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UK Pensions and Double Taxation Agreement

Discussion in 'General Chit Chat' started by Micawber, Feb 25, 2011.

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  1. Micawber
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    Micawber Renowned Lifetime Member

    I am very lucky in that I have some time to 'research' in preparation of my planned retirement in the Philippines.

    One important benefit I have discovered is what is called a “Double Taxation Agreement” that exists between the UK and Philippines.

    Essentially this means that most receivable pension payments should only be taxed once if you’re living in a country which has a double taxation agreement with UK. (ie Philippines)

    Normally, any pension payments above individual personal allowances will be taxed at source in the UK but, if you are resident abroad, and you inform HMRC that your pension will be taxed in your country of residence, then HMRC will authorise payment of your pension without deduction of tax.

    Now here's the really interesting bit. Currently income from pensions are taxed at 0% in Philippines.

    Here's the tricky part, and my question.

    I understand that HMRC require to have the Philippines Tax Identification Number (TIN) in order to grant the approval.
    So somehow I need to get this TIN from Philippines BIR.

    For the life of me I cannot find any information on this at all. None of my friends appear to have any idea about this.

    Anyone here understand how to apply and get issued with this TIN from BIR?
    What documents are needed etc?

    Thanks for any help, comment or suggestion.
    Micawber, Feb 25, 2011
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  2. oss
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    oss Somewhere Staff Member

    You have to go to the BIR in Makati (if you are in Manila) and register as a tax payer and they will issue you with a TIN ID card, we had to do it for Ana a good few years back. You will need the usual list of ID's Passport and Postal ID or your ACR card should be enough. I can't remember any other details as it was so long ago that Ana did this, I do remember that a small 500 peso under the table got us past the queues and queues of people.

    They will have all the forms you need at the BIR.
    oss, Feb 25, 2011
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  3. Micawber
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    Micawber Renowned Lifetime Member

    Thank you so much oss for taking the time. Much appreciated.
    Do you think that the fact of not being a tax payer (since pensions are 0%) would be an issue? or
    would a small 'note' do the trick?
    I know that here in UK if you are not a tax payer you have no tax I/D and no tax code.
    Sorry to be a pain, but it's worth quite a lot to me
    Micawber, Feb 25, 2011
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  4. oss
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    oss Somewhere Staff Member

    No the point is you could be a taxpayer, I doubt if Ana has ever paid tax in her life, she's never earned enough to pay tax or worked for an employer who had to :)

    She just needed it because our lawyer at the time said she needed all these Id's, we didn't, but it's been useful her having it.
    oss, Feb 25, 2011
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  5. Micawber
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    Micawber Renowned Lifetime Member

    Thanks again oss. That really answers my question and make me feel so much better.
    So glad you took the time.
    Cheers
    Micawber, Feb 25, 2011
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  6. oss
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    oss Somewhere Staff Member

    Nae problem sir, if I actually know something I will always chip in :)
    oss, Feb 25, 2011
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  7. KeithAngel
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    KeithAngel 2063 Lifetime Member

    To be a "potential taxpayer" you will also need to be a resident so 13a would probably be your route also the 0% is only applied I believe to your state pension and not private pensions:like:
    KeithAngel, Feb 27, 2011
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  8. oss
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    oss Somewhere Staff Member

    Yep good to make that point explicitly, I took it as implied.

    Interesting about private pension, mine will never pay out much but you are saying that if I left the UK and had arranged for my annuity to be paid into a foreign bank account I will still have to fill in a UK tax return and possibly a Philippine tax return?

    How about if I arranged for my annuity payments to be paid into a UK account and took it out at a cash machine in the Phils how they gonna know :D (in the Phils that is)
    oss, Feb 27, 2011
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  9. Micawber
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    Micawber Renowned Lifetime Member

    Keith, sorry to disagree. This double taxation does apply to private pensions. The only pensions that are not included are 'government pensions' .
    This would include Civil Service pensions, most NHS pensions, Fire and most teachers etc
    Here are the details:-
    http://www.hmrc.gov.uk/manuals/intmanual/INTM343040.htm
    Micawber, Feb 27, 2011
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  10. oss
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    oss Somewhere Staff Member

    Ah also interesting.

    My personal pensions will never pay much more than 9 grand a year in todays money and I would like to take it earlier rather than later so it will be even less and unlikely to be taxed in the UK by the time I get it as they have stated they want to up the personal allowance over the next few years, but I am still interested in the subject.
    oss, Feb 27, 2011
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  11. Micawber
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    Micawber Renowned Lifetime Member

    oss will you have a state pension ?? or any other UK sourced income (income also means interest earned on savings/investments )?
    Micawber, Feb 27, 2011
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  12. oss
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    oss Somewhere Staff Member

    Oh yeah, I will, full pension qualified already but I have to wait for that till I'm 66 due to the recent rule change in which the government took a years pension and an years taxation from me, retirement is a long way off at the moment 14 years :D

    I would prefer to retire earlier and have a few small businesses over there maybe photography, sari sari store and possibly doing some online contract programming (my current profession).

    Question will they pay a married man's pension if I am already oversea's and married when I reach pension age? (under current rules)
    Last edited: Feb 27, 2011
    oss, Feb 27, 2011
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  13. Micawber
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    Micawber Renowned Lifetime Member

    oss, double taxation agreements and TIN with BIR WILL then become important. I base this on the fact that personal allowances will not cover all your income. When the time comes you will probably need to 'juggle' incomes to determine which income you want you UK personal allowance against and which incomes to be 'taxed' in Phils. Can't answer that until the time comes.

    oss, as I understand the 'rules' (today) if you are married you will receive that pension payment in Philippines.
    But.................................I am only 90% sure so I'd better check it.
    Additionally, and most importantly, the pension WILL be uplifted annually in line with inflation (today) or in line with the increase in earnings index (future??) . So better than the poor blighters in Oz, Canada etc.
    Micawber, Feb 27, 2011
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  14. Micawber
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    Micawber Renowned Lifetime Member

    oss, OK I doubled checked state pension and married couple allowance.
    Basically both of you are treated as individuals so will each get a Basic State Pension (BSP) based on your own records.
    Single person - £97.65 per week (£102.15 per week from 6 April 2011)

    The married couple's pension is designed to help those where one of you has a reduced BSP either because they have not worked or because they have paid reduced NI contributions. But you must both be of eligible pension age to qualify. Also one spouse may claim individual pension based on the NI contributions paid by the other. (you need to check at the time)
    Married Couple - £156.15 per week (£163.35 per week from 6 April 2011)

    Hope this resolves your concerns and helps
    Micawber, Feb 27, 2011
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  15. oss
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    oss Somewhere Staff Member

    Yep that's what I thought I had a good look round myself too. :) Definitely helps Micawber always good to have someone else confirm one's interpretation of online info!

    It'll all have changed by the time I get to retire anyway :)

    This discussion caused me to take another look at Philippine tax law.

    The basic rates are as follows

    0
    10,000 5% 500
    30,000 10% 2000
    70,000 15% 6000
    140,000 20% 14000
    250,000 25% 27500
    500,000 30% 75000
    125000 peso on first 500,000 taxable income per annum

    so 25% on the first half million peso a year and 32% on everything above that.

    It's actually quite steep, last time I looked into this I thought the charges were much lower than this.

    I won't be able to even consider it for at least 8 years and I would be taking personal pensions first, I have an occupational one (final salary) that kicks in aged 63 again pretty small, maybe just 1300 quid a year.

    So I would expect to be able to get my personal pensions with little or no taxation in the UK under my personal allowance, then I would just be paying tax on any business I conducted in the Phils, a lot of which would be cash work anyway, upon turning 66 there would be a handy bonus from the UK state pension.

    All sounds like a great plan except that personally I have a feeling the exchange rate will be more like 30 peso to the pound by then and another 10 years of 6% inflation in the Phils will have erased the cost benefit they have over the UK. :(
    oss, Feb 27, 2011
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  16. oss
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    oss Somewhere Staff Member

    Interesting talking about pensions, I met this old gent one night, round the corner from where Ana grew up in Paranaque, during my last visit in early January. He's a Scot who lived and worked in Australia for many years, he settled in the Phils 4 years ago. It was a delight to meet a fellow Scot over there :)

    He's 71 I think and living on a mixture of British Australian and personal pensions, Sammy doesn't have much but he is very very happy man, he's on less than 500,000 peso a year but he manages and is actually building a new house in Bicol at the same time :)

    [​IMG]
    oss, Feb 27, 2011
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  17. Micawber
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    Micawber Renowned Lifetime Member

    Nice information oss. Thanks for that.
    Oh! how I hope and pray that the exchange rates will not be like that. Personally, I think something highly dramatic would need to happen to both UK and Philippine
    economy to create a purchasing power gap that would reflect a 'relative' P30 to a Pound. That would be a massive shift in inflation/deflation and per capita GDP

    This might be interesting for you:-


    Yearly Average
    Year Peso US Dollar Euro
    2010 75.19 1.55 1.18
    2009 74.53 1.56 1.12
    2008 81.97 1.85 1.26
    2007 92.16 2.00 1.46
    2006 94.50 1.84 1.46
    2005 100.08 1.82 1.46
    2004 102.91 1.83 1.47
    2003 88.73 1.63 1.45
    2002 77.71 1.50 1.59
    2001 73.32 1.44 1.61
    2000 66.99 1.52 1.64
    1999 62.10 1.62 1.52
    1998 67.80 1.66 1.47
    1997 48.66 1.64 1.42
    1996 40.94 1.56
    1995 40.62 1.58
    1994 40.44 1.53
    1993 39.46 1.50
    1992 43.25 1.76
    1991 46.72 1.77
    1990 41.98 1.78

    Source:-
    http://www.hmrc.gov.uk/exrate/philippines.htm
    http://www.hmrc.gov.uk/exrate/usa.htm
    http://www.hmrc.gov.uk/exrate/european-union.htm
    Micawber, Feb 27, 2011
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  18. Micawber
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    Micawber Renowned Lifetime Member

    Nice pic oss, thanks for sharing.
    See, there's hope for us all.

    The funny thing oss, is that you can live very very cheaply wherever you if your organised and discipline, just as long as you can meet your needs and still
    remain happy with your lot. That's the key, to be happy/satisfied/content. (Oh and healthy)

    P500,000 pa is not so bad. That's about P42000 (£600) (USD970) per month so not really such a tiny amount for one person to live on fairly well.

    As you know a pensioner here in UK is generally not getting that amount without significant pension credits and other benefits kicking in.

    But..... having said all that 'good stuff', personally I would rather hope for more for myself. Maybe my needs are more or maybe just my my expectations, or maybe dreams.
    Lucky for him he seems to be still in in good health!! eh?

    Hope I will be like that when I'm 70 odd . More power to him.
    Micawber, Feb 27, 2011
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  19. oss
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    oss Somewhere Staff Member

    Yep it is but I knew it already, 2004 to 2010 are particularly relevant to me as they were the years I personally financially experienced and as you can see it was all downhill, at one point I was getting 106 peso to the pound in 2005.

    Personally I think there are hidden problems in the UK and lots of them at that, I hope I am wrong but even if I am there is a re-balancing of international currencies in progress and if we get any more quantitative easing QE then the currency will correspondingly continue to go down the drain.

    Replying to your next post here as well, yeah Sammy is only on a couple of grand a year more than basic UK pension, as he said to me he blew a lot in earlier years perhaps foolishly and he has no savings but he is happy, has a nice place and has good company, I am looking forward to visiting him again next time I am over there.

    I'd be happy on 7 grand UK a year (retired in the phils) right now but it's not going to happen :D and yes I think I would prefer more but I am also a realist and I am not sure that the world economy will even be able to support my current dreams by the time I reach that age.
    oss, Feb 28, 2011
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  20. robbol
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    robbol New Member

    NHS PENSION double taxation agreement

    Hi Micawber, I came across your comment here and I had remembered talking to a retired Brit In Turkey who had NHS pension and he told me he was on zero tax, I did some research and I think he is correct .NHS pensions are not classed as Goverment pensions and Turkey don't tax pensions so he is eligible for the zero tax. I enclose link for you to look at.
    http://www.hmrc.gov.uk/cnr/uk_gov_pensions.htm
    robbol, Oct 23, 2011
    #20
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