Germany Fiscal Court Clarifies Taxation of Lump-Sum Payments From Company Pension Plan

The German Federal Fiscal Court Feb. 26 posted Decision No. X R 28/23, clarifying the taxation of lump-sum payments from a company pension plan. The taxpayer, an employee, received a lump-sum payout in 2015, which was based on a free and unconditional choice between annuity and capital payment, and sought a reduced tax rate under Section 34 of the Income Tax Act, claiming that the lump-sum constituted remuneration for multi-year activities. The Tax Office denied the reduced tax rate and taxed the payout at the standard rate. On appeal, the Federal Fiscal Court found that: 1) the extraordinary nature of ...