Capital gains from foreign stocks and taxes

    I've been going back and forth whether to retire in the Philippines or Thailand and with the new Thai tax law I'm back to thinking Philippines is a better deal.
I live in Denmark which has a tax treaty with Philippines. This means that all pension income will be taxed in Denmark, and there's nothing I can do about that.

I am however a bit confused on how the situation is with my investments. If I have a considerable sum invested in the stock market, e.g., MSCI ETF etc. in an international bank, will I need to pay taxes on gains that I transfer to the Philippines for living?

I intend to live full time away from Denmark and will therefore no longer be considered a tax resident there.

Thanks, Jon

I do not know how Denmark will tax your capital gains once you are no longer resident there. However, there is no Philippine tax on money which are from foreign gains, transferred from your bank in Denmark to the Philippines (bank to bank, ATM, Zoom, Remitly, Wise whatever).  But if you trade real estate or commodities realizing cap gains here in the PI, you pay the tax regardless of your situation in Denmark. Actually, Phils will require that you first pay cap gains tax in full here, then, if Denmark gives you foreign tax credits to avoid double taxation (great), the Philippines will still get 100% of cap gains taxes owed.

Jon,

My recommendation is that you get a copy and read the document (Tax Treaty) first.

I suspect, but I am not sure, that it follows the UN template. Somewhere around art. 18/19, you can find the agreement about pensions.

I would think that, similar to other EU countries, Denmark will only tax state pensions and not other pension income.

Then, there is a difference between income and wealth. The same treaty defines both.

The BIR website is quite understandable. If I remember well there are several paragraphs for resident foreigners.

Remittances to the Philippines are not taxed. The source may be taxable as is the wealth. Be aware of bank charges, unless you use HSBC or plan to use Wise.

Thank you both for your replies.

Both my private pension (which is kind of mandatory in Denmark), and government, will be taxed in Denmark as far as I know.

I will have a look at the treaty.

There are 41 countries that hold tax treaties with the Philippines and Denmark is one the same as my country Australia.

I keep my tax residency in Australia and pay taxes accordingly, I simply transfer cash from my banks in Oz to our Philippines accounts and not taxable.

I deal with my accountant online and he does all our taxes in Australia.

Cheers, Steve.

I've been studying this quite closely because I have an extensive amount of savings here in the UK which is not too different from Denmark.

When I'm not sure I'm following, is that if OP generates capital gains from revenue sources that are based in Denmark and taxed in Denmark under a tax 3D agreement with Thailand, Then the money he repatriates back to Thailand that has already been taxed will not be dual taxed ,as far as I understand it

This is, after all,  the whole point of taxation agreements ,meaning that he will get credit for his existing tax in Denmark which is likely much higher than Thailand ,and therefore will be already taxed by the time it is used  in Thailand.

I am however not a tax specialist and would not mind being corrected.

Denmark

Article 18

PENSIONS AND SIMILAR PAYMENTS

1. Subject to the provisions of paragraph 2 of Article 19 (Government Service).

pensions and other similar remuneration paid to a resident of a Contracting State in

consideration of past employment shall be taxable only in that State.

2. Notwithstanding the provisions of paragraph 1, payments received by an

individual, being a resident of a Contracting State, under the social security

legislation of the other Contracting State shall be taxable only in that other State

3. Notwithstanding paragraph 1 of this Article, neither of the Contracting States shall

be deprived of the right to tax its own citizens

    There are 41 countries that hold tax treaties with the Philippines and Denmark is one the same as my country Australia.
I keep my tax residency in Australia and pay taxes accordingly, I simply transfer cash from my banks in Oz to our Philippines accounts and not taxable.
I deal with my accountant online and he does all our taxes in Australia.
Cheers, Steve.
   

    -@bigpearl

Thank you Steve. I am pretty sure that if I spend more than 183 days out of Denmark per year, I am no longer a tax resident there. Also, the taxes in Denmark are insanely high and I would much prefer to pay tax in Philippines if required. How much is the tax on gains from e.g. sale of stocks?

@emvaningen

I'm not really that worried about the tax on pension as it is mostly clear to me and I cannot change anything about it. What I cannot understand fully is the tax rules when it comes to selling stocks. My plan is to deposit an amount into index as e.g. MSCI and leave it for up to 10 years. By that time it will hopefully have grown considerably and the question is therefore... where will the gains be taxed, and at what rate?

    @emvaningenI'm not really that worried about the tax on pension as it is mostly clear to me and I cannot change anything about it. What I cannot understand fully is the tax rules when it comes to selling stocks. My plan is to deposit an amount into index as e.g. MSCI and leave it for up to 10 years. By that time it will hopefully have grown considerably and the question is therefore... where will the gains be taxed, and at what rate?        -@JonSt

I'm assuming that you are still working in Denmark. If so like most countries you receive tax relief on pension contributions. Here in the UK you get basic tax relief of 20% plus another 20% for higher earners. Naturally the income from the pension once you start to take it is taxable but NOT the capital gains while it remains in that pension wrapper. By investing in MSCI (Morgan Stanley) or ETF's (exchange traded funds) directly you then become liable to CGT.

I don't dabble in the stock market  because every time I place (for example) £30K into my private pension I immediately receive from His Majesty's  govt (as a higher rate tax payer) £11,746. So the 30K contribution effectively only costs me £18,254. A no brainer.

@Lotus Eater

Thank you for the reply.

As mentioned above, I'm not in doubt how the taxation on the pension works.

I'm currently 52 and plan on retiring at 53-54. The can initiate payment from the private pension I have at 60 which I will do as the government pension (activates at 69) will be reduced if I'm receiving payment from the private pension at the same time. The private pension pays monthly for 10 years. I am already getting the maximum tax relief that you mention and therefore it makes no sense to put extra money in there. I invest in stock instead.

I understand. Curious as to how the Danish system works. So like Australia any additional income affects your state pension entitlement? When you say the private pension pays monthly for 10 years what do you mean by this? The state pension age for Brits currently stands at 66 going up to 67 by 2028. I thought we had it bad! Our American friends can retire early at 62 and they still get a higher state pension than Brits at 66

Let me get this right.  Investments that you currently have outside of your pension will naturally be taxed in Denmark while you are resident there whether onshore or offshore. The example you give is proposed investments  with an international bank. Upon taking up residency in the Philippines your income will be coming from the Denmark pension and this International (offshore?)bank. You are clear from Danish tax liability as stated so the question is how does the Philippine tax authority differentiate the source of this income from pension and on going private investments that would be subject to CGT in Denmark? Is this 'international' bank in a location that has a tax treaty with the Philippine govt?

@Lotus Eater

Yes, more or less any income after you retire and receive state pension will affect it.

The private pension (which in a way is mandatory) will give me monthly payments over a period of 10 years. There is also a small portion of it that is life long.

The age for me is 69, for younger people it is up to 70 now i believe. They want you work until you're dead.

This "international bank" (Saxo bank) is just an investment platform that I currently use and intend to continue to use. I believe they will require me to provide a TIN number and my address. I don't think one can say that the bank or its location has a treaty with Denmark and I would therefore expect to taxed in accordance with the country I will be living in, be it Philippines or Thailand.

PWC says this:

https://taxsummaries.pwc.com/philippine … nal-income

@emvaningen

As far as I understand from this, there is no tax on income/gain from stock unless it's domestic.

• That is what I read as well. You need an expert to verify this.
• Same for my previous post, where i see that there is no tax levied by Denmark on pensions from past employment.
• SAXO is in a process of closing all accounts of clients that are Philippine residents.

@JohnSt

It's somewhat sad that the retirement age keeps getting pushed up all the time, From memory when I first started working near 50 years ago it was 62 to avail a pension, somewhere along the line it went to 65 and recently 67 and if you work hard and make a few bucks you won't get a pension as it's means tested based on assets and wealth so for me 45 years paying tax amounts to nada. They keep moving the goal posts because no one knows how to run a/any country and I see it all over the globe. Look recently at the riots in France when the government wanted to push the retirement age from 62 to 64,,,,, pandemonium.

Aside who can live on a measly pension these days?

Cheers, Steve.

    SAXO is in a process of closing all accounts of clients that are Philippine residents.
   

    -@emvaningen

Bummer, but I will just find another broker then

@bigpearl

Yeah, it's sad, and true, the government pension is not even in my calculations of having enough money to retire. The tiny bit I will get at some point if I'm still alive, will just be a little bit extra fun money

@JonSt

The private pension (which in a way is mandatory) will give me monthly payments over a period of 10 years. There is also a small portion of it that is life long.

Any government that makes a private pension mandatory these days is ahead of the curve. Denmark has always been an innovator in that and many other regards. That said, unless I've misunderstood, how can they reduce the private pension after 10 years? Private is yours to own surely? Most UK employers by law have to enrol you in a pension but the contributions by both employer and employee are simply not enough to cover you in retirement especially if you are still renting as many Brits are (and more will) come retirement.

Western countries many of which have greying populations are in a dichotomy when it comes to state monetary provision later in life. More pensioners than ever (as a % of the population) who are living longer with fewer working age adults to fund those pensioners which is why as Steve points out the retirement bar is being raised. Inevitably here in the UK means testing for the state pension will eventually come in - good luck to the government of the day that enacts that piece of legislation.

I feel for the vast majority of Filipinos who don't come from the monied classes or are not employed in the state( pension provided) sector especially if they do not have progeny to support them in their twilight years. Their pious belief in the good lord will be truly tested.

@Lotus Eater

It used to be that most companies had a mandatory 15% contribution of ones salary, but now more and more companies, including mine, have made it optional with a minimum of e.g. 3% that covers at least health and life insurance. I do not like the private pension company they use because they are idiots at investing and can't even beat a market index like MSCI. Therefore, I prefer to do my own investing.

The 10 year pension is called installment pension and in my case it is the amount of money I have at the time of retirement, which is then divided over a period of 10 years with monthly payments. The monthly amount can change during the 10 years, depending on how well, or poorly, the investment of that money goes. The state pension is not even a part of my calculations as to when I can afford to retire.

I myself rely much more on a lump sum from selling my property and putting the money into something like this and have it rest for a period of 10 years.

https://ir.msci.com/stock-information/i … calculator

Can I ask where in the Philippines you are living?

@JonSt

Can I ask where in the Philippines you are living?

I'm based in the UK but have been visiting Asia on business and for pleasure since 2001.

    PWC says this:
https://taxsummaries.pwc.com/philippine … nal-income-@emvaningen

This is very interesting when we consider the Youtuber's here, some of whom like Filipina Pea are making good money by Phil standards, perhaps 7M php per year, and foreign Youtubers who are not citizens. From PWC:

The Philippines taxes its resident citizens on their worldwide income. Non-resident citizens and aliens, whether or not resident in the Philippines, are taxed only on income from sources within the Philippines.

So the citizen Youtuber is taxed on Youtube income, even if Google is an American company. It is worldwide income here. But the foreigner like "Every Man has a Story"  on 13A or SRRV is a non-citizen, therefore should not be subject to Philippine BIR on YouTube income here since they are only taxed on income sources within the Philippines. But I wonder if they need to declare super chat income or Patreon donor income in pesos (meaning the money likely comes from within the Philippines).

Lotus Eater said. . . . Any government that makes a private pension mandatory these days is ahead of the curve.

********************

I agree with you on 99% of your post. It use to be 100%, but the above statement reduces it to 99%.

(1) In the US the social security deduction on wages is 12.4%, split in half by employer/employee.

(2) Then there are some programs which people can invest pretax contributions.

(3) Some employers will match up to 5% into some retirement plan.

(4) Then there is profit sharing offered by some employers.

Going pack to #1,if the SS contributions were invested by the individual,they would be MILLIONAIRES over & over.

Unfortunately the curve you are mentioning was created by George Orwell.