Double taxation of the pension: Why they exist and who concerns them

In the past, employees had to make the deposits of pension from taxed income, but the pension payments were then tax -free. That was the upstream taxation. However, the legislator had to change this system because it led to an unequal treatment of employees and civil servants. Since 2005, the transition to downstream taxation has been in effect, which means that the contributions to the pension have been tax -free since then, initially 60 percent, later more. While the pension payments were gradually taxed. At least 50 percent since 2005, a little more with every year.

Originally, in 2040, the following should apply that pensions would then be taxed 100 percent. But now this time has hiked backwards and the full taxation does not apply until 2058. Since 2023, contributions to the pension have been possible completely tax -free.

The reason for this was lawsuits by pensioners who have been taxed twice since 2005: They also made pension contributions from already taxed income and documents in the pension phase. There was a sticking point: that was added to change the tax. The gradual changeover of the system makes the whole thing somewhat complicated.

So why didn’t you change the taxation in one fell swoop? If the downstream taxation had been suddenly introduced in 2005, then the federal government would have broken out high tax revenue in one fell swoop (because no more workers had paid to pension benefits), and secondly, from 2005, all pensioners would have had to pay taxes to their payments – which would in any case be taxed all twice, which would not be conformed to the constitution.

Therefore, the legislator opted for the extremely long transition period to prevent this double taxation. Nevertheless, in 2021 the Federal Finance Court (BFH) confirmed in two judgments that double taxation could occur, whereupon the legislature was urgently required to improve it. The traffic light coalition in 2023 brought a transitional arrangement on the way – now pension proposals can be deducted, but the full taxation does not apply until 2058. This already leads to a “significant relief”, stated an expert opinion from the Universities of Würzburg and Berlin, which was created on behalf of the Federal Ministry of Finance (BMF). Especially for generations from around 1973 to 1990. Overall, “fewer pensioner cohorts” are now affected, but the report also says: “Nevertheless there is further reform needs”.

Even the traffic light government granted the traffic light government after the improvement of the age of the age of the age: “In order to completely avoid duplicate taxation, both for future pension cohorts, but also for elimination of double taxation that has already occurred in individual cases, further regulations are required in a third step in a third step.” So there is still a new law.

However, double taxation is possible. At the moment, however, it affects very few people. According to the report, those who are already retired are often less taxed than before. However, the double taxation could potentially be able to meet a number of meetings that will soon retire, as determined the BMF report. In general, this depends on four main factors: especially on the salary (i.e. the number of pension points collected annually), the year of pension, the number of years of contributions to pension insurance and the amount of self -contributions to old -age provision. In addition, the type of employment is still relevant, i.e. whether someone is independent or employed or both combined in the work biography. As well as the spouse and his profession.

Men lives alone are often affected because they do not benefit from the cheaper spouse taxation and cannot receive a survivor’s pension and also statistically have a shorter life expectancy. This also gives you fewer pension payments on average.

The appraisers calculated several case studies and stipulated: “A double taxation occurs for numerous cohorts that will retire in the coming decades.” The scope of the double taxation differes for all pension cohorts, but reached its peak around 2058 (through the transitional arrangement). So at the year of birth around 1991, which then retire. The following applies to later generations: “The double taxation problem disappears” at the retirement in 2070, since only this cohort will have fully asserted all contributions to pension insurance as precautionary expenses. ” It should no longer affect the born around 2003.

Double taxation also occurs more frequently the more earnings points the employees collect each year. A low -wage earner (with around 50 percent of the German average earnings of around 50,000 euros) is therefore much less affected, and the double taxation volume is entitled to around 10,000 euros. In the event of an average earner, the load is already growing to 13,700 euros. In the case of high earners that are above the contribution ceiling, they are already accumulating 28,300 euros at the top, and 2058 at retirement.

In the case of self -employed, the problem is also much more pronounced than with employees. Because self -employed pay completely into the pension fund without receiving employer subsidies. In entrepreneurial people there is a good 55 percent of double taxation, and 66 percent for freelancers. With them, the cumulative volume could also be over 80,000 euros.

Anyone who is already retired and affected by a double taxation, for whom the new law has also brought no change. The experts continue to say that its double taxation volume remains unchanged. Particularly self -employed people are confronted with the highest double levies, which is why an additional legal adjustment must be made for them in order to completely avoid double taxation, as the Federal Finance Court has requested. Additional pension allowances could remedy the situation in the future.

There is only an all -clear for everyone whose pensions are below the allowances for pensioners. So if you receive less than around 1000 euros a month, you will not be taxed twice.

Incidentally, a double taxation is calculated as this: If the sum of the taxed income (up to the retirement) is higher than the tax -free share of the pension, then there is a double taxation according to the Federal Finance Court. The following amounts are allowed to the tax -free share of the pension not Calculated: the tax-free subsistence level, the health insurance and care insurance contributions, the advertising cost lump sum and the special expenditure flat amount.

Basically, the following applies: All tax notices since 2005 have a provisional note, which relates to the taxation of pension contributions and pension taxation. If you suspect that you can be subject to double taxation, you should keep all pension payout notices and all tax documents ready, because in case of doubt. However, only tax notices that have been issued after August 30, 2021 can be challenged. All older tax payments are now considered final and are therefore unassailable.