UK Pensions

    I will be eligible for my first UK pension payment at the end of February.
I've not had any Bulgarian income and don't think I ever will.
Will Bulgaria want to tax my pension here?
And do I need to declare (in Bulgaria) all my pension incomes in future?
(I have a drawdown personal pension but haven't taken anything since being here in Feb 2023, but I do want to take some to max out the £12570 UK personal tax allowance before end of March 2023)

Do UK citizens consider themselves resident in the UK for tax purposes solely on the basis of receiving a UK pension?
I've read the UK Bulgaria DTC (Dual Tax Convention).
I don't qualify as "resident for  UK tax purposes" under the 183 day rule.

Facts and references preffered over opinions!
   

    -@Erm1ntrude

If you retire in Bulgaria, you can claim: your UK State Pension or new State Pension. Contact the International Pension Centre for further information. pensions if you've worked in Bulgaria (in Bulgarian).

@Erm1ntrude

I'm in France, but my pensions are taxed at source, in the UK. One of them is a government pension, where the tax has to be paid to the UK, so I've never bothered to change any of them. I've been told that pensioners in Bulgaria, including UK ones, don't pay tax at all, but don't quote me on that, it's only what I've been told. If that's the case then you can choose to declare your income to Bulgaria and inform the UK tax office of that. If that's not correct, then you have to calculate how you'd be best off. Would it be cheaper to pay a flat 10% on everything, or make use of the  £12570 personal allowance. 🤔

As far as I'm aware you pay tax on any UK investments, I dont pay Bulgarian tax but am classified by HMRC as non resident in the UK and still pay tax at source on my drawdown and military pensions above  the UK standard tax allowance.

@grumpyoldbird

thanks, yes the spreadsheet is being dusted off as I type! but Graham's reply gives me confidence

@Erm1ntrude

You can choose to keep the tax payments in the UK. When I moved to France everyone told me I'd have to pay tax to France, but HMRC know where I live and it's never been a problem. When I complete my French tax return, I just show my pensions and the amount of tax I've paid.

@Erm1ntrude

Bulgaria would only tax your income if you transferred your tax affairs there ... In other words full expat..  UK and Bulgaria have a tax agreement

@Erm1ntrude

Have you got children in the UK

@philip Mckay

many!

my rabbit hole trip started when trying to shift my personal pension to a SIPP, requiring me to be UK resident, or resident in the UK for tax purposes and not being able to match available classifications of status with reality... and then each answer posed 2 further questions

I informed HMRC that I am here, so think I'm ok on the pension income side

thanks everyone for your replies...

@Erm1ntrude,, best to check with Philip Mckay on here,he knows his stuff, I believe UK and BG have a tax agreement ,not sure if that means its split between them? But all BG income is taxed at 10%  I think it will depend on your residency status ? BG doesn't have a tax allowance threshold.

The reason I asked about children is that there is a government list of whether your considered to be a expat...

If you have children then it's your permanent link to the UK unless you actually transfer your tax affairs to Bulgaria which is not a wise move if your like your tax free allowance 🙂

If you spend more than 183 days (the "substantial presence" test) in a country, you become liable to tax in that country. If you live in Bulgaria you should therefore be declaring your income and paying the appropriate tax. Just because the Bulgarian tax authorities haven't asked you, doesn't mean it's not so. :-)

Whether you are ONLY tax resident in that new country (e.g. Bulgaria) depends on your tax status in your previous country, and how difficult it is to exit the country.

If you're an American leaving America, it makes no difference as you retain USA tax residence (or at least tax-paying obligation) by virtue of citizenship/passport. Hence Americans living abroad are typically have tax residence in 2 countries (country of citizenship, country of residence).

Brits can typically leave the UK, go abroad, and they leave the UK tax residence (from the end of the current tax year, I believe). But with exceptions. I don't know about wives/children (living in the country), but Spain certainly has a rule like this. The UK has a rule on property, so if you currently own a house in UK, and keep it... then you remain a UK tax resident. In which case, you'd also have tax residence in both UK/Bulgaria.

Hi

Regarding your tax residency:

You are tax resident in Bulgaria because (not sure but I assume):

1/ You spent more than 183 days in Bulgaria

2/ You have permanent address in Bulgaria and eventually (but not obligatory) own property

3/ You "viral interest" are in Bulgaria - for example your husband lives in Bulgaria as well

So you are fully covering the criteria for "local person" for tax purposes in BG, however because of source of income from the UK and the Tax treaty between UK and BG you are tax liable in the UK as well.

Regarding your income:

Pension income: it is under taxation in the UK (art. 17 of the Tax treaty between UK and BG). No tax is due in Bulgaria (free of tax as per art.13 of the Bulgarian Law for the taxes of individuals)

USA has agreement with Bulgaria for avoiding double taxation

I plan to pay only US tax

If you are American there must be a form to fill in Bulgaria stating that fact

@Hristo Marinov

many thanks

@Erm1nt

uk state pension taxed only in uk even if transfered to bg bank

@geoffreywebb21

Are you sure?

@Hristo Marinov

That seems to be a misreading of Article 17 and 18.

My reading of it suggests that a Government (Civil Service) pension would be paid to the recipient net of tax, and would not be subject to further tax in Bulgaria.

Whereas a private pension or state pension would most likely be paid gross, and therefore would be subject to taxation in Bulgaria.

Certainly that's the situation with my teacher friend in Plovdiv. His teacher's pension is paid net, and his state pension is paid gross. He doesn't pay Bulgarian tax on either, but that is (I suspect) because he doesn't bother to fill in a tax return for the Bulgarian tax authorities. And he probably thinks that if it's been fine for 7 years, it will be fine in the future. Fingers crossed, eh? :-)

@gwynj The Pensions are free of tax (state or private):  art.13 of the Bulgarian Law for the taxes of individuals. The "free of taxation" income is not to be declared. Me as accountant confirm: Bulgarian governament is not taxing the pensions no matter state or private, from BG or elsewhere (and never did, hopefully will never do).

@grumpyoldbird

hi if unsure read .gov site pensions abroad

@Hristo Marinov

thats correct we dont pay tax on our pensions

@geoffreywebb21, All

Fantastic Forum, wealth of knowledge, so I finally decided to join in.

Regarding pensions, it is still not clear to me. According to the double taxation agreement, UK private pension would be taxed in BG, but IF BG is NOT taxing it (which seems to be the case), then it would be subject to tax in the UK.

I understand that if BG taxed it at 1% then UK would not tax it at all, but if BG makes private pension tax exempt, the UK has the right to tax it as income. There might even be a difference between 0% and exempt (as with VAT rules), in which case 0% would make the pension taxable in BG, albeit at zero rate, while UK would no longer be able to tax it.

This might be further complicated, as the agreement specifies that lump sums are always taxed in the UK, while income from pension - in BG. But what is the difference between lump sum and income in a flexi drawdown pension? Would it be about fixed amount each month? What if the fixed amount is £10,000 a month, wouldn't this just be a series of fixed lump sums?

In any case, a EU resident (national) would still have the £12k tax free allowance in the UK, but what happens if the "income" pension is much higher?

Interestingly, in Slovakia double taxation agreement there is no clause that says that UK would tax private pensions that are NOT taxed in Slovakia, and Slovakia also has the "Exempt, Exempt, Exempt" pension taxation policy. This seems to unique to BG..