Tax & Legal

German taxation of payments from US 401(k) pension plan

Payments from a pension plan under Section 401(k) of the US Internal Revenue Code are subject to income tax according to Section 22 No. 5 Sentence 2 letter b of the German Income Tax Act if made before 1 January 2025. The Supreme Tax Court’s conclusion on the matter is largely the result of the structural comparability recognized and acknowledged by Germany pursuant to Section 1 (1), § 1b (2) and (3) of the Law on Promotion of Employer Pension Schemes (Betriebsrentengesetz) specifying ways and means in which employers can organize occupational pension schemes.