Requirements for the recognition of a pension provision

If the conditions for drawing a pension component are not clearly defined, this has no detrimental effect on the pension provision for another pension component whose conditions are clearly defined.

The recognition of a pension provision is possible if and to the extent that the written pension commitment provides clear information on the type, form, conditions and amount of the promised future benefits. The Federal Fiscal Court has clarified that a breach of this unambiguity requirement for one component of the pension benefit has no negative impact on the provision for the promise of another component, provided that the promised benefits can be divided accordingly.

In the case in dispute, a GmbH had paid its former managing partners a retirement pension following their early retirement. While the requirements for the regular retirement pension from the 65th birthday were clearly defined, the regulation for early withdrawal was not as clear as intended. The tax office therefore did not want to recognize the entire pension provision, but has now been proven wrong by the Federal Fiscal Court: If the conditions for drawing a retirement pension upon reaching the standard retirement age are clearly defined, a pension provision must be set up for this, even if the pension commitment does not contain any clear information on the conditions for early retirement pension payments.