Taxation of Distributions from an 401(k) to an individual Resident in Germany

Taxation of Distributions from an 401(k) to an individual Resident in Germany

In its decision dated August 9, 2018, the Fiscal Court of Cologne (Finanzgericht Köln) held that for German residents taxation should be limited to the difference between the contributions to a 401(k) and the distributed amount from the 401(k) assuming that the contributions were not deducted from any income taxable in Germany. As the fiscal authority of Cologne has appealed the decision, the German Federal Fiscal Court (Bundesfinanzhof) will have to rule on the issue. The decision should also clarify how Germany taxes income from other tax deferred savings plans, e.g. an IRA. 

For further information on the Taxation of distributions from an IRA/40(k) please see our article Taxation of Distributions from an inherited IRA to a person Resident in Germany. 

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