No claim to higher tax relief from pension expenses

Federal Constitutional Court: Examination only possible at retirement age

If taxpayers fear double taxation in connection with their old-age provision, they can only have this constitutionally checked as pensioners. With two resolutions published on Wednesday, July 20, 2016, the Federal Constitutional Court in Karlsruhe rejected complaints against the taxation of pension expenses during active working life (Ref .: 2 BvR 290/10 and 2 BvR 323/10).

In the first case, an employee complained against the taxation of his contributions to the statutory pension insurance. In the second case, a freelance tax consultant wanted to ensure that his contributions to the occupational pension scheme remained tax-free as "anticipated income-related expenses".

Both fear double taxation. That would be the case if they now save taxed income money for the retirement age and this would later be taxed again as income when paid.

Background is a judgment of the Federal Constitutional Court of 6 March 2002. It complained then a difference in treatment between civil service pensions and the statutory and other pension payments (Az .: 2 BvL 17/99).

The legislature responded to this with the Retirement Income Act of 5 July 2004. The taxation of civil servants' pensions was retained. In the case of the statutory pension and also the self-employment of the self-employed, a change from the so-called upstream to the downstream taxation will be carried out in several stages by 2040. This means that an ever higher proportion of pensions will be taxed "downstream" at the time of disbursement, then full from 2040 onwards. In return, an increasing proportion of contributions to statutory pension insurance or other pension schemes is deducted from taxable income. The pension contributions are thus no longer payable in this amount from the already taxed income and are thus exempt from the "upstream" taxation.

The Federal Constitutional Court has already ruled that it is necessary and therefore constitutionally unobjectionable that the inequality of treatment alleged in 2004 persists in the transitional phase (decisions of 29 and 30 September 2015, ref .: 2 BvR 1066/10, 2 BvR 1961 / 10 and 2 BvR 2683/11, JurAgentur Report dated 1 December 2015).

With its new resolutions, the Federal Constitutional Court ruled that other types of unequal treatment can be accepted during the transitional phase, as long as there is no double taxation.

In general, this can be achieved not only by exempting current pension costs, but also by exempting future pension benefits. Therefore, upstream and downstream taxation would have to be coordinated accordingly. "The prohibition on double taxation does not (therefore) justify a claim to a certain deductibility of contributions in the start-up phase."

It is true that double taxation is conceivable, in particular among gainfully employed persons, who will retire from 2039 to 2043. Whether it comes to that, but always depends on the individual case. Therefore, a constitutional review is possible only at retirement age.

In addition, the judges of Karlsruhe confirmed the cap on the tax deduction in advance of pension costs to € 20,000 or € 40,000 annually for spouses and life partners. This was justified by the legislature with the avoidance of abuse, the Federal Constitutional Court found in its resolutions of 14 June 2016, now published in writing. Mwo / fle