WR writes:

Just read your article The New Tax Year on Expatica.com and it was really helpful.

I noted your comments for pension regulations for 2005 onwards. But specifically for tax years 2001 - present day, would pension contributions paid into a UK pension scheme, but taken from net income in Germany, be due for tax re-imbursement here in Germany? What about National Insurance contributions which are paid through the same route? Of course both these items come from gross income if living and working in the UK.

I would be grateful for your opinion.

______________________

Dear WR,
 
Thanks for this interesting question.
 
According to the German income tax law that was valid until 2004, contributions to a governmental pension scheme and to health insurance companies are deductible from gross income up to certain limits. These contributions are known as 'special expenses'.

As the income tax law did not say 'German governmental pension scheme', the above in general also applied to contributions paid into foreign governmental pension schemes. The same applies to health insurance contributions.
 
However, in addition to the German income tax law the German income tax directives (Einkommensteuerrichtlinien) state that a deduction of special expenses is not possible if the special expenses directly relate to tax-free income.
 
So, are your contributions deductible or not? A brief example can be used for clarification:
 
Employee X has been on assignment from the UK to Germany since 1 July 2004. His income from January to June 2004 was taxable in the UK due to the double tax treaty.

As his assignment fulfils certain criteria, he can remain in the UK social security scheme while on assignment to Germany according to EU regulation 1408/71. Therefore, he contributed to the UK governmental pension scheme and to National Insurance during the whole year 2004.

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