, say a doctor worked in a government hospital he would definitely be receiving a government pension. It is just the way it is.


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## In 2 bikes (Apr 18, 2013)

TonyJ1 said:


> There is no difference - it is in the definition. Government pensions are normally taxed by the paying country. There are however a lot of inconsistencies, varying from country to country on what exactly are government pensions. e.g. in the UK doctors working for the NHS used to fall under this definition, however this is no longer so for most of them - they are kind of contractors to the NHS.
> 
> In the SA case, as well in Portugal, say a doctor worked in a government hospital he would definitely be receiving a government pension. It is just the way it is.


For those U.K. enquirers still confused and needing "a definition"...............Speak to Her Majesty's Revenue and Customs ( United Kingdom) to decipher if you have a United Kingdom, Government Pension........................as opposed to a Governmental 'old-age' pension or any other form of retirement cash scheme . 

H.M.R.C. can be contacted here... https://www.gov.uk/government/organisations/hm-revenue-customs/contact/online-services-helpdesk


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