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HMRC internal manual

International Manual

From
HM Revenue & Customs
Updated
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Description of double taxation agreements: Pensions

The general rule is that pensions paid in consideration of past employment are only taxable in the country of the recipient’s residence. The same applies to annuities. However, some agreements provide that pensions may be taxed in the country where the pension arises - the source country.

An annuity is defined as a stated sum payable to an individual periodically at stated times during life or during a specified period of time under an obligation to make the payments in return for adequate and full consideration in money or money’s worth.

Some agreements include alimony and other similar payments in the pensions Article and these will also then only be taxable in the country of the recipient’s residence.

Social security and old age pensions are not paid in consideration of past employment and do not, therefore, come within the pensions Article. They are within the other income Article (INTM153240). However, two agreements (Denmark, Finland) provide for sole source state taxation and two others (Luxembourg and Sweden) provide that pensions paid under social security legislation may be taxed by the source country.