Taxation of voluntary pension insurance
January 27, 2010 | 50,00 EUR | answered by Dipl.BW/SB Ulrich Stiller
Dear Sir or Madam,
The following situation: I received a gift of 10,000 euros from my mother (single, no children). She paid taxes on this amount when it was withdrawn from the bank, but did not declare it as an expense for herself.
I have invested this money in a pension insurance as a one-time payment and have also obtained a receipt for the tax office.
- Do I need to declare this money as income for 2009? (I am inclined not to do so, as my mother has already paid taxes on it)
- When the tax office takes this into account, will the money only be counted for 2009 or will it be distributed proportionally over several years?
- If I discover a more attractive pension offer for myself in 2010 and decide to cancel the existing insurance, take out a new one using my own funds and claim it on my taxes, do I need to declare that 10,000 euros of the amount come from the canceled policy or declare the payout as income?
Best regards,
F. Walinski
Dear Client,
Thank you for your inquiry, which I would like to answer based on the information you provided as follows:
Do I have to declare this money as income for 2009?
No, you do not have to. The 10,000 euros are not subject to income tax. The German Income Tax Act lists 7 types of income in § 2, none of which include the gift of 10,000 euros from your mother.
If the tax office takes this money into account, will it only be credited to 2009 or will it be distributed proportionally over several years?
No, there will be no credit, as you do not have to pay taxes on the amount.
If I discover a more attractive pension offer for myself in 2010 and cancel the existing insurance, take out a new one using equity and claim it on my taxes, do I have to declare that 10,000 euros of the amount comes from the dissolved policy, or report the payout as income?
An early termination could result in income from capital assets according to § 20 para. 1 no. 6 EStG, which reads as follows:
"the difference between the insurance benefit and the sum of the contributions paid (earnings) in the event of survival or upon redemption of the contract in the case of pension insurance with a capital option, unless the lifelong pension payment is chosen and made, and in the case of life insurance with a savings component, if the contract was concluded after December 31, 2004. If the insurance benefit is paid out after the taxpayer's 60th birthday and after twelve years since the conclusion of the contract, half of the difference is to be applied. In the case of the paid acquisition of the right to the insurance benefit, the acquisition costs replace the contributions paid before the acquisition. Sentences 1 to 3 apply accordingly to earnings from unit-linked life insurance policies, earnings in the event of survival in pension insurance without a capital option, if no lifelong pension payment is agreed and made, and earnings upon redemption of the contract in pension insurance without a capital option."
If you have chosen the pension payment in a pension insurance with a capital option, but then terminated the pension payment prematurely by cancellation and the pension payment claim was settled by a capital payment, this insurance benefit must be taxed as described above. This also applies to the premature termination of a pension insurance without a capital option - for example, by cancellation by the policyholder or rescission by the insurer from the insurance contract.
The concluded contract should therefore be reviewed in detail for a final statement.
I hope my explanations are helpful.
Best regards,
Ulrich Stiller
Tax advisor
