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Pension tax

Almost 5 million of the 17.8 million old-age pensioners in Germany are already liable for income tax. The pension increase in July 2019 alone will probably result in around another 48,000 pensioners becoming liable for tax.


The number of pensioners subject to tax is rising continuously. This is due to the fact that for each new pensioner cohort, an increasingly higher proportion of the statutory pension is taxable. The tax-free amount calculated in this way is fixed; the pensioner must therefore pay full tax on every pension increase.


Pensions are differentiated between basic pension provision, tax-subsidized pension contracts and other private pension provision. There is a different taxation system for each category (see below for more).


The tax office receives pension withdrawal notices from the paying offices and therefore learns which pensions they have transferred. However, this does not release them from the obligation to file a tax return.


A complex subject in which we are happy to support you. So that you are as well informed as possible about the tax burden you should expect. We help you to be as relaxed as possible about your retirement financially.








There are a number of different types of retirement income. Typical retirement income is, for example, pensions from the statutory old-age insurance systems and pensions. In addition, income from company and private pension schemes is used in particular to ensure an adequate standard of living in old age.


The taxation of retirement income was newly regulated with the Retirement Income Act on January 1st, 2005. This law gradually aligns the taxation of the various types of retirement income. In particular, pensions from the statutory pension insurance are increasingly being taken into account when determining the taxable income and the allowances to be granted for pensions are being gradually reduced.


At the same time, the retirement pension expenses can be taken into account for tax purposes as special expenses to an ever increasing extent. This smooth transition to subsequent taxation that is complete in the end will last until 2040. For people who retire in 2040 or later, the full amount of the pension will then be subject to taxation. Persons who receive a pension for the first time from 2040 onwards will then be treated equally under income tax law.






We can help you with your income tax return. If you do not incur any tax liability, we will also submit an exemption application to the tax authorities for you. This can be done for 3 or more years, for example.





Taxation of foreign social security pensions

if you live in Germany


If a taxpayer resident in Germany draws pensions from a foreign social security system, this income is taxable in Germany due to the world income principle. According to numerous DTAs, pensions are only taxable in the pensioner's country of residence (exclusive right to tax in the country of residence). The other state has no withholding tax law, which is why it is not possible to offset a foreign tax. If, despite this, a tax has been paid in the other country, the taxpayer must have it reimbursed there. This group includes: B. Albania, Armenia, Estonia, Greece, India, Kosovo, Kuwait, Latvia, Liberia, Lithuania, Montenegro, Norway (until 2014), Pakistan, Portugal, Russia, Zambia, Switzerland, Serbia, Slovakia, Slovenia, the Czech Republic, Tunisia, Turkmenistan, Cyprus.


In many DTAs, a sole right to tax in the state where pensions are paid has been anchored in the social security system (exclusive right to tax in the source country)


The foreign pensions are therefore basically tax-free in the country of residence Germany and are only subject to the progression proviso according to § 32b para. 1 sentence 1 No. 3 EStG as regulated in double taxation agreements with Belgium, Bulgaria, Denmark, Finland, France, Georgia, Great Britain, Ireland, Lichtenstein, Luxembourg (from 2014), Malaysia, Malta, Macedonia, Mexico, New Zealand, the Netherlands (until 2015), Austria, Philippines (from 2016), Poland, Romania, Zimbabwe, Singapore, Syria, Taiwan, Ukraine, Hungary, Uruguay and Uzbekistan).


According to some double taxation agreements, the pensions are taxable in Germany as the country of residence as well as in the source country (tax liability with credit method)


In order to avoid double taxation in these cases, Germany offsets the proven foreign tax that is no longer subject to any reduction in tax. These rules contain z. B. the double taxation agreements with Argentina, China, Canada, the Netherlands (from 2016), Norway (from 2015), the Philippines (up to VZ 2015), Spain or Turkey.

When crediting the proven tax from the Netherlands, Norway and Spain, the respective maximum withholding tax rate must be observed. Taxes in excess of this rate must be refunded to the taxpayer in the Netherlands, Norway or Spain. In this respect, there is no crediting in Germany.






In summary, this means the following:

If you receive international pension payments in Germany, the individual pensions must be checked for tax purposes.






In the case of pension payments from Luxembourg, Luxembourg law (as described above under B) must also be observed. The ILBA Fiduciaire SARL in L-Echternach is happy to assist you here.


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