Why taxes on pensioners in Germany have risen up to 500 percent since 2010

The tax burden on pensioners has increased fivefold within ten years in some cases, according to figures released by the Finance Ministry on Wednesday.

Why taxes on pensioners in Germany have risen up to 500 percent since 2010
Photo: DPA

For example, new pensioners now have to pay €430 in income tax per year on a monthly gross pension of €1500, compared with €79 in 2010.

The figures were released on Wednesday, as part of an inquiry submitted to the Federal Ministry of Finance by Die Linke. 

READ ALSO: How to maximize your German pension – even if you plan to retire elsewhere

For an individual with a monthly gross pension of €1700, €294 was due at the start of pension payments in 2010. This year that figure has risen to €758.

If the monthly earnings were €2000, €679 in taxes would have been due in 2010. Now the figure has risen to €1326. 

Die Linke Left Party leader Dietmar Bartsch criticized the increasing pension taxation as a “de facto pension cut”.

Why is there an increase?

The sharp increase is due to a change which was introduced in 2005. Until then, a tax-free allowance of 50 percent of the pension was permitted. 

Since then, the tax rate on pensions has risen by two percentage points annually. 

Health and long-term care insurance contributions and some everyday expenses can also be claimed.

The tax becomes due when the total income of a pensioner exceeds the basic annual tax-free allowance (€9168 or €764 per month). The average monthly pension in 2018 was €1219.

“In the next few years, the tax burden for small and medium-sized pensions will continue to rise,” Barsch told DPA.

He called on Finance Minister Olaf Scholz and Labour Minister Hubertus Heil (both SPD) to present a plan with significantly higher tax allowances to protect small and medium-sized pensions.

In 2015, a total of €34.65 billion in income tax was paid to the state by taxpayers with pension income.

There is currently a push around Germany to raise the pension age to 69, up from 67, in light of rising lifespans.

Read more of our coverage of pensions in Germany HERE


Tax burden – (die) Steuerbelastung, (die) Steuerlast 

Fivefold – um das Fünffache

due/payable – fällig

Pension contributions – (die) Rentenbeiträge

Basic tax-free allowance – (der) Grundfreibetrag

To deduct – abziehen 

We're aiming to help our readers improve their German by translating vocabulary from some of our news stories. Did you find this article useful? Let us know.


Member comments

Log in here to leave a comment.
Become a Member to leave a comment.


Germany and France extend Covid tax breaks for cross-border workers

Germany and France have agreed to extend the relaxation of tax rules for cross-border workers until the end of the year.

Cross-border workers commute by car but they can for now continue to work at home
Cross-border workers usually have to commute but can for now continue to work at home.. Photo: Fabrice Coffrini / AFP

The agreements between France and the governments of Belgium, Luxembourg, Germany, Switzerland and Italy avoids double taxation issues for anyone travelling across the French border to or from those countries in order to work.

During the pandemic, tax rules were eased to allow French cross-border employees, like their counterparts in Belgium, Luxembourg, Germany, Switzerland and Italy, to work from home without having to change their tax status.

The deals, which were established at the beginning of the health crisis in March 2020, were due to end on September 30th – and would have plunged cross-border workers still working from home because of the health crisis into renewed uncertainty over their taxes.

The latest extension of these agreements means there’s no confusion over where a cross-border worker pays their taxes until December 31st – for example cross-border workers who work in Geneva but live in France, who normally pay their taxes and social security contributions in Switzerland. 

Under normal circumstances, anyone living in France who works in Switzerland can spend no more than 25 percent of their time working from home. If they exceed this time limit, they would have to pay these tax charges tin France rather than in Switzerland, which would be much higher.

The agreements between France and Belgium, Luxembourg, Germany and Switzerland “provide that days worked at home because of the recommendations and health instructions related to the Covid-19 pandemic may … be considered as days worked in the state where [workers] usually carry out their activity and therefore remain taxable,” according to the statement from the French Employment Ministry.

In the case of Luxembourg, days worked from home because of the health crisis are not counted in usual the 29 day limit.