Decicison of the German Federal Fiscal Court on the Taxation of Distributions from a 401(k) to Beneficiary in Germany

1) Distributions from a 401(k) are other income pursuant to Section 22 No. 5 Sentence 1 of the German Income Tax Act (Einkommensteuergesetz, EStG).

2) Pursuant to Sec. 22 No. 5 Sentence 2 EStG, the income is taxable in the amount of the difference between the contributions and the distributions, provided that the taxpayer was not subject to domestic taxation during the contribution phase.

3) The provisions of Sec. 22 No. 5 Sentences 1 and 2 EStG do not allow, either according to their wording or by way of analogy, to treat contributions to a 401(k) alike payments to a German tax-deferred savings plan.

BFH Ruling of October 28, 2020, X R 29/18

Jan-Hendrik Frank 08/03/2021

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Decicison of the German Federal Fiscal Court on the Taxation of Distributions from a 401(k) to Beneficiary in Germany

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