Tax & Legal

If a civil service pension is split internally under the Pension Equalization Act, the tax-free allowance for pension income and also the additional allowance must be calculated for the person eligible for equalization in the year in which the claim arose, i. e., the year in which that person first was entitled to receive the pension. With its decision, the Supreme Tax Court confirmed the opinion of the Federal Ministry of Finance (BMF) published in October 2013.

The Supreme Tax Court once again decided on pension promises to a managing director who is also the majority shareholder of the employer company and specified in more detail the rules for distinguishing allowable business expenses from disallowable “hidden distributions”. In the case at hand the plaintiff received compensation for early termination of pension claims as a result of significant financial difficulties of the company.

The German government intends to present a bill before the end of the year to amend the statutory regulations governing the taxation of retirement income arising from basic pensions.

The Supreme Tax Court has referred a question to the ECJ as to whether the exclusion of deduction for a private pension paid by a non-resident in return for the transfer of ownership rights in a business is in breach of community law.

The finance ministry has issued a decree making a provision for future pensions based on past profits conditional upon a written confirmation of the additional benefits.

The German and Austrian finance ministries have agreed to tax civil service pensions paid to widows as though payment continued to be to the original beneficiary.