Taxation of German Pension Lump-Sums for Austrian Tax Residents

More and more Aus­tri­an res­i­dents are receiv­ing lump-sum pay­ments from Ger­man occu­pa­tion­al pen­sion schemes. These cross-bor­der pen­sion ben­e­fits often cre­ate uncer­tain­ty regard­ing their cor­rect tax treat­ment. This arti­cle pro­vides a com­pre­hen­sive overview of the legal frame­work and recent Aus­tri­an case law.

1. Treaty-based Classification

The Aus­tria-Ger­many Dou­ble Tax Treaty is the legal basis for the tax­a­tion of cross-bor­der pen­sion income. A cen­tral ques­tion is whether such pen­sion pay­ments fall under Arti­cle 15 (Income from Employ­ment) or Arti­cle 18(1) (Pen­sions for Past Employ­ment).

The Aus­tri­an tax author­i­ties and the Fed­er­al Finance Court (BFG) clear­ly clas­si­fy these as pen­sions for past employ­ment, not as deferred salary. Thus, Aus­tria as the coun­try of res­i­dence has the exclu­sive right to tax these ben­e­fits.

2. Recent Case Law

The BFG con­firmed this inter­pre­ta­tion in the fol­low­ing deci­sions:

• BFG 24.10.2024, RV/7103107/2021
• BFG 28.04.2025, RV/2100873/2019

In both cas­es, the BFG ruled that such pay­ments are not active income, but rather pen­sion ben­e­fits which must be taxed in Aus­tria only.

3. Taxation in Austria

Under Aus­tri­an tax law, these ben­e­fits are clas­si­fied as income from for­mer employ­ment (§ 25 para. 1 lit. a EStG) and taxed at stan­dard rates. No pref­er­en­tial tax treat­ment applies.

4. Avoiding Double Taxation

If Ger­many with­holds tax (usu­al­ly via wage tax), this is not com­pli­ant with the treaty. To avoid dou­ble tax­a­tion:

• The tax­pay­er may request a refund in Ger­many by cit­ing the treaty and pre­sent­ing a res­i­dence cer­tifi­cate.
• Alter­na­tive­ly, an Aus­tri­an tax cred­it may be claimed dur­ing the tax return process.

5. Our Support

Heinz Kobled­er – Tax Advi­sors are experts in inter­na­tion­al pen­sion tax­a­tion. We assist with:

• Fil­ing the Aus­tri­an income tax return
• Han­dling refund or cred­it pro­ce­dures
• Liais­ing with tax author­i­ties in both Aus­tria and Ger­many