Federal Tax Court Announces Pension Judgments May 31 | Free press


Munich (dpa) – Germany’s highest financial court wants to announce two groundbreaking pension tax rulings on May 31 – with potentially dire consequences for retirees as well as the treasury.

The date was announced Wednesday after the two oral negotiations by the X Senate of the Federal Tax Court. The question is whether the state is getting too much in the gradual transition of the pension tax, which will continue until 2040, at the expense of retirees. The Senate showed no inclination.

The conversion of the pension tax has been ongoing since 2005, previously the pension contributions of the employees were taxed “upstream”. From 2040, the pensions paid will be fully taxed, not the contributions. In the transitional phase of 35 years, the tax burden on pension contributions will decrease; these will be tax-free from 2025. At the same time, a steadily growing portion of the pension must be taxed, currently 81 percent.

This decade-long transition phase is what the two retirees, a former dentist and a former tax advisor, who are supported by the taxpayers’ association, are doing. As early as 2040, pensions should be fully taxed, according to the tax advisor. “The pension contributions are only fully deductible for 15 years.” That means “double and triple tax” – because then the full tax on the pension must be paid, even though the contributions are tax-free for only a relatively short period of time.

In Germany, according to pension insurance figures, 21 million people are currently receiving a pension, so the rulings could have a major impact. The Federal Tax Court only decides on the two individual cases, but were the judges to grant the claims only partially, the federal government would have to respond.

In both cases, various complex individual points are discussed in detail. The tax advisor deals with questions that are of interest to a large 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.

The dentist is more of a special case – in addition to his statutory pension, he had also taken out a Rürup pension and about twenty private supplementary pensions and now states that these supplementary pensions are too heavily taxed. “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.”

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.”

Both claimants cite, among others, the Federal Constitutional Court. The Karlsruhe courts have ruled that the contributions that have already been taxed should not be taxed again later when the pension is paid – that would be 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. The calculations are based on the average life expectancy and the life tables of the statistical offices.