Summary
A recent Belgian tax ruling confirms that pension benefits paid under the UK Universities Superannuation Scheme can qualify as private-sector pension income rather than government pension income. This distinction determines which country may tax the pension (Decision of 31 March 2026, Nr. 2026.0106).
Background
The taxpayer was a Belgian tax resident with both Belgian and British nationality. He had previously worked as an employee of Queen Mary University of London and accrued pension rights under the Universities Superannuation Scheme (hereafter ‘USS’).
USS is a UK-registered occupational pension scheme funded through both employer and employee contributions. Benefits may be paid as periodic pension payments or as a lump-sum capital payment.
The main question was whether the USS pension had to be treated as a government pension under Article 19 of the Belgium–UK tax treaty or as an ordinary (private) employment pension under Article 18 DTA.
Public university but not government service
Queen Mary University of London is a public university, but it operates as an independent university and non-profit organisation.
According to the facts submitted to the Belgian Ruling Office, the university was mainly financed through private income, including student fees, while government funding represented only a limited part of its resources.
The Ruling Office therefore accepted that the employment could not be treated as government service merely because the former employer was a public university.
The relevant factors were that the:
- university did not act as a government body for treaty purposes
- pension rights arose from an ordinary employment relationship and
- institution was not predominantly financed by public funds.
Article 19 UK-BE DTA was therefore not applicable according to the Belgian tax authorities.
Taxation under Article 18 DTA
The Ruling Office concluded that both the periodic USS pension payments and the lump-sum payment qualify as pensions or similar remuneration under Article 18 of the Belgium–UK tax treaty.
Under the wording of that provision, pensions arising in one contracting state and paid to a resident of the other state are taxable only in the state from which they arise (source state principle). The UK was therefore entitled to tax the USS pension.
This source-state taxation is based on the principle that the taxing right should remain with the state responsible for paying the pension. It is, however, not entirely clear why private pension funds should be treated differently in this respect, since private pensions are generally taxable in the beneficiary’s country of residence. The Belgium–UK tax treaty is an exception to this general rule, since it generally allocates (since 2013) the taxing right over private pensions to the state from which the pension arises.
Belgium must exempt the pension, while retaining the right to take the exempt income into account when determining the tax rate applicable to the taxpayer’s other Belgian taxable income. This is the ‘exemption-with-progression’ method.
The taxpayer’s dual nationality did not affect the outcome because Article 19 DTA was found not to apply. Nationality may, however, become decisive where a pension does qualify as government-service remuneration.
Article 18 versus Article 19 DTA
The distinction between Articles 18 and 19 of the UK-BE tax treaty is important.
Article 18 generally applies to pensions arising from private employment. Article 19 applies to pensions connected with services performed for a state or certain public authorities.
The fact that a pension is paid by a public institution, government-related body or publicly established pension fund is not sufficient by itself to classify it as a government pension.
The decisive question is the nature of the former employment and the services for which the pension rights were accrued. Relevant factors include:
- legal status of the former employer
- degree of government control
- source of the employer’s funding
- legal nature of the employment relationship
- activities performed by the employee and
- whether the services were performed on behalf of the government.
A pension arising from an ordinary private-law employment relationship may therefore fall under Article 18 DTA even where the employer has a public character.
No separate treaty provision for UK social security benefits
The Belgium–UK tax treaty does not contain a specific provision dealing separately with social security benefits.
This can create confusion, particularly for statutory state pensions. The Belgian tax authorities (mainly when it concerns Belgian state pension) often take the position that a pension funded or paid by a government body or public authority must automatically fall under the government-service article. That interpretation is incorrect.
A statutory state pension may have been accrued during private-sector employment and may be paid under a general social security system. The mere fact that the pension is administered, funded or paid by a government body does not mean that it was earned in respect of government service.
The relevant distinction remains whether the pension relates to services performed for the government. The identity of the payer or administrator is not decisive on its own.
In practice, this is a recurring issue during Belgian tax audits. State pensions are often incorrectly classified as government pensions solely because they are paid by a public authority. This can lead to an incorrect allocation of taxing rights.
Nature of the former employment
Belgian and international case law generally focus on the services performed during the employment rather than solely on the identity of the pension payer.
Government-pension provisions may apply where the factual circumstances show that the services were effectively performed for and on behalf of the government, even where the formal employer was a separate legal entity.
Conversely, pensions accrued through genuine private-sector employment should not be classified as government pensions merely because they are paid by a public fund or government body.
This distinction is particularly relevant for:
- university pensions
- statutory state pensions
- pensions paid by public pension agencies
- pensions from publicly funded institutions and
- pensions transferred between public and private schemes.
Pension transfers and mixed careers
The classification may become even more complex where pension rights were accrued through both public and private employment or were transferred between pension schemes.
A typical example is a teacher who works for part of their career at a public school and later takes up employment with a private school. The pension rights accrued during the public-school employment may fall under the government-service provision, whereas the pension rights accrued during the private-school employment should normally be treated as a private-sector pension.
The analysis should therefore focus on the services in respect of which each part of the pension was accrued. The pension should not automatically be classified solely by reference to the institution or pension fund currently paying it.
Where possible, the pension should be divided between the relevant employment periods, taking into account the nature of the employer and the services performed during each period.
Practical implications
Pensions paid to Belgian residents following employment at a foreign university or other publicly connected institution should not automatically be treated as government pensions.
The same applies to statutory state pensions paid by a government body. Payment by a public authority does not, by itself, bring the pension within the government-service article.
A proper treaty analysis should consider whether the:
- former employer forms part of the government for treaty purposes
- institution is legally and financially independent
- employment was governed by public or private law
- services were performed on behalf of the government
- pension arose under a general social security system and
- treaty contains a separate provision for social security benefits.
For USS pensions arising from employment with an independent UK university such as Queen Mary University of London, the Belgian Ruling Office has thus accepted that Article 18 DTA applies. The pension is therefore taxable in the UK, while Belgium must grant an exemption with progression and only apply the municipal tax.
The ruling also confirms a broader principle: the tax treatment of a pension depends primarily on the nature of the underlying employment, not simply on the public or private status of the pension payer.