Germany's Annual Tax Act 2024 (Jahressteuergesetz)
brings tweaks to the country's Income Tax Act
(Einkommensteuergesetz). Due to adjustments to Sec. 22 no.
5 sentence 2 of the act, the tax treatment of people receiving
retirement income from abroad will tighten significantly. Coming
into force on 1 January 2025, the new regulation will specifically
have consequences on tax breaks for pension contributions granted
under foreign tax law. Following the German parliament's
adoption of the draft legislation in October, the Federal Council
approved the Annual Tax Act 2024 on 22 November.
Background: Downstream taxation in Germany
The Retirement Income Act (Alterseinkünftegesetz)
took effect in 2005. Since then, Germany has followed the principle
of downstream taxation when it comes to retirement accounts, i.e.
tax is levied when the pension is paid. Pursuant to Sec. 22 no. 5
sentence 1 of the Income Tax Act (hereinafter: ITA), this affects
expenses and benefits from
