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Taxation of UK pensions in Belgium


As a Belgian resident I am taxed in Belgium on my world-wide income, which includes, from 2016, a UK pension.
In summary, the Protocol on Bel/UK taxation of income and pensions (1990) Article 18 Pensions says: Any pension paid to a resident of a Contracting State shall be taxable only in that State. In the case of Belgium, where a resident of Belgium derives a pension which may be taxed in the United Kingdom, Belgium shall exempt such income from tax but may, in calculating the amount of the tax on the remaining income, apply the rate of tax which would have been applicable if the UK pension had not been exempted.
In my case this has meant that although my UK pension has been "exempted" from tax, I am being asked to pay a higher tax on the rest of my income in Belgium.
That is to say, excluding the UK pension the tax on my Belgian pension would have been 6.6%. But when the UK pension is added to my income the tax I have to pay rises to 13.6%. This represents a more than double increase in income tax. Effectively it means that The Belgian State is taxing my UK pension at nearly 30% (i.e. if the amount of extra tax is expressed as a percentage of my UK pension).
My conclusion is that in this situation The Belgian State is circumventing the protocol and is effectively invalidating the objective of the protocol, which is to avoid double taxation.
I should like to learn if there is any action open to me to contest the amount of tax I am being asked to pay.
Has anyone reading this found themselves in a similar situation and what if any action have they taken?

J Aug 26, 2017 10:00

Wrong. The principle of double-taxation is that you don't pay the same tax twice. That's all. You should still pay tax at the higher rate, which in this case is in Belgium.

becasse Aug 26, 2017 10:27

The procedure used is totally reasonable, especially as you are actually paying less tax on your UK pension (which presumably derives from some sort of government or local government service) than you would do if it were taxed here (as it would be if it were from a private-enterprise company or even from a nationalised industry). Note that you will be have local taxes applied to your UK-taxed pension (just as a Belgian in a comparable situation would have to pay Council Tax in the UK), the treaty has been modified to permit this.

Stop moaning - and look on the bright side, the collapse in the value of sterling against the euro means that you will have to pay less tax, so in effect the Belgian state is sharing some of the pain with you.

Mikek1300gt Aug 29, 2017 00:53

"Stop moaning - and look on the bright side, the collapse in the value of sterling against the euro means that you will have to pay less tax, so in effect the Belgian state is sharing some of the pain with you."

Quality stuff, the reason this site is now a bloody ghost town.

CC_R Aug 29, 2017 12:21

If you really want to understand your liability you may save yourself hassle and time and possibly money by employing someone who can actually look at your income and give advice on what tax benefits you are entitlled to.
Pensions are taxable end of discussion plus who knows what brexit brings with it.
Seek proper advice rather than asking a bunch of people who don't know the intraces of your individual case.

LuciaWilliamson Aug 29, 2017 16:53

The technique utilized is absolutely sensible, particularly as you are really paying less duty on your UK benefits. You should in any circumstance pay charge at the higher rate, which for this situation is in Belgium. In UK many assignment writers pay taxes to the UK government like me and it is legal to pay within the policy.

CM Aug 30, 2017 13:04

I sincerely pity anyone who's having their 'assignments' written by Lucinda!

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