(2022)
How is my pension from an agricultural pension fund taxed?
Pensions from agricultural pension funds, like pensions from the statutory pension insurance, are part of the so-called basic provision. This means:
- Taxation is based on the so-called taxable portion. This is a certain percentage legally fixed for the year the pension begins.
- This taxable portion depends on the year the pension begins. It starts at 50 per cent in 2005 and increases by 2 percentage points for each new pensioner cohort from 2006 to 2020, and by 1 percentage point from 2021 to 2040.
- The taxable portion is applied only in the year the pension begins and in the second year of receiving the pension.
- In the second year of receiving the pension, the remaining amount after deducting the taxable portion is the personal pension allowance, which remains tax-free for life.
- From the third year onwards, the pension is fully taxable after deducting the personal pension allowance and the standard allowance for income-related expenses of 102 Euro.
- Since the pension allowance remains unchanged for life, any pension increase is fully taxable.
Hans Müller retired on 1 January 2009 and received a statutory pension of 12.000 Euro last year. For Hans Müller, 58 per cent of his pension is taxable, and the pension allowance is 42 per cent.
Thus, Müller would have to declare 6.960 Euro as income to the tax office for the year. However, if he has no other income, he does not have to submit a tax return, as the amount is below the basic allowance of 10.347 Euro (2022).
The lifelong pension allowance for Hans Müller is 5.040 Euro. He would only have to pay tax on income above this allowance if it exceeds the basic allowance.
However: Income from renting and leasing or capital gains must be added to the income.
If Hans Müller were to receive a pension of 15.000 Euro and retire in 2022, he would have to pay tax on 12.300 Euro (82 per cent) of his pension and therefore also submit a tax return.
Note: The pension allowance for Müller remains the same for the rest of his life. Even if his income from the pension increases after pension adjustments, only 5.040 Euro would be tax-free each year in the first example. The allowance refers to a specific amount of money, not a percentage of the respective pension. Thus, Mr Müller must fully tax future pension adjustments.
The tax office automatically deducts a standard allowance for income-related expenses of 102 Euro without further proof. If you have higher expenses, you should declare them in your tax return to reduce your taxable income. You can declare, for example, tax consultancy costs (for form R), pension advice, or a lawyer if they support you with pension matters. However, you must provide evidence of these higher expenses.
