Munich (dpa) – Germany’s highest financial court wants to announce a decision on May 31 with potentially dire consequences for retirees and the treasury. The X Senate of the Federal Tax Court announced this on Wednesday after the first of two oral negotiations on pension tax.
The question is whether, in the gradual conversion of the pension tax, which will continue until 2040, the Tax and Customs Administration makes so wrong calculations that the state will collect excessive taxes.
A former dentist from Hesse and a former tax advisor from Baden-Württemberg had filed a lawsuit against their tax assessments with the support of the Bund der Steuerpayers. Both proceedings are conducted separately. The Senate did not show any trend during the first of the two negotiations.
“It’s all bad for me,” said the dentist. In old age he had not been able to maintain his standard of living. “And I am punished with double taxation.” He argues, among other things, that his Rürup pension and more than a dozen private supplementary pensions were over-taxed. However, the Federal Treasury emphasized that the federal government does not want to abuse retirees: “We want fair taxation,” said Rolf Möhlenbrock, head of the ministry’s tax department. “No one should be overused.”
The conversion of the pension tax has been ongoing since 2005, previously the pension contributions of the employees were taxed “upstream”. Once you retire, you no longer have to pay tax on your pension contribution, with the exception of the so-called income portion – the interest accrued in the meantime.
From 2040, the pensions paid will be fully taxed, not the contributions. In the transitional phase of 35 years, the tax burden on contributions decreases, while at the same time the taxable part of the pensions paid rises – from 2005 to 2020 by two percent per year, now by one percent. However, pension increases are already fully taxed during the transition phase.
The Federal Constitutional Court has ruled that the contributions that have already been taxed should not be taxed again later when the pension is paid – that would be the prohibited double taxation. This means that every retiree should receive as much tax-free pension as he has paid in contributions from taxed income in previous decades. These calculations are based on the average life expectancy and the life tables of the statistical offices.
In both cases there are several complex individual points. The many supplementary pensions of the dentist in particular play an important role. The tax advisor deals with matters of concern to a much greater number of retirees. The Federal Tax Court has to decide, among other things, whether or not the basic benefit and deductible health insurance contributions should be added to the tax-free portion of the pension.