Many German pensioners living in the South Cariboo – and Canada – are unhappy about receiving tax notices from their motherland billing them for back taxes to 2005.
Anke Zucchelli, an accounting technician with PMT Chartered Accountants, says this is leading many to seek tax advice in Canada, but others are paying it without question – some of them out of fright.
The “bureaucratic language” in the tax letter is overwhelming for most people affected, she says, adding many of whom are in relatively low-income brackets.
As Zucchelli speaks German and is well-versed in the country’s tax laws, PMT is getting dozens of requests for help from across the province, she adds.
“I probably have one or two new people a week coming forward right now who are not former clients, but have received a letter.”
Jörg Heizmann of Canim Lake says he was dismayed to suddenly receive 2005/06 tax bills in early December 2012, as well as a notice of more to follow for 2007-2011.
“Since we are here in Canada, we always submitted our pension amount to income tax, and if there was something to pay on it, then we paid it.”
Heizmann notes he only worked nine years in Germany, so that pension is small, but the tax rate is “quite high” in that country.
“I'm going to be paying nearly 200 Euros [$260 a year], and that's quite a bit.”
He explains Germany and Canada have a tax agreement to avoid double-taxation, so it's “not fair” to have to pay again, when he's already paid Canadian taxes for the German pension income.
Heizmann also receives Old Age Security income in Canada, but notes that is taxed at a much
smaller percentage than the bills from Germany.
Zucchelli explains the double taxation agreement Germany has with foreign countries includes the right for the pension-generating country to administer the taxation, but it also ensures the foreign country credits that back.
The German foreign tax laws were changed and took effect in 2005, but she says it's taken the tax officials in that country until about two years ago to even begin to “catch up” with foreign pensioners.
Now, more and more retired Germans living in Canada are getting these tax bills, and Zucchelli notes they don't have the tax exemptions that are available here.
“Their overall income might not be that high, and once they have their personal exemption, their medical claim and all that, they don't owe taxes to the Canadian government.”
This means for those pensioners – and Heizmann is likely one of them – the credit won't help them recoup the German taxes they must now pay, Zucchelli notes.
“Some times they get a little bit back ... but they don't tend to get 100 per cent.”
However, she says there is hope for many pensioners affected by the new tax laws.
People with a slightly higher pension income in Canada and a lower one from Germany may benefit from the credit, Zucchelli explains.
It's important to note those with a low income can apply to the German government for tax relief, she says, adding a letter of objection must be sent within two months of the date on the tax letter.
Any future tax notices can be disputed once they arrive, and Zucchelli notes PMT has helped clients, who immediately paid the taxes, argue successfully and get some of that money back.
She encourages all affected pensioners to look at the numbers, and if it seems worth the cost, consult an accountant with expertise in German tax laws, even if the deadline is past.
Pensioners who have some tax knowledge themselves or don't have much money involved should still consider disputing the taxation, Zuchelli adds, especially if they can prove a low income.