Taxation of foreign pensioners
August 13, 2012 | 30,00 EUR | answered by Michael Herrmann
I have been retired since 2007. My main residence is in France. I receive a pension from the German pension insurance amounting to approximately 15,000 euros annually. Additionally, I receive a pension from a Swiss pension fund amounting to approximately 25,000 euros. I do not pay taxes on this amount in Switzerland. I own a rented apartment in Leipzig, so the Leipzig tax office is responsible for me. They have declared me as "limited tax liable" for 2010 and taxed all my income in Germany (without the tax-free allowance of 8,004 euros). The same applies to my tax return for 2011. I have raised objections against both decisions. My questions: - Could the progression clause apply to my foreign income? - Are the conditions met to regain "unlimited tax liability"? "If your total worldwide income in the calendar year is subject to at least 90% of German income tax, you can apply for treatment as an unlimited tax liable person according to § 1 paragraph 3 EStG." After all, my worldwide income is 100% taxed in Germany. Thank you. Regards.
Dear inquirer,
first of all, thank you very much for your inquiry, which I would like to answer based on the information provided and in the context of your request for initial advice. The response is based on the description of the situation. Missing or incorrect information about the actual circumstances can affect the legal outcome.
Due to your residence, you are subject to unlimited tax liability in France. German tax law only provides for the recognition of unlimited tax liability despite residence abroad in cases where almost exclusively domestic income is earned, upon request. This only applies to the described case with German income of at least 90%.
Based on your description of the situation, I cannot see that this requirement is met. The pension from the Swiss pension fund is not considered taxable income in Germany. Only rental income and the German pension are subject to limited tax liability. Therefore, income is not earned 90% in Germany.
Therefore, the tax office correctly explained that there can be no application of unlimited tax liability in Germany for you. The taxation rights of a state are generally not dependent on the taxpayer's choice.
Therefore, you should investigate why the Swiss pension was included in the taxable base and whether this is correct. Otherwise, an appeal should be filed against this. In general, you are not subject to limited tax liability or the progression clause in Germany. However, the denial of the basic tax allowance is correct.
You can only become subject to unlimited tax liability in Germany if you establish a residence there.
I hope that these explanations have provided you with a sufficient overview of the situation within the scope of your request and this initial consultation, even if you may not be able to derive a satisfactory result from it, and remain
Yours sincerely,
Michael Herrmann
Dipl.-Finanzwirt (FH)
Tax advisor
