Premium Bonds and Steuerpflicht

[kiplette]

Now I know for sure from the old TT that Premium Bonds are taxable in Germany.

On one of the Brit/Germany FB pages, a lady is asking this question and I think I'm the only one who is making this point.

The others are all looking at the Lotto win laws, which allow for wins to be tax free if you are not making a living from them, in which case, that's your income and tax you must pay.

Thing being, Premium Bonds are not tickets you buy to enter a particular draw and win a prize - they are a thing you buy and keep until you sell them, which during your ownership are put in for each draw and may/may not win a prize/prizes. So it's an uncertain investment rather than a fixed-rate investment, but you'll never lose the original capital (except a tenner put on in 1970 is still a tenner now and worth much less, obv.)

Does anyone have an actual 'proof' type thing I can give the lady to show her? She seems to want to do it 'right' which is nice. Also hiding this stuff is pointless these days. 'They' share all this financial info regardless of what we would rather hide

[john_b]

You're quite right, I have always declared my very modest wins from the Premium Bonds down the years. Only have a few these days, hardly worth it TBH. And they are not at all like the Lotto here in D-Land, for the reasons you cite, and also because they are in the UK.

[PandaMunich]

Now I know for sure from the old TT that Premium Bonds are taxable in Germany.

On one of the Brit/Germany FB pages, a lady is asking this question and I think I'm the only one who is making this point.

The others are all looking at the Lotto win laws, which allow for wins to be tax free if you are not making a living from them, in which case, that's your income and tax you must pay.

Thing being, Premium Bonds are not tickets you buy to enter a particular draw and win a prize - they are a thing you buy and keep until you sell them, which during your ownership are put in for each draw and may/may not win a prize/prizes. So it's an uncertain investment rather than a fixed-rate investment, but you'll never lose the original capital (except a tenner put on in 1970 is still a tenner now and worth much less, obv.)

Does anyone have an actual 'proof' type thing I can give the lady to show her? She seems to want to do it 'right' which is nice. Also hiding this stuff is pointless these days. 'They' share all this financial info regardless of what we would rather hide

The proof that "prizes" from Premium Bonds are considered interest by Germany is directly in the double taxation agreement between Germany and the UK, in article 11 (2): https://www.bundesfinanzministerium.de/ ... onFile&v=1

• (2) The term “interest” as used in this Article means income
  from debt-claims of every kind, whether or not secured by mortgage, and whether or not carrying a right to participate in the
  debtor’s profits and in particular, income from government securities and income from bonds or debentures, including premiums
  and prizes attaching to such securities, bonds or debentures

2024-09-05 14_34_16-Bundesgesetzblatt Teil 2 Nr. 33.jpg (141.13 KiB) Viewed 122 times

I have also written about this on my website: https://expertise.tax/en/faq-german-tax ... /#resident

• You have to declare your worldwide financial holdings in your German tax return, this includes investment funds you simply held, i.e. did not sell (since a “fictive” profit called Vorabpauschale is charged, just because you owned investment funds on 31. December), as well as income that you are used to being tax-free back home, like Premium Bond prizes (they are explicitly defined as interest in article 11 (2) of the D/UK DTA), in ISA and SIPP (UK) or from tax-exempt bonds (USA).

[kiplette]

Well thank you, Panda, that is lovely clear.