German pensioners abroad: Sudden tax surprise on their pension!

German pensioners abroad: Sudden tax surprise on their pension!

German pensioners who spend their retirement in countries like Thailand are increasingly faced with unexpected tax demands. How Pension notice24 reports, many will soon receive mail from the Neubrandenburg tax office and will have to pay income tax on their German pension. Many people wrongly assume that their pension abroad is tax-free.

German tax law refers to the so-called limited tax liability (Section 1 Para. 4 EStG), which always applies when a pensioner moves his place of residence abroad. This means that the pension becomes taxable from the first euro, without a basic allowance. Personal benefits such as spousal splitting or child allowances are not applicable. The financial impact is significant: a pensioner in Thailand with a monthly pension of 1,000 euros could be hit with taxes of around 3,000 to 4,000 euros. In contrast, with unlimited tax liability, a basic allowance of 12,096 euros would apply in 2025, which would mean no tax burden.

High additional demands and the path to unlimited tax liability

An unpleasant surprise is the possibility that high back taxes can be due up to four years retroactively. Many pensioners are automatically classified as having limited tax liability when they deregister in Germany and enjoy their retirement abroad. This can result in the pension insurance company in Germany being able to request repayments and, in the worst case, the pension insurance account will be seized. The best course of action is to examine the tax assessment carefully, file an objection and seek advice from a tax advisor.

Applying for unlimited tax liability (Section 1 Paragraph 3 EStG) can offer an opportunity to take advantage of tax advantages. The requirements are clear: At least 90 percent of the income must come from Germany or the foreign income is below the basic allowance. Important evidence is required in this context, including an official certificate from the foreign tax authority and various documents regarding pension payment.

Additional information about tax returns

But that's not all: how Tax calculator for pensioners supplemented, there may be differences in taxation depending on the country of residence and the existing double taxation agreements (DTA). It is advisable to check these agreements as they can affect the amount of taxes. The tax calculator offers initial guidance, but individual tax advice is definitely recommended.

In Thailand, for example, there is usually no tax on foreign pensions, although it may be necessary to submit a German tax return, depending on the pension amount and the respective DTA. The documents required for the tax return include the pension certificate and evidence of income in the country of residence. You should definitely take action here early on.

In addition, there is also the aspect of the life certificate Financial tip informed. The pension insurance regularly checks whether pensioners are still alive and an official document must be presented. This should be done promptly upon receipt of the certificates, as late submission could impact pension payments.

Overall, it is important for retirees abroad to be well informed and prepared to avoid unpleasant surprises in retirement. A good hand in tax structuring and timely measures can help to significantly reduce the financial burden in old age.