Non-Resident Pensioners

The Isle of Man has recently negotiated a number of taxation agreements which have affected the way in which pensions paid by one country to a resident of the country, are taxed.

Many of the new agreements provide that the Isle of Man can continue to tax pensions paid to a non-resident (i.e. there is no change to the current position) but some of the agreements provide that pensions should only be taxed in the recipient’s country of residence. This means that instead of having Isle of Man income tax deducted from the pension, the recipient can claim to have their pension paid gross.

Non-residents in receipt of an Isle of Man pension, who are resident in a country that the Isle of Man has a taxation agreement with, should refer to the text of the agreement to understand how they may be affected. For full details of all the agreements that have been negotiated and/or signed see International Agreements.

A Practice Note has also been published, explaining the process for making a claim for an Isle of Man pension to be paid without the deduction of tax at source.

Please complete the claim form in order to apply for gross payment of an Isle of Man pension.

The UK agreement includes the following provision: 'Pensions and other similar remuneration paid to an individual who is resident of one of the territories shall be taxable only in that territory'.

This means that Isle of Man occupational pensions set up by private employers, personal pensions and group personal pensions paid to UK residents will be taxable only in the UK.

This provision also applies to pensions paid by the Isle of Man government to individuals who are resident and ordinarily resident in the UK.

Individuals should complete the claim form and submit it to HMRC in the first instance in order for UK residency to be confirmed. The completed form should then be submitted to the Isle of Man Income Tax Division. If the claim is successful then future pension payments will be made without the deduction of Isle of Man income tax and any tax deducted since 6 April 2009 will be refunded in due course.

The agreement with Ireland provides the general rule that pensions paid 'in consideration of past employment' are taxable only in the country of residence. This means that Isle of Man occupational pensions paid to Irish residents are now taxable only in the Ireland.

Private pensions are unaffected by the agreement as they are not paid 'in consideration of past employment. This general rule does not normally apply to pensions paid by governments or local authorities. Pensions paid by the Isle of Man government to an Irish resident remain taxable in Isle of Man; but in most cases will no longer also be taxable in Ireland.

Individuals in receipt of an occupational pension from the Isle of Man should complete the claim form and submit it to the Irish Revenue Commissioners in the first instance in order for Irish residency to be confirmed. The completed form should then be submitted to the Isle of Man Income Tax Division. If the claim is successful then future pension payments will be made without the deduction of Isle of Man income tax and any tax deducted since 6 April 2009 will be refunded in due course.