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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15979
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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NZ armed Forces pensions have what is called a 'Free of tax

Customer Question

NZ armed Forces pensions have what is called a 'Free of tax reduction' (approx 17%) so that the amount actually recieved is Income Tax free. I have recieved this pension for over 20 years as a Married Man and paid Income Tax accordingly.Last year was my first return as a Widower and I am now informed that the NZ Reduction is not a tax and that the Pension that I recieve is subject to full UK taxation, in other words Taxed twice. I am now resident in the UK after 30Years and my sole Income is made up of the UK OAP the the NZ Pension in question.
Question, Is this double tax on my NZ Armed Forces Pension correct?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi. According to Article 19 of the UK/New Zealand double tax treaty which you can read here, your NZ pension should only be taxed in the country in which you are tax resident. If you are resident in the UK, then it will be taxable in the UK, not New Zealand. If the 17% deduction deducted by the New Zealand pension payer is tax, then you should claim it back by contacting the NZ tax office and asking them to send you the appropriate forms and to tell the pension payer to stop deducting tax. Failing that, it will be deductible from your UK tax liability on the NZ pension to avoid double taxation. However, as I said at the start, the tax treaty says your pension should be taxable in the country you live in so there should be no need to offset. I hope this helps but let me know if you have any further questions.