Taxation of UK pensions in Belgium
As a Belgian resident I am taxed in Belgium on my world-wide income, which includes, from 2016, a UK pension.
In summary, the Protocol on Bel/UK taxation of income and pensions (1990) Article 18 Pensions says: Any pension paid to a resident of a Contracting State shall be taxable only in that State. In the case of Belgium, where a resident of Belgium derives a pension which may be taxed in the United Kingdom, Belgium shall exempt such income from tax but may, in calculating the amount of the tax on the remaining income, apply the rate of tax which would have been applicable if the UK pension had not been exempted.
In my case this has meant that although my UK pension has been "exempted" from tax, I am being asked to pay a higher tax on the rest of my income in Belgium.
That is to say, excluding the UK pension the tax on my Belgian pension would have been 6.6%. But when the UK pension is added to my income the tax I have to pay rises to 13.6%. This represents a more than double increase in income tax. Effectively it means that The Belgian State is taxing my UK pension at nearly 30% (i.e. if the amount of extra tax is expressed as a percentage of my UK pension).
My conclusion is that in this situation The Belgian State is circumventing the protocol and is effectively invalidating the objective of the protocol, which is to avoid double taxation.
I should like to learn if there is any action open to me to contest the amount of tax I am being asked to pay.
Has anyone reading this found themselves in a similar situation and what if any action have they taken?