Tax trap abroad: German pensioners suddenly have to pay!

Tax trap abroad: German pensioners suddenly have to pay!

The unexpected appearance of a letter from the Neubrandenburg tax office causes excitement among many German pensioners abroad. Pensioners now have to expect high tax demands, especially in popular destinations such as Thailand, Paraguay, Argentina, Chile, the Philippines, Cambodia and Vietnam. But what is behind these additional demands? Pension notice24 reports that many retired Germans mistakenly believe that their pension is tax-free once they live abroad.

German tax policy is not squeamish here. With the limited tax liability in accordance with Section 1 Paragraph 4 EStG, every pensioner who does not have a residence in Germany and stays here for less than 183 days per year is classified as having limited tax liability. This means that the pension is taxable from the first euro and there is no longer a basic allowance. Where benefits such as spousal splitting or child allowances normally apply, these pensioners usually have to endure the full tax program - a real surprise for many.

High additional demands and unlimited tax liability

So what happens when retirees don't respond in a timely manner? The consequences can be huge. An example illustrates this: A pensioner with a monthly pension of 1,000 euros in Thailand could have to pay income tax of up to 4,000 euros. And this applies retroactively for up to four years. In the case of unlimited tax liability, as would be possible with an application for unlimited tax liability, a basic allowance of 12,096 euros would apply in 2025 - a regulation that could save some pensioners from very high taxes if they act in a timely manner.

In order to be recognized as subject to unlimited tax liability, a pensioner must ensure that at least 90% of his or her income comes from Germany or that the foreign income is below the basic tax allowance. A corresponding application can be submitted to the tax office, although an official certificate from the foreign tax authority is required. Simply reporting abroad without prior consultation with the German tax office can quickly result in an unpleasant cash payment.

Recommendations for those affected

How should affected pensioners proceed? First of all, it is advisable to check the tax assessment carefully and, if necessary, file an objection. A German tax advisor can provide valuable support in this regard. “Acting early” could be the key to minimizing your tax burden and avoiding financial surprises in retirement. It is important to check your tax status in a timely manner to avoid unpleasant financial surprises.

For many pensioners who want to enjoy their retirement abroad, it is crucial to deal with the tax conditions at an early stage. The supposed tax exemption can quickly turn out to be a fallacy and lead pensioners into an actual tax trap. Anyone interested can find out more about what needs to be taken into account here Tax office pension abroad read up.