Taxation of foreign pensions due to accident
July 4, 2012 | 50,00 EUR | answered by Wirtschaftsprüfer André Hintz
Dear Sir or Madam,
My wife (Finnish) and I (Swiss) are planning to move from Finland to Konstanz by the end of 2013. Since a riding accident in Switzerland in 2006, my wife has been receiving the following pensions from the following countries (her disability degree was determined by the Swiss disability insurance to be 93%):
Germany: Full disability pension, 181.00 EUR/month
Finland: Full disability pension, 288.00 EUR/month
Switzerland: Disability pension from the statutory accident insurance, 5'045.00 CHF/month, regular disability pension from the disability insurance (IV), 881.00 CHF/month, disability pension from the BVK (employee pension fund of the canton of Zurich), 358.00 CHF/month
I would like to find out now to what extent these pension benefits are taxed in Germany.
Thank you for your help!
Best regards,
DK
Dear inquirer,
I would like to answer your question within the scope of an initial consultation and your fee commitment, in accordance with the rules of the online portal. My response is based on the situation you have described.
Upon moving to Germany, you will become subject to unlimited taxation. Germany follows the principle of worldwide income taxation, as you have your residence / habitual abode in Germany. Your pension income must be separated based on its origin.
Pension income in Germany is taxed as other income. The special feature is that pensions from statutory German social security institutions gradually become fully taxable due to changes. The taxable portion is determined by the start of pension payments. For example, for pensions starting in 2006, the taxable portion is set at 52% of pension income.
Under the double taxation agreement with Finland, pensions from statutory social security institutions in Germany are tax-exempt. However, these income are subject to the progression clause, meaning they are taken into account when determining the individual tax rate.
Similarly, under the double taxation agreement with Switzerland, pensions from statutory funds in Germany are also tax-exempt. However, these income are also subject to the progression clause.
Pensions from private insurance institutions of any origin are subject to taxation in Germany based on the earnings portion. The taxable portion ranges from 1 to 52%, depending on the duration of the pension.
I hope my explanations have been helpful to you and remain
Yours sincerely,
André Hintz
Tax consultant
