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Taxing Retirement Income

I would like to know if Germany taxes retirement income? I.e Social Security etc.

Yes, retirement income - both from the German pension system and other (private or commercial) sources is subject to income tax in Germany.
Social security (Hartz IV) payments, however, are at or below the tax-free survival minimum and thus not taxable.

This interests me as well. I have been told by another US retiree that his retirement benefits are not taxed in Germany. However, I have also been told by a tax accountant that they should be taxed in Germany.

The differing answers are confusing and frustrating.

If in doubt, I would believe the tax adviser, rather than a random retiree (who might have made mistakes in his German tax statement - it is almost impossible to avoid them if you aren't native speaker and well-versed in tax matters!).
In any case, you have to, in your tax statement, declare your entire world income and the tax authority then checks what is taxable and what not. (They also often make mistakes in this, which you can then appeal against - get a good German tax adviser for all this!)

I'm in bfox74's neighborhood of interest as well.

I found this information about the avoidance of double taxation agreement between the US and Germany.

https://www.irs.gov/pub/irs-trty/germany.pdf

Of note, I was reviewing Articles 18-19 which dealt with pensions, annuities, Government service, and Social Security.

Article 18-
1. Subject to the provisions of Article 19 (Government Service; Social Security). pensions and
other similar remuneration derived and beneficially owned by a resident of a Contracting State in
consideration of past employment shall be taxable only in that State.
2. Subject to the provisions of Article 19 (Government Service; Social Security), annuities derived
and beneficially owned by a resident of a Contracting State shall be taxable only in that State.
The term
"annuities" as used in this paragraph means a stated sum paid periodically at stated times during a
specified number of years, under an obligation to make the payment in return for adequate and full
consideration (other than services rendered).



Article 19-
1.
a) Wages, salaries, and similar compensation and pensions paid by the United States or
by its states or political subdivisions to a natural person, other than a German national,shall be
exempt from tax by the Federal Republic of Germany
.

b) Wages, salaries, and similar compensation and pensions paid by the Federal
Republic of Germany or by its Laender or by municipalities, or pensions paid by a public
pension fund thereof to a natural person, other than a citizen of the United States and other than
an individual who has been admitted to the United States for permanent residence therein, shall
be exempt from tax by the United States.
c) Pensions, annuities, and other amounts paid by one of the Contracting States or by a
juridical person organized under the public laws of that State as compensation for an injury or
damage sustained as a result of hostilities or political persecution shall be exempt from tax by the
other State.
d) For the purposes of this paragraph the term "pensions" includes annuities paid to a
retired civilian government employee.
2. Social security benefits paid under the social security legislation of a Contracting State and other
public pensions (not dealt with in paragraph 1) paid by a Contracting State to a resident of the other
Contracting State shall he 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.


I am not an accountant nor tax attorney, but I think it depends on what type of "retirement income" the OP is talking about, yes? (Bolded above)

If I'm reading this right (and I'm probably not lol), I think it says that if you got a governmental pension (like police, fire, etc) from State, local or Federal from the US that is taxed in the US and you are a US citizen, then Germany won't tax it?  But if it's private retirement income or investments, it's liable to both?

Thanks, this is very good information. Additionally, I talked with a German tax preparer last week and learned that my retirement income is not taxed in Germany. However, that income is used to determine the tax rate that I pay on my German income. In other words, I am only taxed in Germany on what I make in Germany, but my tax rate is based upon my worldwide income.

bfox74 :

Thanks, this is very good information. Additionally, I talked with a German tax preparer last week and learned that my retirement income is not taxed in Germany. However, that income is used to determine the tax rate that I pay on my German income. In other words, I am only taxed in Germany on what I make in Germany, but my tax rate is based upon my worldwide income.

Correct!
This applies to all non-taxable payments, thus you have to list your complete world income in the German tax declaration, no matter whether it's taxable or not.

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