The Düsseldorf Fiscal Court has ruled that a Dutch „General Civil Pension Fund“The old-age pension paid must be included in the taxable portion under the progression clause.”.
Practical example:
The Tax Court had to decide whether an old-age pension from a Dutch pension fund should be taken into account under the progression clause based on the taxable portion amounting to 70% or solely based on the income portion amounting to 18% of the pension. The plaintiff resides in Germany and is a Dutch citizen. He was previously employed as a career soldier by the Dutch Ministry of Defense and is now retired. Among other things, he receives a pension from a Dutch pension fund („Algemeen Burgerlijk Pensioenfonds“). The German tax office took the view that, when determining the special tax rate (the so-called “progression clause”), the pension should be taken into account in its entirety—including the taxable portion—and not merely the income portion.
The Tax Court agreed with the tax authorities and dismissed the lawsuit. Under the double taxation treaty (DTA), the pension payments are taxable exclusively in the Netherlands. Nevertheless, this income must be taken into account under the progression clause when assessing taxes under German income tax law. The payments constitute a Dutch occupational pension plan, which is subject to the progression clause.
Life annuities from the statutory pension insurance system: The Finance Court justifies its decision by stating that, when classified according to comparative law, retirement income should be regarded as life annuities from the statutory pension insurance system. It compares the essential characteristics of this income within the German pension system with those of the Dutch three-pillar or tiered system, thereby also following the corresponding classification established by the social courts.
Note: The Federal Fiscal Court (BFH) has already ruled on when a foreign old-age pension can be considered comparable to a pension within the meaning of Section 22(1), sentence 3, letter a, subletter aa of the Income Tax Act (EStG). To date, these rulings have concerned Danish and Swiss old-age pensions, respectively. However, there is as yet no supreme court case law regarding comparability with a Dutch pension. The Finance Court has therefore granted leave to appeal, and the case is pending before the BFH under case no. X R 14/25.