Working and receiving pension

18 posts in this topic

I will reach 65 at the end of this year, (after working many years in Germany), but I am likely to continue working here for up to 1 year.

 

I already know that I have the choice of taking my pension at 65 (in addition to my salary) or deferring it until I finish working. The Bva have informed me that, if I do defer my pension, I will get 0.5% more for each month I defer.

 

Initially, that does not look too good a deal (quite a long payback time for the pension I have not claimed) but other factors could come into play here.

 

Because my tax affairs are quite simple I have dispensation from putting in a tax return (the hassle is not worth any paltry amount I might get back). However, when I have icome from a second source (my pension), how will (can they) they marry that up with my salary to get correct tax rate - or will I be forced to do an annual tax return. That might be sufficient to tip the balance into deferring my pension.

 

Does anyone have any guidance for me?

 

Thanks in advance.

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As soon as you receive a pension and the taxable part of it is more than the Grundfreibeitrag of 8,004€ (16,008€ if you're married and your wife has no income herself), you will have to do a tax return, no way around it.

If you work and receive a pension in parallel you will have to do a tax return.

 

The non-taxable part of your pension (= Rentenfreibetrag) is fixed the first time you get your pension, and stays the same amount all your life.

Example:

you retire when you hit 65 and get your first pension payment in December 2011

Rentenfreibetrag = 38% of your first annual pension, e.g. 0.38 * 18,000€ = 6,840€

--> the Finanzamt will consider your taxable income to be 18,000€ - 6,840€ = 11,160€

i.e. you would have to do a tax return, since it's over the Grundfreibetrag (if you're single).

 

--> This is your personal Rentenfreibetrag and is set in stone, i.e. even when your pension rises in future years, only that exact amount (38% of the annual pension during your first year of retirement) will remain unconsidered when calculating your tax burden.

 

To give this an additional twist, the later you push the start of your retirement, the less a percentage is your Rentenfreibetrag (see table here). For example if your defer your retirement until 2015, only 30% of it will count (it's 2% less for every year you delay).

 

If you decide to get your pension from 1.12.2011 and to continue working you have some advantages over normal employees:

 

  1. if you have public health insurance, you and your employer have to pay 0.3% less each, i.e. 0.6% in total (= ermäßigter Beitragssatz). However, this will also mean that you no longer have a right to Krankengeld, i.e. after your 42nd day of illness you won't get paid any longer. The idea behind this is that you have your pension so you won't starve. (source 1, source 2)
  2. you have an additional tax-free component, the Altersentlastungsbetrag. This is also set in stone and depends on the year you turn 65, in your case 2011. So you are allowed to deduct 1,444€ (or 30.4% of your salary, whichever is higher) from your income, be it income from being an employee, or being self-employed, or from interest, or from rents, ...
    Here's the table citing the amounts and here's an example calculation for salaried income and one for interest income.

 

The tax return isn't that hard to do, there are step-by-step instructions in the TT Elster Wiki and as a pensioner you would only have to fill in one form additionally, the Anlage R.

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@PandaMunich: thank you very much. I have only quickly scanned your post so far but it seems very comprehensive. I will go over it again slowly a little later.

 

Brilliant - thank you again for your knowledgeable reply

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Tax return for pensioners

 

These instructions are for the tax forms of 2010, the 2011 forms have not yet been published.

 

You will need to fill in following forms:

 

  • Mantelbogen ESt 1A (see TT Elster wiki, turquoise part for instructions how to fill it in). Don't forget to mark line 37: Renten lt. Anlage R (also mark all other Anlagen you will attach)
  • Anlage R (see below for instructions)
  • Anlage Vorsorgeaufwand (see below for instructions)
    If you also had employee income or self-employed income: please see TT Elster wiki, yellow part for additional instructions on how to fill in the Anlage Vorsorgeaufwand.
  • Anlage KAP if you had interest income of more than 801€ and and you think you will get some of the Abgeltungsteuer back by reducing the interest income by your Alterentlastungsbetrag or because your overall personal tax rate is less than 25%
  • Anlage N if you continued being an employee after retiring (see TT Elster wiki, yellow part)
  • Anlage S if you had freelance income after you retired (see TT Elster wiki, turquoise part)
  • Anlage G if you had non-freelance self-employed income after you retired (see TT Elster wiki, green part)
  • Anlage V if you had income from letting German or non-EU real estate (see last part of the post in Rental Income calculation for step-by-step instructions)
  • various other Anlagen if had other kinds of income

 

 

*********************************************************************************************************************

 

How to fill in Anlage R

 

- in line 1: your surname

- in line 2: your first name

- in line 3: your tax number, mark whether this is the Anlage R for you (mark "Stpfl./Ehemann") or for your wife (mark "Ehefrau")

_______________________________________________________________

 

I. Pensions taxed according to nachgelagerte Besteuerung (you had tax advantages when paying contributions):

 

- in line 4: fill in either 1, 2, 3, 4, or 9

1: German public pension

2: German public pension for farmers

3: German pension from your trade association (for medical doctors, lawyers, notaries), e.g. if you're a lawyer from the bar association

4: German private pension if you started paying into that contract after 31.12.2004 (Rürup-Rente)

9: Foreign pensions where you contributed from untaxed money

You have space for three pensions there (3 columns), if you receive more than three pensions, fill in an additional Anlage R.

- in line 5: gross pension amount including one-off payments (also including what you pay for health&nursing). You will get a letter (= Jahresrentenbescheinigung) once a year from your pension provider telling you this gross amount and all the other things you have to fill in the Anlage R, so don't despair.

- in line 6: difference between your annual pension in the year for which you do your tax return and your annual pension in the year in which you first received a pension. Example: you first received a pension in 2008 and it was 12,000€ for the whole year. In 2010 (the year for which you do this tax return) you received a higher annual pension of 13,000€ --> fill in the difference between those 2 amounts here, i.e. 13,000€ - 12,000€ = 1,000€

- in line 7: date on which you first received the pension

- in line 8 and 9: begin date and end date of an earlier pension you no longer receive, but which received in the past for temporary disability or as a surviving spouse (=widow's pension)

- in line 10: one-off payments that are attributed to more than one year (do not fill in amounts that only concern one year, amounts are also included in the gross amount you filled into line 5)

_______________________________________________________________

 

II. Pensions taxed according to the more advantageous Ertragsanteil (you had tax advantages before 2005 or you paid the contributions out of your already taxed money).

For example, if you start getting the pension at age 65, only 18% of it have to be taxed:

 

- line 11: if prior to 31.12.2004 you paid for at least 10 years more than the legal maximum into German public pension insurance, then (same as private pension plans below) you are eligible for taxation according to the more advantageous Ertragsanteil. Get a letter from your pension provider confirming this percentage and fill it into line 11.

- line 14: fill in either 6, 7, 8, or 9

6: German private pension, contract made before 31.12.2004

7: German private pension with limited payout time (e.g. only 12 years)

8: pension resulting from other deals (e.g. if when selling your house/business you accepted to get a life-long pension from the buyer instead of a lump sum)

9: Foreign pensions where you contributed from taxed money

- in line 15: gross pension amount. You will be told this amount in the yearly letter of your pension provider.

- in line 16: date on which you first received the pension

- in line 17: if you inherited a time-limited pension, date of birth of person you inherited it from

- in line 18: for time-limited pensions: the pension will stop with the death of .... (name of person)?

- in line 19: for time-limited pensions: the pension will stop on which date?

- in line 20: one-off payments that are attributed to more than one year (do not fill in amounts that only concern one year, amounts are also included in the gross amount you filled into line 15)

_______________________________________________________________

 

III. Private pensions for which you receive a yearly Leistungsmitteilung (see here for an example) from the provider, telling in which line of Anlage R to fill in what (these pensions are taxed at your peronal tax rate, no tax-free part here like in sections I or II !).

 

The provider has in parallel already informed the Finanzamt about these amounts, so this Leistungsmitteilung is just for you to help you fill in Anlage R, you don't have to attach it to your tax return.

 

Examples of pensions in this category: Riester-Rente, Altersvorsorgevertrag (Rentenversicherung, Investmentfonds- oder Banksparpläne), betriebliche Altersversorgung (Pensionsfonds, Pensionskasse[auch VBL] contracted after 31.12.2004 or Direktversicherung

 

- in lines 31 to 49: look for the words:

lt. Nummer 1: fill in the amount next to number 1 in your Leistungsmitteilung

lt. Nummer 2: fill in the amount next to number 2 in your Leistungsmitteilung

and so on

_______________________________________________________________

 

lines 50 to 57: expenses you had for those pensions, e.g. stationary to contact pension provider, travel costs to pension provider, stamps for letters to them, telephone costs for calling them, ...

If you don't fill in anything they give an allowance of 102€ for these expenses.

 

- in line 50: expenses you had that can be attributed to pensions you filled into lines 5 and 15:

Name kind of expense, e.g. "Bürobedarf, Telefonkosten, Briefmarken" / amount in €

- in line 51: expenses you had that can be attributed to pensions you filled into lines 10 and 20

and so on

 

- in line 58: income you had from special tax deferral schemes (= Steuerstundungsmodelle) the Finanzamt doesn't much like (and has been trying for years to get classified as tax evasion), e.g. Medienfonds = film financing funds, or container ship leases.

_______________________________________________________________

 

That's it for the Anlage R.

 

See here for an overview (in German) with the 3 classes of pensions (what to fill in into sections I, II, and III)

 

If you feel like reading it, here's the official German guide for filling in Anlage R.

 

*********************************************************************************************************************

 

How to fill in Anlage Vorsorgeaufwand

 

top of page: your tax number, surname, first name

first column is for you/husband if you're married, second column is for the wife:

- in line 18: contribution to the public health insurance (if you have one)

- in line 21: contribution to public nursing insurance (if you have one) (Pflegeversicherung)

- in line 24: subsidy for your public health insurance you get from "Deutsche Rentenversicherung"

- in line 31: fill in the value for health insurance the private health insurance (if you have one) will have sent you in a letter for health & Pflegeversicherung, which will be considerably less than you actually paid, because you are only allowed to claim 100% in the tax return what a "basic" insurance, which is comparable to public insurance cover, would have cost

- in line 32: fill in the value for nursing insurance (=Pflegepflichtversicherung) from the letter you got

- in line 34: subsidy for your private health insurance you get from "Deutsche Rentenversicherung"

- line 35, field 354: fill in difference amount for health insurance that is not "basic", i.e. if you paid 1,200€ per year, and only 960€ corresponds to "basic", then fill in the difference of 240€ here. Also filled in what you paid for Anwartschaften.

- line 36, field 355: fill in difference amount for nursing insurance above "basic".

- lines 46 to 50: any other insurance you may have, e.g. personal liability insurance in line 48

 

You will be allowed to claim all you paid for "basic" health&nursing insurance in any case, but all other insurance only up to an allowance of 1,900€ per year if you're an employee or 2,800€ if you're not (allowance includes what you paid for "basic" health&nursing).

For an explanation read the second half of Tax deductions for pension and health insurance.

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@PandaMunich: Thank you very much for the additional comprehensive information.

I have been through all this and I think I understand the impact but, just to be sure, can I say what I understand from this (assuming I start to take my pension from 01.12.2011).

 

- I am married and my wife does not work. She will remain registered here although she will split her time roughly 50-50 between UK and Germany.

- My salary is sufficient for my marginal tax rate to be 42%

- I have just over 14 years of pension contributions to the German tax system.

- From 1.12.2011 I will get a full UK pension regardless of what I do here (this probably means I would need to complete a tax return anyway)

- In addition to any tax calculation made by my employer, (including standard tax class allowances), I would get an additional allowance (Rentenfreibetrag) meaning that part of my German pension was also free of tax.

- I am not clear if tax is deducted at source on the remaining pension or not but I am guessing this would not be at the full 42% liability.

- When I do my tax return at the end of the year there would likely be some additional liability to be paid (at least to adjust the tax on taxable part of my pension to my marginal rate of 42%).

- When I do finally stop working then I will return to the UK so I would expect that, at that point, I would have no further German tax liability on my pension as this would be my only income in Germany..

 

Does that sound more-or-less correct?

 

btw: I am not sure if you are a professional tax advisor or not (you seem to have the knowledge) but, if you are, it may be worth you contacting me.

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Disclaimer: I'm not a tax advisor, so please excuse any mistakes and to be sure about all of this, please consult a tax advisor

 

 

- I am married and my wife does not work. She will remain registered here although she will split her time roughly 50-50 between UK and Germany.

- My salary is sufficient for my marginal tax rate to be 42%

 

This means your personal for all your taxable income will be 42% (except for interest income, that's at a flat rate tax of 26.375% of you're not a church member, or 27.99% if you are).

 

 

- From 1.12.2011 I will get a full UK pension regardless of what I do here (this probably means I would need to complete a tax return anyway)

 

Yes, you would have to do a tax return anyway.

So no additional bureaucracy if you also opt to receive the German pension.

 

I once did a calculation for someone in the family and the result was that it is always better to get a German public pension as soon as possible, since the increase in pension if you apply later never makes up for the lost (a bit lower) pension payouts in the years leading up to the pension start. To put it another way, the German public pension system is not a good investment, and you should try to get everything you can back out of it as soon as possible, since additional payments into it don't pay off.

 

But by all means, to be sure please do your own calculations and ask the Deutsche Rentenversicherung to do a calculation for you what the financial implications would be in your case.

 

 

- I have just over 14 years of pension contributions to the German tax system.

- In addition to any tax calculation made by my employer, (including standard tax class allowances), I would get an additional allowance (Rentenfreibetrag) meaning that part of my German pension was also free of tax.

 

Yes.

And the sooner you start getting the German pension, the higher a percentage the tax-free aprt of your pension will be (2% less for every year you delay).

 

 

- I am not clear if tax is deducted at source on the remaining pension or not but I am guessing this would not be at the full 42% liability.

- When I do my tax return at the end of the year there would likely be some additional liability to be paid (at least to adjust the tax on taxable part of my pension to my marginal rate of 42%).

 

No, all pensions are paid out gross, and you then have to do a tax return so that your personal tax (dependent on your total income from all sources) is calculated and applied.

 

You won't have to pay 42% tax on your whole German pension, but it will 42% on the taxable part (= gross pension - Rentenfreibetrag).

 

For the first year you receive your pension, you should start saving a part of your pension (corresponding to the tax burden you anticipate) so that you have the lump sum to pay the income tax after your first tax return.

In the following years, the Finanzamt will, since it will now have a baseline, ask you to pre-pay income tax (= Einkommensteuer-Vorauszahlungen) every quarter corresponding to the tax burden of the previous year. This is the same system that the self-employed have, they also have to pre-pay according to last year's income.

 

 

- When I do finally stop working then I will return to the UK so I would expect that, at that point, I would have no further German tax liability on my pension as this would be my only income in Germany..

 

Let's start with health insurance (here's the source).

If you move to to your home country and also get a public pension from that country, then that country takes precedence and you will no longer have to be health insured (= pflichtversichert) in the German health system, but in your home country's health system.

This would mean for you personally, since you will have a UK pension, that you will be covered by the NHS once you move back and will no longer have to pay for German health insurance.

 

However, if you received only a German public pension and moved to another EU country or Turkey or Tunesia, then you would still be obliged to be health insured in Germany and still pay for German health insurance. If you went to a doctor there, then your costs would would in the end be borne by your German health insurer.

_____________________________________________________

 

Now for the income tax aspect.

You always have to look at the double tax treaty the country you move to and Germany have, for some countries you have to tax the German pension in the country you moved to.

 

However, for you the Germany/UK double tax treaty says in Article 17 that a German pension has to be taxed in Germany.

This means you would still have to do a German income tax return every year, but as a "beschränkt Steuerpflichtiger" (= someone with limited income tax liability in Germany).

 

The Finanzamt in Neubrandenburg has been designated as the Finanzamt responsible for all pensioners who live outside Germany and who only have German pension income:

 

Real address:

Finanzamt Neubrandenburg

Neustrelitzerstraße 120

D-17033 Neubrandenburg

 

Snail mail address:

Finanzamt Neubrandenburg

Postfach 110164

D-17041 Neubrandenburg

 

Telefon: +49-(0)395 - 380-1000

Fax: +49-(0)395 - 380-1059

E-Mail (RIA = Rentner im Ausland): ria@finanzamt-neubrandenburg.de

Internet: http://www.finanzamt-neubrandenburg.de

 

If you have other kinds of income from Germany, e.g. rental income from a German house/flat you let, then you still have to declare all your income (German pension, German rental income, etc.) to that local Finanzamt.

 

The bad news is that a beschränkt Steuerpflichtiger does not get the tax-free Grundfreibetrag of 8,004€ (16,008€ if you're married) that a unbeschränkt Steuerpflichtiger would get.

 

I have found some sources that say this runs contrary to EU law and that you would then still get that Grundfreibetrag, but those were old sources, the new sources seem to agree that if you're beschränkt steuerpflichtig:

 

  1. you either opt to be unbeschränkt steuerpflichtig in Germany so that you get that Grundfreibetrag. But this is is only allowed if your foreign income is less than 8,004€ or you make at least 90% of your world-wide income from Germany. (source: last paragraph of this page, legal basis: §1 Absatz 3 EStG), or
  2. you pay the normal tax rates, but without having the tax-free Grundfreibetrag, i.e. you start your taxation from the first € with the Eingangsteuersatz of 14%.

 

For case 1 (unlimited tax libility in Germany) you would still have to submit the same forms as if you were still resident in Germany, see the instructions in post 4 of this thread for instructions.

 

For case 2 (limited tax liability in Germany) you would still have to fill in:

 

  • a different Mantelbogen, the Mantelbogen ESt 1C, see instructions in the second half of this post in Rental Income calculation for step-by-step instructions on how to fill in this special Mantelbogen, plus
  • the same Anlagen (at least Anlage R, plus Anlage Vorsorgeaufwand should you have to pay health insurance in Germany), see instructions in Post 4 on how to fill them in

 

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@PandaMunich: Thank you for your very comprehensive reply. I realise that there are probably not too many older TT members my age but, hopefully, this will all be some use to others (either now or in the future).

 

I see your disclaimer that you are not a tax advisor but maybe you should be with this amount of knowledge about the situation. I am sure you do know what you are talking about and are right but, don't worry, the final arbiter will be when I submit my tax return (with or without a tax accountant). What I really needed is what you have given, a general guide as to how these things work and what to expect.

 

It is a bit of a bummer that it looks as if I will have to continue to do a German tax return long after I have left - but, if that is the way it is, then that is the way it must be.

 

Thanks very much for all your help.

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- From 1.12.2011 I will get a full UK pension regardless of what I do here (this probably means I would need to complete a tax return anyway)

 

 

 

Yes, you would have to do a tax return anyway.

 

While you're still resident in Germany you will have the following situation:

 

The Germany/UK double tax treaty cuts both ways, your UK state pension will have to be taxed at the source in the UK, so you will also have to do a tax return in the UK, too.

 

However, the German Finanzamt also wants to know about your UK state pension (amount to be filled into Anlage R, section I, foreign pension).

You may now ask why do they want to know about it if it is already covered in the Germany/UK double tax treaty?

Although they won't tax it again, the foreign pension amount will raise your personal tax rate in Germany (= Progressionsvorbehalt, in accordance with §32b EStG), and with the new, higher total income (German income + foreign pension) you will be pushed into a higher tax bracket.

 

Even in your special case, with you already paying the maximum possible marginal tax rate of 42%, the Grenzsteuersatz on your salary alone, you are affected.

 

If you look at the following graph, important for you isn't the Grenzsteuersatz = marginal tax rate = turquoise line (i.e. the tax rate with which the last Euro of your income is taxed), but the average tax rate = blue line. Your new, higher total world income will push you further up the blue line and you will have a higher average tax rate (and pay more German income tax on your German income) than without the UK pension.

 

Graph for married people (i.e. you, taxation according to Splittingtabelle):

post-24869-13040227048636.gif

 

Graph for single people (taxation according to Grundtabelle):

post-24869-13040222069149.gif

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I have new information telling me that I can defer my UK pension (the unclaimed payments would, eventually, be paid in full as a lump sum with interest).

 

So, there is no financial loss from deferring my UK pension. From what you have told me there is a loss from deferring my German pension, (unless I live a very long time after retirement). So I now need to sit down and crack some actual figures to see what the loss would be to set against the benefit of keeping the admin simple. I should have enough information (or at least the pointers) from the information you have provided.

 

Once again - thank you very much for your knowledgable information on this. I must admit that I would have never have worked this out without your guidance because it does seem, to some extent, counter-intuitive.

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It is a bit of a bummer that it looks as if I will have to continue to do a German tax return long after I have left - but, if that is the way it is, then that is the way it must be.

 

Something new came to light in another thread.

 

Apparently, you won't have to do the German tax return any longer once you move back to the UK, see here for the source :)

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Apparently, you won't have to do the German tax return any longer once you move back to the UK, see here for the source

 

No longer so sure about this, according to this source, the double taxation agreements Germany has in place say that only if you live as a pensioner in:

 

  • Luxembourg, or
  • Bosnia, or
  • Serbia, or
  • Slovakia, or
  • the Czech Republic, or
  • Hungary, or
  • the USA, or
  • Spain

are you allowed to tax your German pension in the country you live in.

 

In all other cases you seem to have to tax it in Germany (i.e. file a German tax return), as somebody with limited tax liability (= beschränkt steuerpflichtig), which means you don't get the Grundfreibetrag of 8,004€ (or 16,008€ if you are married) tax-free allowance a year that people with unlimited tax liability (= unbeschränkt steuerpflichtig) in Germany get.

 

However, there is a solution to still get that tax-free allowance of 8,004€ (or 16,008€ if you are married), according to §1 Absatz 3 Einkommensteuergesetz people who:

 

  • earn at least 90% of their worldwide income from Germany, or
  • whose non-German income is less than the Grundfreibetrag (in 2012: 8,004€)

can apply for unlimited tax liability in Germany, for details please see post no. 455 in Filing a tax return.

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The non-taxable part of your pension (= Rentenfreibetrag) is fixed the first time you get your pension, and stays the same amount all your life.

Example:

you retire when you hit 65 and get your first pension payment in December 2011

Rentenfreibetrag = 38% of your first annual pension, e.g. 0.38 * 18,000€ = 6,840€

--> the Finanzamt will consider your taxable income to be 18,000€ - 6,840€ = 11,160€

i.e. you would have to do a tax return, since it's over the Grundfreibetrag (if you're single).

 

 

According to Steuertipps in 2023* when I retire the tax free portion will be 13.6% so then the Rentenfreibetrag =13.6% of your first annual pension, e.g. 0.136 * 18,000€** = 2,448 will be tax free. So 18,000 less 2,448 = 15,552€ thusly being married and under the limit 16,008 I won't have to file a tax return. But since I have other income will put me over than I will have to file a tax return and pay tax at the required rate.

 

Second question: for calculating taxes do you count in pension and unemployment costs? In other words I only need to use only German Tax Calculator to figure out what my net will be.

 

Third question: taxation of foreign pensions. In my case I will be getting a pension from Canada and 15% withholding tax will apply. No further tax will be due in Germany.

 

* yeah I know it seems crazy that I'd be planning this far ahead but when you get older time speeds up, blink once and a year has gone by, blink again and you're facing retirement!

** 18,000 or 1500 a month is the estimated pension I will get

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According to Steuertipps in 2023* when I retire the tax free portion will be 13.6% so then the Rentenfreibetrag =13.6% of your first annual pension, e.g. 0.136 * 18,000€** = 2,448 will be tax free.

 

Nope, if you do start off by citing my post, please also use the link that I provided in it.

 

If you had, you would have found out that:

 



  • the Rentenfreibetrag in 2023 will be 17% (= 100% - 83%), but only if your pension is based on former social security contributions.
  • If your pension is paid by a former employer (= Betriebsrente) or is civil service pension (= Beamtenpension) then it will be taxed fully, i.e. 100%.
  • If your pension is based on private contributions, i.e. made from already taxed money (on which you had also already paid social security contributions) then the part of the pension that is taxable is based on your age when you first get the pension, if it is age 65 then 18% of it is taxable, i.e. the Ertragsanteil is 18%.

 

On the other hand, what you found was a link to the Altersentlastungsbetrag, which is allowed to be up to 646€ a year in 2023 and which is a tax deduction only applied to income other than employee or pension income.

So it's a nice-to-have deduction for your rental income in your case, but of no other use.

 

Of course, the above rates can be changed any time by the German government...

 

 

So 18,000 less 2,448 = 15,552€ thusly being married and under the limit 16,008 I won't have to file a tax return. But since I have other income will put me over than I will have to file a tax return and pay tax at the required rate.

 

Only if 1,500€ a month is the sum total of what you and your wife would have as income.

The first (2 * Grundfreibetrag_in_2023), if we were speaking about 2015: 2*8,472€ = 16,944€, of a married couple's total income is tax-free, you don't get double the Grundfreibetrag just to yourself just by virtue of having gotten married, you have to share with your wife.

 

 

Second question: for calculating taxes do you count in pension and unemployment costs? In other words I only need to use only German Tax Calculator to figure out what my net will be.

 

The calculator you linked to is for employee income.

Once you are pensioned you no longer pay pension and unemployment insurance.

 

Try the income tax calculator and input your family's total worldwide income.

And don't forget that your wife will have to pay around 25% (my estimate for public health insurance + nursing insurance contributions in 2023) of her German public pension to her Krankenkasse.

While we are at it, let's not forget that if you have income from any source that exceeds 1/7*Bezugsgröße (in 2015: 405€ a month = 1/7*2,835€) then you will no longer be insured free of cost under your wife's family cover in public health insurance, but have to get your own policy and pay for it as a voluntary member, which means paying that contribution on all your worldwide income.

 

And it could of course rise to more than 25%, and German public health insurance also has a history of asking for contributions on an ever expanding contributory base, so by 2023 they could well charge 25% of all your worldwide income as a couple, not just on your worldwide income like they do under today's rules.

 

Never mind that God only knows what the tax rates will be like in 2023.

 

 

Third question: taxation of foreign pensions. In my case I will be getting a pension from Canada and 15% withholding tax will apply. No further tax will be due in Germany.

 

Think again.

It only means that the 15% that you paid to Canada will be deducted from the German income tax that you'll owe, see article 23 (2) B) ee) of the double taxation agreement between Germany and Canada

 

So, if you paid 2,700€ (= 0,15*18,000€) in tax to Canada on your Canadian pension, then Germany will happily tax your Canadian pension according to German rules (see the above differentiation between social security, company & civil service and private pensions), and give you a tax credit of 2,700€ on the resulting German income tax.

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Nope, if you do start off by citing my post, please also use the link that I provided in it.

 

Yes sorry but nice to find out about an extra deduction eh. So to clarify the Retenfreibetrag applies to a Government pension but not if your employer offers a topup pension. The Altersentlastungsbetrag is used to offset a portion of the rental income in retirement, correct? When I asked about Unemployment/Healthcare I should have asked about Unemployment/Pension instead as I had already asked and you answered the question of healthcare costs. Also found this Private Pension from German Lebensversicherung.

 

OK to get an understand of how this works here’s an example. Note these are rough numbers as without software it’s hard to get exact numbers. I’m also not taking into account withholding tax as I’m assuming as a dollar paid in tax elsewhere offsets a dollar of tax here. Also regarding health care I’m not sure if you pay half or the full amount. Also I’m assuming the spouse is co-insured

 

 

  • Gross income less healthcare = taxable income.
  • Healthcare @ 15.5% of world wide income

 

  • Employer pension so no tax break for that
  • Capital income: taxable income is gross less healthcare x 26.375

 

  • Altersentlastungsbetrag: ignoring as it will only make small difference.
  • Married

Income of 47,000€ ( pension income foreign and German, rurup rental income etc ) and another 12,000 from capital.

 

Healthcare

 

12,000 x 15.5% = 1,860

 

47,000 x 15.5%= 7,285

 

Total 9,145

 

Taxable Income

 

Capital:12,000 less 1,860 x 26.375% = 2710

Other income 47,000 less 7285 = 39715

 

Entering this into the German tax calculator gives us a burden of 5,475 and gives you a take home of 41,670. From what I’ve read the total tax burden would be lower in Canada due to extra tax breaks seniors get. there is software which will allow you to calculate your exact tax burden but it only runs on XP. I’m planning on picking up a used machine in the next bit, once I’ve got it up and running I’ll update the numbers here.

 

Edit: my number is too high should be 6,696 but running out of time to edit, but as mentioned one needs to take into account that if the spouse has income over 400€ you'll need to plan on another 150€ or so a month extra.

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As you found out, public health&nursing insurance is capped at (in 2015):

Beitragsbemessungsgrenze * (14.9% + 2.6%)

= 49,500€ * 17.5%

= 8,662.50€

 

************************************************************

 

Abgeltungsteuer&Soli on capital income (for capital income no other deduction than the Sparer-Freibetrag is permitted):

 

  • (capital_income - Sparer-Pauschbetrag) * 26,375%
    = (12,000€ - 1,602€= * 0.26375
    = 10,398€ * 0.26375
    = 2,742.47€

 

Einkommensteuer&Soli on all other income (use the Parmentier income tax calculator):

 


  • Your personal tax rate on [other_income -
Rentenfreibetrag - Altersentlastungsbetrag - health&nursing] * (other_income - Rentenfreibetrag - Altersentlastungsbetrag - health&nursing)
= Your personal tax rate on [47,000€ - Rentenfreibetrag - Altersentlastungsbetrag - 8,662.50€] * (47,000€ - Rentenfreibetrag - Altersentlastungsbetrag - 8,662.50€)

 

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Abgeltungsteuer&Soli on capital income (for capital income no other deduction than the Sparer-Freibetrag is permitted):

 

  • (capital_income - Sparer-Pauschbetrag) * 26,375%
    = (12,000€ - 1,602€= * 0.26375
    = 10,398€ * 0.26375
    = 2,742.47€

 

 

Duh forgot the tax free portion, face punch for that one!

 

I think I’m going to have to wave the white flag on this one, it is just too complicated to get an exact number.

 

post-2537-14211448270704.jpg

 

Now the reason why I’m being so anal about this whole thing is I’ve noticed that people either wait way too long (70 or later) and then retire with a big pension and wished they hadn't watied so long, or they do zero planning retire and hopfor the best (my father in law) and then get stuck spending winters in a cold climate (me is a snow bird at heart). The wife and I are both mid 50s and hoping to retire on her 60th birthday. If she worked till her 66th birthday than we’d fine. The other issue, which is a bit more complicated, is where to live, stay in Germany or return to Canada or perhaps somewhere else.

 

What I will do is take my income less healthcare and punch that into the German tax calculator, for planning purposes that will be fine. As we get within shooting distance I will pay a steuerbreater to run numbers for me.

 

Also my Vista (whoot whoot) laptop should arrive today and which means I’ll be able to run FI Metrics on it.

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@PandaMunich thanks we visited the Rente people several times and they have been nothing but helpful. My wife is about to sign off on a package, mucho appreciate you input. One note if you've worked in more than 2 countries it's important that you visit check the status of your pension. My wife had a ton of problems getting it sorted out but it's done now. 

 

 

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