An analysis by Flick Gocke Schaumburg, Taxand Germany
Germany’s Annual Tax Act 2024 has revised the taxation of foreign retirement income under Sec. 22 no. 5 of the Income Tax Act. From 2025, foreign pension plan payments (e.g., 401(k), IRAs) will face stricter taxation, fully recognised as income if contributions received tax benefits abroad. Previously, such payments enjoyed partial tax exemptions, unlike domestic plans.
Payments from plans funded with post-tax income remain unaffected. The changes primarily impact US plans and may require strategic planning, such as early payouts or timing relocations. Tax advice is recommended to minimise implications.
Michal Fabian Kühn and Stephan Linseisen LL.M. from our German member firm Flick Gocke Schaumburg have analysed these new rules in more detail here.