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Taxation of refunded amounts from the pension insurance or pension fund

September 1, 2016 | 50,00 EUR | answered by StB Patrick Färber

Good day,

I have the following question:

Since 2010, I have been employed as a lawyer in a company that has been deducting pension contributions to the German Pension Insurance (employer and employee share) to the Deutsche Rentenversicherung. At the same time, I have also been working as a self-employed lawyer since that time and have had to pay approximately EUR 200.00 per month (minimum contribution) to the pension fund for lawyers responsible for me, so I have been paying pension contributions to the pension fund regardless of my law firm's profits. Since that time, I have been in dispute with the DRV about exemption from pension insurance obligation, with the aim that my employer can also pay pension contributions to the pension fund, thus avoiding a "double payment". This goal has now been achieved and all contributions since 2010 have been transferred (retroactively) from the DRV to my pension fund. However, there is now an "overpayment" amounting to a few thousand euros at the pension fund (mainly the monthly minimum contribution I paid), which I can either keep there (as voluntary contributions) or have paid out to me. I am inclined to have the entire amount paid out to me.

My question: Is this payout tax-free? If not, how and where do I have to declare this payout? In my research, I came across sections 3 b and c of the Income Tax Act (in my view: tax-free). On the other hand, in the past years, I had claimed the contributions to the pension fund as special expenses (there was a field in the tax return for "contributions to professional pension funds")...

Thank you for your response!

StB Patrick Färber

Dear inquirer,

In principle, the repayment of contributions paid in the past that have been treated as special expenses will reduce the contributions of the same kind made in the year of repayment (consistent allocation). Sections 3b and 3c are not applicable here and deal with other topics. This could probably result in an additional payment for this refund year, as the special expense deduction is reduced.

If there is an excess of reimbursement (e.g. repayment of TEUR 12, contributions made in the year of repayment TEUR 8), then the excess reimbursement of TEUR 4 will unfortunately be taken into account only for contributions to pension insurance/pension funds by amending the tax assessments of previous years (§ 175 AO retrospective event) and the remaining refund will be offset against the contributions of the respective assessment period until the excess is used up. This could potentially lead to repayments in the past (possibly with interest).

Therefore, I would advise you to leave the contributions in the pension fund.