Company pension plan: how it works with the tax return

Every year as popular and longed for as a visit to the dentist: the tax return. Everyone wants to deduct as much as possible, contributions to a company pension plan, for example. But where do I enter the? And even after you retire, you won’t be spared by the taxman. Because pensioners are also liable to tax, and those who receive a company pension must declare this in their tax return. We tell you what belongs in the tax return- and what not.

Topics in this article

  • Deferred compensation: No disclosure in the tax return
  • Special payments: The exception to the (tax) rule
  • Payout phase: company pension must be taxed

To the point

To the point

  • During the savings phase of the company pension plan, it is usually not necessary to make an entry in the tax return. Exception: special payments from the employer.
  • In the payout phase, the company pension is usually subject to income tax and must therefore be reported in Annex R of the tax return. Company pensions from pension commitments are stated in the appendix N.

Conversion of remuneration: No disclosure in the tax return

There are various models for company pension schemes (bAV). As a rule, they all run via so-called deferred compensation, also known as salary conversion. This means that your employer retains a certain amount from your gross salary and pays this into your pension plan. This part of your salary is converted directly into pension contributions and does not even end up in your account. In most cases, the employer also contributes a small amount; in the case of newer contracts, the employer is even required to do so. Read more about this in the article "Deferred compensation: If your boss deducts the money for your company pension.”

The most common form of occupational pension is a direct insurance policy. The employer takes out a life or pension insurance policy for you, into which the amount deducted from your gross salary is paid. This means: You pay no tax on this part of your salary. Therefore, you cannot claim the contributions as tax-reducing in the income tax return- Because otherwise you would save taxes a second time, so to speak. So you do not have to worry about your bAV in your annual tax return.

However, this only applies to contracts concluded from 2005 onwards. Before, the legal situation was somewhat different, so there are some transitional and special regulations for such old contracts. If you have questions about the taxation of your contributions from such a contract, it is best to contact your employer or a tax advisor.

Special payments: The exception to the rule

No rule without exception! This also applies to the bAV contributions, which you normally do not have to note separately in the income tax return- yes, you are not even allowed to. Special payments" are an exception. What this is? ÜUsually, these are severance payments that employees receive when they leave the company. In some cases, employees do not receive their severance pay with their last salary; instead, the employer pays an extra amount into the company pension plan. Because this can be more favorable for you as an employee.

Why? It’s quite simple: You have to pay full tax on a severance payment. But there is an allowance for special payments into the bAV. Only if the special payment is higher than this allowance, you have to pay tax on the difference. You enter the difference in Annex N of your tax return.

And how high is the tax-free amount? Unfortunately, this is a bit more complicated. Because it varies from individual to individual. This is how it is calculated: Four percent of the monthly contribution assessment ceiling (West) for pension insurance times the number of years you have worked in the relevant company- but for a maximum of ten years.

Example: For 2021, the contribution assessment ceiling of the statutory pension insurance (West) is 7 per month.100 Euro (2022 it decreases to 7.050 euros). Of which four percent are 284 euros. If you have been with the company for ten years, this results in a maximum amount of 284 x 10 = 2.840 euros, which the employer may put into the company pension of the departing employee tax-free as a special payment. If the length of service is shorter, the amount is correspondingly smaller. If the employer now pays 5.If our example employee pays 5,000 euros into his or her company pension plan, he or she must pay 5,000 euros into his or her pension plan.000 Euro minus the calculated tax-free amount of 2.840 euros, that is 2.Enter 160 euros in Annex N of the tax return.

What is the purpose of the AV and precautionary expenditure annexes??

What is the purpose of the AV and Vorsorgeauand attachments?

Even if you might think so: The AV and Vorsorgeauand investments are not required for company pension plans. Annex AV must be completed solely for the Riester pension. Here you carry all the expenses for the private old-age provision with the Riester pension a. You can read more about this in the guide "Taxes on the Riester pension: How much of the cake does the state get?”

Üabout the Investment pension expense you can Make basic contributions to health and long-term care insurance tax deductible. This is also where you enter additional pension expenses, such as for the Rurup pension (basic pension) or voluntary employment and/or occupational disability insurance. However, the tax office recognizes for 2021 only 92 percent – a maximum of 23.724 euro – of the indicated expenditures on. 2022, the tax-deductible portion increases to 94 percent. (Status: December 2021)

Payout phase: company pension must be taxed

As soon as the company pension is paid out, however, the taxman does strike: you have to pay tax on the entire sum you receive as income. No matter how much of this is accumulated from the contributions of your income and how much from the subsidies or special payments of the company. At least with contracts that were concluded from 2005 onwards.

But here again the old tax wisdom applies: no rule without exceptions. In the case of older contracts, 20 percent tax is already due on the bAV contributions during the payment phase. This is why holders of these old occupational pension contracts no longer have to pay taxes on their savings when they are paid out. At least not if they have the entire amount paid out as a lump sum at the start of their pension.

Important: If you have statutory health and long-term care insurance, you must also pay contributions to statutory health and long-term care insurance from your company pension as soon as your monthly company pension exceeds a certain exempt amount. currently 159.25 euros per month (as of December 2021).

And now concretely: Where exactly the payments, which receive you as pensioner*in from the bAV, in the tax declaration are indicated? This actually depends on the type of company pension plan mentioned at the beginning. If it is a direct insurance, enter the benefits in the Annex R to the income tax return on. And in field 31 if the bAV was concluded from 2005 onwards and in field 36 for old contracts.

In the case of the rarer bAV contracts with a pension commitment, the payments are not taxed as a pension, but as income from non-independent work. They are registered as "tax-privileged pension benefits" (box 11) in the Appendix N registered.

Sounds complicated, but most of the time it’s not that difficult at all. As a rule, you will receive a benefit notice each year from the provider through which your company pension plan runs. In it you will find precise information about which number you must enter where in which tax form.

What else you need to know about paying out the bVA, read the guide "Paying out the occupational pension: Caution trap!”

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