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Information on taxation of German old age pensions

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Pensioners taking in the view at Lake Constance
Pensioners taking in the view at Lake Constance© dpa
Since 2005, pensioners living abroad who draw retirement income from Germany within the meaning of § 22, No. 1 Sentence 3a of the German Income Tax Act have generally been subject to limited income tax liability (§ 49, Sec. 1, No. 7 of the German Income Tax Act). As of 2009, certain retirement income drawn from Germany within the meaning of § 22, No. 5, Sentence 1 of the German Income Tax Act (§ 49, Sec. 1, No. 10 of the German Income Tax Act) is also subject to limited income tax liability. Whether this income is in fact taxed in Germany, however, depends on whether the provisions of the bilateral double-taxation Agreement provides for taxation by Germany as source state.

Since 2008, the double-taxation Agreement with the U.S. no longer provides for taxation in the source state. Consequently, the pensioner’s country of residence has had the exclusive right of taxation since 2008. Therefore, as of the 2008 assessment period, it is no longer necessary for persons living in the U.S. who exclusively draw retirement income from Germany within the meaning of § 22, No. 1, Sentence 3a of the German Income Tax Act or § 22, No. 5, Sentence 1 of the German Income Tax Act (in particular pensions paid out of the German Pension Insurance) to file a tax return in Germany (starting in 2009). It must be pointed out, however, that, although the Finance Office is currently forgoing the filing of tax returns, it is generally entitled to require the filing. If a taxpayer receives such a request, he or she is obligated to submit a tax return.

For questions please contact (please enclose the letter you received on your pension, a passport copy and your green card)

Finanzamt Neubrandenburg

Neustrelitzer Str. 120

17033 Neubrandenburg

Tel.: 01149 395 44222 47000

Email ria@finanzamt-neubrandenburg.de

www.finanzamt-neubrandenburg.de

The Double Taxation Agreement between the Federal Republic of Germany and the United States of Americastates in Article 18, 5:

„Social security benefits paid under the social security legislation of a Contracting State and other public pensions (not dealt with in Article 19 (Government Service) paid by a Contracting State to a resident of the other Contracting State shall be taxable only in that other Contracting State. In applying the preceding sentence, that other Contracting State shall treat such benefit or pension as though it were a social security benefit paid under the social security legislation of that other Contracting State.“

Full text of the Double Taxation Agreement

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