Living in Germany with US Retirement Accounts, 401K, IRA, Roth

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Just moved to Germany... I'm a US citizen, and my wife is a German citizen with a green card. I've read various older articles here regarding the various US retirements accounts and how they are treated under German tax law, but I wanted to just summarize my understanding, and get some confirmation that it's correct... and hopefully provide a more summarized resource for others. I am not a tax accountant... I'm just a regular person who does their own US taxes, and will attempt to do his own German taxes as well. I'm hoping to get some more knowledgeable people to bless/correct my statements here.

 

My understanding is that Germany doesn't recognize any of the US retirement accounts... Traditional IRA's, Roth's, 401K's, 403b's, 457's, etc. They are treated just like a regular brokerage account. Some articles on Toytown have suggested not telling the German tax office about these accounts. Ignoring the legality of doing that for a moment, it seems to me that if you might end up staying in Germany for a long period of time, that could get tricky when you want to start using money from those accounts in retirement. So I'm going to assume that people reading this article will be declaring these accounts.

 

401K/403b/457/Traditiona IRA (pretax) Accounts

In these accounts, my understanding is that any money I would contribute while in Germany is not tax free. So putting money in these accounts while being a resident of Germany doesn't make much sense. The US won't tax the money deposited (coming from your paycheck most likely), but Germany will tax it. And in the future, when the money is taken from the account, the US will then tax it again. No idea how one would handle the idea of avoiding double taxation in this case. In addition, capital gains made in these accounts are taxable in the year they are realized in Germany. So if you sell a mutual fund or stock in one of these accounts (or "rebalance"), and have a gain (or loss), this needs to be declared on your taxes. The dividends/interest received is also taxable in Germany. So even if you don't contribute to one of these accounts while you are in Germany, you will be taxed when you sell for a gain or earn dividends/interest, and then taxed by the US when you take money from the account in the future, since the US assumes all money in these accounts, whether contributions or gains, are pretax. Someone please correct me if I'm wrong. This then begs the question of what to do about these accounts when moving to Germany. One could invest your money inside these accounts before coming to Germany for the long term, and then just let it sit until you return to the US. You'd have to pay taxes on dividends/interest while in Germany, but if your investments are mutual funds that just increase in value in your account, then there should not be any taxes due in Germany. You could of course take the money out of these accounts altogether, but that would result in a ridiculous tax hit + 10% penalty. Any other suggestions?

 

1) Anyone aware of any discussion between the US and Germany to make the tax laws in Germany match the US tax laws for these accounts?

 

2) My wife is German. If we decide to stay in Germany, and she gives up her green card, I assume she is no longer subject to US taxes. So if she has a 401K plan in the US, and it's time for her to retire, will the US tax this account, or will she somehow get that money tax free? (too good to be true) Germany should not want to tax the account, since it is treating all these retirement accounts as regular brokerage accounts.

 

Roth IRA's

Roth IRA's contain post-tax money, and are exempt from US taxes when the contributions and gains are withdrawn, if you follow the IRS' rules for doing so. Germany will not recognize this tax exempt status. So although Germany will also not tax you for withdrawing money from these accounts (just like any other brokerage account) they will tax you on gains and dividends/interest in the year they are made... which turns your Roth into a regular brokerage account, negating the value of having it.

 

529's

529 accounts are not retirement accounts, but rather college savings accounts. In the US, you deposit post-tax money (which might be tax free for state income taxes), and the capital gains and dividends/interest accrue tax free. The account can then be used tax free for a qualifying college. My understanding is that very few colleges in Germany qualify. So if you saved money for college for your kids like I did, and then move to Germany where tuition is essentially free, it's unclear to me if taking money from those accounts will result in a 10% penalty. I would think the IRS would say that it would, even if you are using the money for living expenses, books, etc. for a top university in Germany, just because it's not on the official list of colleges that the US maintains. Talking to my 529 plan provider, it really seems like a gray area. And, as usual, capital gains and dividends/interest from these accounts will be considered taxable by Germany anyway. So essentially these accounts become worthless, and likely an overall negative because of the likely/possible 10% penalty, if you plan for your kids to attend college in Germany.

 

 

Obviously if you intend to be in Germany for only a few years, it will likely make sense to just pay the taxes due during that time, and when you go back to the US, continue to receive the benefits of these accounts. It will make sense to sell 

 

 

Wash Rule

My understanding is that Germany does not have a wash rule. Meaning, if you sell a stock/fund for a loss, you can turn around immediately and buy the same stock/fund, and still declare the loss for that tax year. In the US you need to wait 30 days (it's a bit more complicated than that in reality). So if you have a capital gain currently in one of the accounts above, you can sell anything that's currently showing a loss to offset that gain, just like you'd normally do in a brokerage account. In the US, it won't matter, since gains/losses don't matter in the above accounts. But in Germany, it could negate a gain that would otherwise be taxable.

 

 

I'd really appreciate it if anyone reading this could please confirm or correct what I've written, answer my questions, and just generally comment. Thanks.

 

 

 

 

 

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Straightpoop/others might have some more insight, but:

 

4 hours ago, StephenGermany said:

401K/403b/457/Traditiona IRA (pretax) Accounts

In these accounts, my understanding is that any money I would contribute while in Germany is not tax free. So putting money in these accounts while being a resident of Germany doesn't make much sense. The US won't tax the money deposited (coming from your paycheck most likely), but Germany will tax it. And in the future, when the money is taken from the account, the US will then tax it again. No idea how one would handle the idea of avoiding double taxation in this case. In addition, capital gains made in these accounts are taxable in the year they are realized in Germany. So if you sell a mutual fund or stock in one of these accounts (or "rebalance"), and have a gain (or loss), this needs to be declared on your taxes. The dividends/interest received is also taxable in Germany. So even if you don't contribute to one of these accounts while you are in Germany, you will be taxed when you sell for a gain or earn dividends/interest, and then taxed by the US when you take money from the account in the future, since the US assumes all money in these accounts, whether contributions or gains, are pretax. Someone please correct me if I'm wrong. This then begs the question of what to do about these accounts when moving to Germany. One could invest your money inside these accounts before coming to Germany for the long term, and then just let it sit until you return to the US. You'd have to pay taxes on dividends/interest while in Germany, but if your investments are mutual funds that just increase in value in your account, then there should not be any taxes due in Germany. You could of course take the money out of these accounts altogether, but that would result in a ridiculous tax hit + 10% penalty. Any other suggestions?

 

1) Anyone aware of any discussion between the US and Germany to make the tax laws in Germany match the US tax laws for these accounts?

 

Re: 401(k)s and IRAs - http://www.toytowngermany.com/forum/topic/161462-how-to-contribute-to-roth-ira-from-germany/?do=findComment&comment=3187955

 

It won't make sense to continue contributing to a 401(k) or Traditional IRA (due to only being able to contribute after tax money), but you should be OK to continue to contribute to a Roth IRA as long as you use Foreign Tax Credits to eliminate your US tax liability or if you make more than the cap on the Foreign Earned Income Exclusion.  You won't owe tax on any dividends or realized/paper gains.

 

4 hours ago, StephenGermany said:

2) My wife is German. If we decide to stay in Germany, and she gives up her green card, I assume she is no longer subject to US taxes. So if she has a 401K plan in the US, and it's time for her to retire, will the US tax this account, or will she somehow get that money tax free? (too good to be true) Germany should not want to tax the account, since it is treating all these retirement accounts as regular brokerage accounts.

 

She will have to pay tax in the US because you have to pay tax on 401(k) distributions.  If y'all are living in Germany at that point, it would also most likely count as taxable income here.

 

4 hours ago, StephenGermany said:

Roth IRA's

Roth IRA's contain post-tax money, and are exempt from US taxes when the contributions and gains are withdrawn, if you follow the IRS' rules for doing so. Germany will not recognize this tax exempt status. So although Germany will also not tax you for withdrawing money from these accounts (just like any other brokerage account) they will tax you on gains and dividends/interest in the year they are made... which turns your Roth into a regular brokerage account, negating the value of having it.

 

A Roth IRA is great for investing in Germany.  You don't have to worry about paying taxes on the distributions if you end up retiring back in the US, there are no issues with your yearly tax filing here in Germany, and finally, it is kind of the only way to own ETFs/Mutual funds as if you own German mutual funds, the US will probably consider it a PFIC and vice versa in Germany for American mutual funds outside of a pre-exisiting retirement count.

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Thanks very, very much for your reply! OK, so most of what I wrote was incorrect... good to know! I don't see a way to add a disclaimer to my original post, so hopefully other people will read the thread until your post...

 

So I should essentially not mention any of those accounts on my German taxes, as gains/losses/dividends in them don't have tax consequences in Germany either. Very easy.

 

Few more questions...

 

1) I saw very few posts here regarding rollovers. I'm assuming that if I have an existing 401K, and roll it over into an IRA while living in Germany, that this should also be fine, given it's not taxable in the US, and it's just converting the account from one type of retirement account to another... and since I'm not mentioning (apparently) any of my retirement accounts in the US on my German tax forms anyway.

 

2) Any further advice on 529's? Or is what I said above basically correct?

 

3) Regarding your last statement about Roth's... you mentioned the distributions are tax free in the US which I know... but are you thinking that if we retire in Germany that they would be taxable there? The whole amount or just the gains? Either would of course be bad.

 

Thank you!

 

 

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1) I am not 100% sure, but as long as it doesn't create a taxable event in the US, then I would imagine you'd be OK in Germany

 

2) Sorry, I don't know anything about 529.

 

3) My understanding is that the distributions would be treated as normal income and taxed as such (as in, if you took out €10,000 and that was your only income for the year, your tax return for the year would state that you had an income of €10,000 and you would pay the necessary taxes on it).  It would be no different than just buying normal ETFs/stocks in Germany and then selling it (well, maybe the exact tax rate might be different, but in principle, the same).

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For #3, I asked about a Roth... the contributions are post-tax, and in the US distributions are tax free, for both the contributions and the gains. If Germany would tax the distributions, that would result in double taxation of the contributions, which I would find hard to believe. If Germany taxes the gains, I would think they would tax them at the time you make the gains (which they don't, according to this thread), not when the money is taken from the account... what do you think?

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You're not being double taxed.  If you were to go to Deutsche Bank and open up an investment account and then bought some individual stocks and/or ETFs, you would be purchasing them with after-tax dollars and you would have to pay tax on any dividends and any gains when you sold hem.  Contributing to a Roth is no different.  You're contributing after-tax dollars, but you don't have to pay taxes on any dividends or gains.  You will still have to pay income tax on the income you derive from the account when you start getting distributions, as Germany doesn't recognize its tax free status.

 

A Roth IRA in Germany is a hedge against where you might end up retiring and a way to avoid the complications America and Germany create for people with mutual funds/ETFs located in another country.  Best case, you end up saving money if you retire in America.  "Worst case" you're able to invest and make more money than you would by leaving it all in a Tagesgeldkonto or having to pay all the taxes associated by having your investments outside of an IRA.

 

It's not the best deal if you end up retiring here, but AFAIK, there aren't any better alternatives for long-term investing as a US citizen residing in Germany.

 

(This all assumes we're correct (as it seems we are) with regards to Germany respecting the tax free growth of a fund/stock within a Roth IRA).

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My confusion was from your 10,000 euro distribution comment. Your taxes on a 10,000 distribution would then be some kind of complicated taxation of the prorated portion of your gains to that point... Not on the whole 10,000... Agree? So if you'd contributed 100,000 lifetime to the account, and the value of the account is 150,000 when you take your first distribution, would you not only be taxed on 1/3 of the 10,000, since your gains are 1/3 the value of your overall balance? Or something like that... Given the original contributions should not be taxed again...

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Stephen,  I am in the same sitation as your wife but already surrendered my green card. Before your wife does ,make sure you know all about being a "covered expat" and how to avoid it Learn about IRS form 8854! You might want to read my older posts about it

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Hi wurzel333, I've learned a lot since I wrote that post above! Yes, I'm familiar with the long term green card holder "tax". My wife still has her green card. I think we're OK.

Appreciate the warning!

 

And since I've been summarizing/correcting some of my posts from when we moved here... here are some concluding comments for others reading this in the future...

 

1) All pretax retirement accounts... 401K, 403b, 457, and pretax traditional IRA's are not taxable until distributions are made in the US or Germany. So you can contribute to the

accounts tax-free for both US taxes (of course) and in Germany (although I haven't contributed since we've been in Germany, and haven't submitted a Steuererklärung deducting income for having contributed). You can trade stocks, earn dividends, etc in those accounts without paying taxes. Distributions are taxable in both countries, so the double taxation foreign tax credit will come into play. I -think- the account needs to exist before you come to Germany, or at least I recall reading something about the accounts being "existing" in the double taxation agreement. You can also do rollovers from say a 401K to an IRA without paying taxes in Germany (or of course the US).

 

2) For Roth IRA's, the result is not as good. Roth IRA's take posttax contributions. In the US, distributions are tax free. In Germany however, the gains are likely taxable. So the tax benefit of a Roth IRA is then lost, as compared to a vanilla brokerage account. I don't plan to contribute more money to my Roth IRA's. 

 

3) I still don't have a really good answer on the 529 accounts. In Germany, my guess is they will think of these accounts as normal brokerage accounts. So taxes due when funds are sold or dividends are paid. And worse yet, if you send your kids to a German (free) university, and want to use 529 money for living expenses, books, etc, I think the letter of the law says this won't work for most German universities, because most of them are not on the official list. https://ifap.ed.gov/ifap/fedSchoolCodeList.jsp  So that would mean you would have to pay a 10% penalty on top of normal income taxes on the gains when you take distributions. I'm currently not trading in those accounts to avoid issues.

 

Hope this helps someone.

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Thank you for your post, Stephen.You did confirm that I am not owing taxes anywhere on thr 401k until I start withdrawing,. Istill have to figure out how to get information on my status whether or not I am a covered expat and on the "how to" of withdrawals re. The taxes.I need to know if I can claim the regular deductions and if yes, if I then have to pay taxes in Germany on the amount that thus became tax free in the States.I'll call thr IRS to ask about my status in the coming week, but somehow I doubt thst I'll get an answer

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wurzel333,

 

Just for others, here's a link to the other thread where we are discussing the expat tax issue...

 

 

 

 

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Question... as I said at the top of this thread, I have a mix of US retirement accounts. I have never been self-employed before, but will be starting here in

Germany very soon. Taking a quick look at good ways to save for retirement in the US when one is self-employed, the SEP IRA looks good. Problem I have

with this, is reading the double taxation agreement between the US and Germany, I see this text (slightly edited to make sense out of the original text)...

 

The provisions (that state that contributions to US pension plans are tax free in the US and Germany) shall -not- apply unless:
a) contributions by or on behalf of the individual, or by or on behalf of the individual’s employer were made before the individual began to

exercise an employment or self-employment in the other State

 

So this is rather tricky. I have been living in Germany for 1.5 years, but have not worked. So I have not started employment here. So does that mean I can

open a new SEP, contribute some money (knowing I will have enough income post foreign income exclusion) before I work, and then I'm good contributing for

life? Another way around this would be to open a SEP, and roll money into it from an existing IRA, since rollovers are allowed. I -think- the intent here, is that

they are OK with you continuing to contribute to existing US accounts, but don't want you opening a new one, and starting to contribute from scratch. But the

way it's worded, I think I can do either of the things I said.

 

Any opinions on this?

 

Thanks.

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@StephenGermany

 

The only thing official, other than Article 18A of the treaty itself, that I have been able to find on the subject of the German tax treatment of contributions to and distributions from a US IRA is the following memorandum from the Oberfinanzdirektion Karlsruhe.

 

Provided that the IRA is one of the types recognized for favorable treatment under Art 18A of the treaty and was established prior to the transfer of residence to Germany, continuing contributions to the account (at least those made after 2008) are apparently deductible in Germany to the extent allowed under German law.

 

The Karlsruhe memo, however, is a bit fuzzy on the subject of the taxation of distributions.  It appears to understand only two possibilities:  total lump sum withdrawal or receipt of a "Rente".

 

There is no discussion or apparent understanding of the freedom enjoyed by an American IRA owner to take distributions in varied amounts at whatever times he sees fit.   Assuming an IRA holder begins taking distributions after age 59 1/2 but only irregularly and in varying amounts, will such distributions qualify for treatment as a "Rente" or a series of lump-sum "capital" distributions?  What if the IRA holder waits until 70 1/2 when distributions from traditional IRA's become mandatory?  Is the Minimum Required Distribution (MRD) after attaining age 70 1/2 a "Rente"?  What about an amount in excess of the MRD? Less?

 

I simply do not know.  Maybe @PandaMunich will join in the discussion and offer her thoughts.

 

Here, in the meantime, is the text of the OFD Karlsruhe memo:

 

Oberfinanzdirektion Karlsruhe v. 16.10.2012 - S 2257b/29 – St 126

 

Steuerliche Behandlung von Beiträgen an und Leistungen aus einem amerikanischen 401(k)-Plan

 

Im Inland unbeschränkt Steuerpflichtige können Bezüge aus amerikanischen Altersvorsorgeplänen erhalten. Hierunter fallen insbesondere die sog. 401(k)-Pläne.

 

Die USA differenzieren zwischen steuerbegünstigten (qualified) und nicht steuerbegünstigten (non qualified) Vorsorgeplänen. Bei den sog. 401(k)-Plänen handelt es sich um steuerbegünstigte Vorsorgepläne, bei denen der Arbeitnehmer auf die sofortige Auszahlung eines Teils seines Gehalts oder seiner Gehaltserhöhung zugunsten einer Abführung an den Vorsorgeplan verzichtet. Dies führt in den USA zu Steuervergünstigungen (z. B. Steuerfreiheit für die Beiträge). Eine Besteuerung erfolgt in den USA erst mit der Auszahlung an den Begünstigten (sog. nachgelagerte Besteuerung).

 

Für die Anwendung des deutschen Steuerrechts ist eine Qualifizierung der ausländischen Altersvorsorgepläne nach deutschem Recht vorzunehmen. Der 401(k)-Plan ist vergleichbar mit externen Versorgungseinrichtungen (Pensionskassen, Pensionsfonds, Versicherungsunternehmen) im Inland. Dies ergibt sich aus dem Protokoll vom 01.06.2006 zur Änderung des DBA-USA vom 29.08.1989 ( BGBl 2006 II S. 1184, Nr. 16 zu Art. 18A, S. 1206), durch das auch ein neuer Art. 18A (Altersvorsorgepläne) in das Abkommen aufgenommen wurde.

 

Danach ist für die im Protokoll genannten US-Altersvorsorgepläne auch der Anwendungsbereich des § 3 Nr. 63 EStG eröffnet. Die durch das Protokoll neu eingeführten bzw. geänderten Vorschriften sind erstmals auf Steuern anzuwenden, die seit dem 01.01.2007 im Abzugsweg (Lohnsteuer auf Beiträge, wenn keine Veranlagung durchgeführt wird) bzw. seit dem 01.01.2008 (veranlagte Einkommensteuer auf Leistungen) erhoben werden. Im Protokoll sind folgende US-Altersvorsorgepläne genannt:

 

  • 401(k)-Pläne,

     

  • anerkannte Pläne („qualified plans”) nach § 401(a) Internal Revenue Code,

     

  • individuelle Altersvorsorgepläne einschließlich individueller Altersvorsorgepläne, die Teil eines vereinfachten betrieblichen Altersvorsorgeplans („simplified employee pension plan”) nach § 408(k) Internal Revenue Code sind,

     

  • individuelle Rentensparpläne (IRAs = „individual retirement accounts”), individuelle Rentenversicherungen („individual retirement annuities”) und Pläne („accounts”) nach § 408(p) Internal Revenue Code,

     

  • steuerrechtlich anerkannte Rentenpläne („qualified annuity plans”) nach § 403(a) Internal Revenue Code,

     

  • Pläne nach § 403(b) Internal Revenue Code und

     

  • staatliche Pläne („governmental plans”) nach § 457(b) Internal Revenue Code,

     

nicht jedoch Roth-IRAs nach § 408A) Internal Revenue Code.

 

1. Steuerliche Behandlung der Beiträge

 

Zunächst ist nach den allgemeinen Grundsätzen zu prüfen, ob Deutschland in der Ansparphase das Besteuerungsrecht inne hat. Bei den in Frage kommenden Arbeitnehmern kann es sich z. B. entweder um von den USA nach Deutschland entsandte Arbeitnehmer US-amerikanischer Konzerne oder aber um inländische Arbeitnehmer, die bei einem in Deutschland ansässigen Tochterunternehmen eines US-amerikanischen Konzerns tätig sind, handeln.

 

Für Beiträge bis zum 31.12.2006 kommt eine Steuerbefreiung nach § 3 Nr. 63 EStG nicht in Betracht, da die abkommensrechtlichen Voraussetzungen noch nicht erfüllt waren. Die sich durch das o. g. Protokoll vom 01.06.2006 und der Einführung des Art. 18A DBA-USA ergebenden Änderungen sind erstmals für Beträge, die seit dem 01.01.2007 bzw. dem 01.01.2008 gezahlt wurden, anzuwenden. Dies gilt sowohl für 401(k)-Pläne als auch für alle weiteren im Protokoll genannten US-Altersvorsorgepläne (s. o.).

 

Bei den im Abzugsweg erhobenen Steuern kann die Steuerbefreiung des § 3 Nr. 63 EStG bereits für Beiträge seit dem 01.01.2007 gelten. Steuern gelten als im Abzugsweg erhoben, wenn keine Veranlagung durchgeführt wird.

 

Die Ausnahmeregel greift nicht bei einem in Deutschland unbeschränkt Steuerpflichtigen ohne inländischen Arbeitgeber. Da in diesem Fall kein Steuerabzug vom Arbeitslohn vorgenommen wird, besteht eine Veranlagungspflicht (§ 25 Abs. 1 i. V. mit § 46 EStG).

 

Für diesen und alle anderen Fälle kommt die Steuerbefreiung des § 3 Nr. 63 EStG dem Grunde nach erst für Beiträge seit dem 01.01.2008 in Betracht. Die Höhe der Steuerbegünstigung richtet sich nach den allgemeinen innerstaatlichen Voraussetzungen des § 3 Nr. 63 EStG (z. B. Höchstbeiträge; s. a. auch BMF-Schreiben vom 31.03.2010, BStBl 2010 I S. 270, Rz 247 ff.).

 

2. Steuerliche Behandlung der Leistungen

 

Zunächst ist auch hier die Frage zu klären, wem das Besteuerungsrecht für die Zahlungen aus einem amerikanischen Altersvorsorgeplan zusteht. Erhält ein im Inland unbeschränkt Steuerpflichtiger Leistungen aus einem amerikanischen Altervorsorgeplan, so unterliegen diese grundsätzlich der deutschen Besteuerung (Welteinkommensprinzip). Die Leistungen aus einem amerikanischen Altersvorsorgeplan sind abkommensrechtlich stets im Ansässigkeitsstaat zu besteuern. Dabei kommt es nicht darauf an, ob die Auszahlungen als Ruhegehalt oder als andere Einkünfte anzusehen sind. Sowohl Art. 18 Abs. 1 DBA-USA (Ruhegehälter) als auch Art. 21 DBA-USA (andere Einkünfte) weisen das Besteuerungsrecht dem Ansässigkeitsstaat zu.

 

Auf Bundesebene wurde beschlossen, dass Leistungen aus den im Protokoll genannten US-Altersvorsorgeplänen nach § 22 Nr. 5 EStG zu besteuern sind. Es ergibt sich demnach folgende steuerliche Behandlung:

 

2.1 Fallgruppe 1: Besteuerungsrecht in der Ansparphase bei Deutschland

 

Hat der Anleger in der Ansparphase Beiträge für einen der genannten US-Altersvorsorgepläne geleistet und wurden diese Beiträge in Deutschland nach § 3 Nr. 63 EStG steuerfrei gestellt, sind die sich aus diesen Beiträgen insoweit ergebenden Leistungen nachgelagert nach § 22 Nr. 5 Satz 1 EStG zu versteuern.

 

2.2 Fallgruppe 2: Besteuerungsrecht in der Ansparphase bei den USA

 

  1. Beiträge seit 2008

     

Beruhen die Leistungen auf Beiträgen, die in der Ansparphase in den USA seit dem 01.01.2008 steuerfreigestellt waren, dann gelten die Beiträge in voller Höhe als nach § 3 Nr. 63 EStG gefördert. Die sich insoweit ergebenden Leistungen sind grundsätzlich nachgelagert nach § 22 Nr. 5 Satz 1 EStG zu versteuern.

 

  1. Beiträge vor 2008

     

Die aus den vor dem 01.01.2008 in den USA steuerfrei gestellten Beiträgen beruhenden Leistungen sind nach § 22 Nr. 5 Satz 2 EStG steuerlich zu differenzieren.

 

Soweit die Leistungen auf Beiträgen beruhen, die nicht nach § 3 Nr. 63 EStG als gefördert gelten, erfolgt die Besteuerung dieser Leistungen

 

  • nach § 22 Nr. 5 Satz 2 Buchst. a i. V. mit § 22 Nr. 1 Buchst. a Doppelbuchst. bb EStG (Ertragsanteil), sofern die Leistung als lebenslange Rente, Berufsunfähigkeits-, Erwerbsminderungs- oder Hinterbliebenenrente ausgezahlt wird[J1] ,

     

  • nach § 22 Nr. 5 Satz 2 Buchst. b i. V. mit § 20 Abs. 1 Nr. 6 EStG (in der jeweils gültigen Fassung), sofern die Leistung als Kapitalleistung (häufigster Fall) ausgezahlt wird. Dies gilt auch, wenn Kapital aufgrund der vorzeitigen Beendigung des Altersvorsorgeplans ausgezahlt wird.

     

Dies hat zur Folge, dass sich die aus einem der genannten US-Altersvorsorgepläne ergebenden Leistungen aufzuteilen sind. Da die ausländischen Versorgungseinrichtungen keine Bescheinigung nach § 22 Nr. 5 Satz 7 (neu Satz 8) EStG erstellen, hat der Steuerpflichtige die Aufteilung nach den Regelungen des BMF-Schreibens vom 11.11.2004, BStBl 2004 I S. 1061, darzulegen. Hierbei ist grundsätzlich eine genaue Aufteilung anzustreben, allerdings erlaubt das BMF-Schreiben auch eine Aufteilung im Verhältnis der als steuerlich gefördert geltenden zu den nicht als gefördert geltenden Beiträgen (beitragsproportional). Eine beitragsproportionale Aufteilung darf aber nicht zu einem offensichtlich unzutreffenden Ergebnis führen.

 

Oberfinanzdirektion Karlsruhe v. 16.10.2012 - S 2257b/29 – St 126

 

Fundstelle(n):
[KAAAE-20836]

 

 

 


 

 

 

 

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Thanks @straightpoop!

 

I will work on digesting that memo. You said the memo says the account needs to exist before establishing residence in Germany. Yet the double taxation

agreement only talks about having the account prior to "exercising employment" in Germany. I wonder how they made that jump. Of course most

people move here and start to work right away, but that's not my situation. So I find myself having established a US SEP IRA after establishing residence,

but before starting work (self employment)... and I'm hoping to contribute money free of German/US taxes to this account. It's a SEP, so you can put

a lot of money in there. I'm also wondering what "under German law" would mean in this case. Given this would need to be a Sonderausgabe (I think),

do you think they mean that some kind of limit would apply under German law, which could be more restrictive than US law for that type of account?

Thank you.

 

 

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As far as I understand it, article 18A in the double taxation agreement between Germany and the US (DTA) is just meant to avoid inconvenience for US employees who have been posted (= seconded to) for a few years to Germany (and of course vice versa also for German employees posted to the US), in order to allow them to continue contributing to their 401k.

It is not meant to apply to people who aren't on such postings. 

Such postings are governed by certain rules, it's only possible for 2 years (which can be extended under certain conditions, to up to 5 years) and, for example, such a person would remain in the US social security system, and only pay income tax to Germany, not social security contributions.

 

It's also possible for self-employed persons to "post" themselves to Germany, i.e. to remain for a time under their home country's social security system, one of the prime examples are Brits who avoid having to pay high German health insurance contributions for self-employed for the first two years in Germany by using this loophole, see here.

 

My view seems underpinned by this old IWW article, which explains why article 18A of the DTA was introduced (their website is offline for maintenance right now, but it's still in Google's cache): http://webcache.googleusercontent.com/search?q=cache:lTIuuDnw9YgJ:www.iww.de/pistb/archiv/auslandsentsendung-steuerlicher-abzug-von-beitraegen-zur-altersvorsorge-nach-dem-neuen-dba-usa-f33214+&cd=4&hl=de&ct=clnk&gl=de 

and by this excerpt from a Kommentar (= books that explain the law in more detail) on the DTA: http://www.beck-shop.de/Endres-Jacob-Gohr-Klein-DBA-Deutschland-USA-Doppelbesteuerungsabkommen/productview.aspx?product=21693 

If you look on page 405 in this excerpt, at Randziffer (number in the margin) no. 3, it explains that section 2 of article 18A is meant to make secondments easier.

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Both of you have far more experience than I do at this stuff. I'm just a guy reading the text, and assuming that what it says, is what actually applies.

Hoping you will indulge me a little further...

 

1) Article 18A also talks about self-employed people. I don't see how that can be someone "seconded" to Germany. Thoughts?

 

2) I have not read the whole article you sent above... but it's written by a Steuerberater... couldn't it be that this is just his personal opinion of the text?

 

3) Does it matter -why- the text is in the treaty? Isn't it the text itself that dictates how each country has agreed to tax pension plans in the other country?

 

On another note, assuming I could make use of this text to save some taxes, part of the text in the Article worries me...

 

"The relief available under this paragraph shall not exceed the relief that would be allowed by the other State to residents of that State for contributions to, or benefits accrued under, a pension plan or plans established in that State. The competent authorities of the Contracting States shall determine the relief available under this paragraph pursuant to the preceding sentence."

 

-If- the State here is Germany, then this would imply that I can only deduct from my income, the amount that a German can put into a similar plan in Germany... which

from what I can tell, is way less than I could put into a SEP IRA living in the US (max of $53,000).

 

Thanks!!

 

 

 

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On 2/1/2017, 10:17:31, StephenGermany said:

"The relief available under this paragraph shall not exceed the relief that would be allowed by the other State to residents of that State for contributions to, or benefits accrued under, a pension plan or plans established in that State. The competent authorities of the Contracting States shall determine the relief available under this paragraph pursuant to the preceding sentence."

 

-If- the State here is Germany, then this would imply that I can only deduct from my income, the amount that a German can put into a similar plan in Germany... which

from what I can tell, is way less than I could put into a SEP IRA living in the US (max of $53,000).

 

@StephenGermany

 

Your understanding of the language quoted above is correct.  Assuming your SEP qualifies as a plan recognized under Art18A in terms of when it was established, etc., the German income tax advantages of any qualifying contributions you make to it will be no more or less than what are allowed to contributions to the equivalent German plans.

 

Another thing to keep in mind:  in order for an SEP or IRA contribution to qualify under US tax law, the qualifying wages or net earnings from self-employment upon which the contribution is based cannot be excluded from gross income under the foreign earned income exclusion (§911).

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Thank you!

 

Been googling around to find out what the max contribution per year would be... I've seen some conflicting information online... and it's not as straight forward

as in the US... something about 4% of something, and 80% of that is tax deductible... do you happen to have a pointer for me to something pretty clear? I would

be self-employed if that makes a difference. Thank you.

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Hi @Straightpoop, any thoughts on how to determine the max amount I can contribute? I talked to the FInanzamt, and they thought it would

be in the 15-20K range/year. But looking at section 63 of the income tax law, it sounds like much less... although in my case, I am sort of both

employer and employee, so maybe it's something outside the scope of section 63... thanks.

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I am not particularly knowledgeable on the subject of the German taxation of contributions to and payments from pension plans.  Perhaps @PandaMunich

can better enlighten you.

 

My understanding, however, is that 82% of contributions made in 2016 are potentially deductible.  (An additional 2% will be added annually until 100% is eventually reached in 2025.)

 

There is a also a maximum annual amount that can be deducted depending upon filing status.  In 2016 the max amount of deductible contributions is 82% of €22,762 - double that amount (82% of €45,524) for a married couple filing jointly.

 

So far as I can determine, being self-employed or otherwise not obligated to contribute to the gesetzliche Rentenversicherung does not affect these limits.

 

 

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