(2023)
How is my pension from an agricultural pension fund taxed?
Pensions from agricultural pension funds are taxed similarly to state pensions. Here are the key points:
- Taxation is based on the taxable portion, which is determined by the start date of the pension.
- This portion varies depending on the start date and gradually increases.
- In the year the pension begins and the second year, the pension is only partially taxed.
- In the second year, the remaining amount is tax-free, known as the personal pension allowance.
- From the third year onwards, the pension is fully taxed after deducting the pension allowance and a standard allowance for income-related expenses of 102 Euro.
- The pension allowance remains the same for life, meaning any pension increase is fully taxable.
Take Hans Müller as an example. He retired in 2009 and received a pension of 12.000 Euro last year. For him, 58 per cent of his pension is taxable, while the pension allowance is 42 per cent. Since his income is below the basic allowance of 10.908 Euro, he does not need to file a tax return if he has no other income.
Hans Müller's lifelong pension allowance is 5.040 Euro. However, income above this allowance would only be taxed if it exceeds the basic allowance. But income from renting, leasing, or capital gains must be added to his income.
However, if Hans Müller receives a pension of 15.000 Euro and retires in 2023, he would have to tax 12.375 Euro (82.5 per cent) of his pension and accordingly submit a tax return.
Important to note: Hans Müller's pension allowance remains unchanged, even if his pension increases due to adjustments. Each year, only 5.040 Euro are tax-free. This amount refers to a fixed sum, not a percentage of the pension. Therefore, Mr Müller must fully tax future pension adjustments.
The tax office automatically deducts a standard allowance of 102 Euro for income-related expenses. If you have higher expenses, you should declare them in your tax return to reduce your taxable income. These include costs such as tax advice, pension advice, or legal fees for pension matters, which you must provide evidence for.
