Pension Taxation Between Ukraine and Algeria
Algeria’s economy is strongly associated with the mining, oil and gas industries, which attract foreign workers seeking employment opportunities. Ukrainians who have worked in Algeria may eventually decide to return to Ukraine after reaching retirement age. In such circumstances, questions concerning pension entitlement and the taxation of pension income become particularly important.
Each country taxes individuals’ income in accordance with its domestic legislation. However, where a person receives income connected with one country while residing in another, there may be a risk of taxation in both jurisdictions. To regulate such situations, states conclude international agreements for the avoidance of double taxation.
On 14 December 2002, Ukraine and the People’s Democratic Republic of Algeria signed a Convention for the Avoidance of Double Taxation with Respect to Taxes on Income and Property and for the Prevention of Fiscal Evasion.
The Convention contains specific provisions governing the taxation of pensions and other similar remuneration connected with a person’s previous employment. These rules determine which of the two states has the right to tax the relevant pension income, taking into account the nature of the payment, its source and the recipient’s tax status.
Separate rules may apply to pensions received in connection with government service. Depending on the circumstances, the right to tax such a pension may be allocated to the state that pays the pension or to the other contracting state where the recipient is resident and, where relevant, a national of that state.
Therefore, a person who has worked in Algeria and later returns to Ukraine should distinguish between two separate legal issues: entitlement to a pension and taxation of pension income. The Double Taxation Convention regulates taxation but does not, by itself, establish whether periods of employment or social insurance accumulated in Algeria can be counted towards the insurance record required for a Ukrainian pension.
The recognition of foreign employment and insurance periods for pension purposes must be determined separately under Ukrainian legislation and any applicable international social security arrangements. Accordingly, Ukrainians who have worked in Algeria should retain documents confirming their employment, earnings and social insurance contributions, as these may be important when determining their pension rights after returning to Ukraine.
