To continue our series about the German tax law, we take a closer look at how wages gained from an occupation abroad are treated in the German tax system:
No deduction of compulsory contributions made to the domestic statutory pension that are based on tax free wages gained abroad
If an employee living in Germany gains wages for an occupation abroad, the salary is often tax-free based on an agreement between the country of residence and the country of employment to avoid double taxation. However, to calculate the income-tax rate for the income taxable in Germany the tax-free salary is added (so called progression proviso).
The fiscal court of Rhineland-Palatinate (Germany) has ruled that compulsory contributions to the German statutory pension attributed to the tax free salary gained abroad cannot be asserted as special expenses.
The compulsory contribution is economically directly related with the tax-free income argues the fiscal court in this state. In general such expenses must not be claimed in Germany. This particular court case dealt with salary gained in Switzerland. The Federal Fiscal Court will take a final decision.
Note: In a similar case the Court of Justice of the European Union had decided that the German ruling was not in accordance with EU law. At least in those cases where wages are gained in another European member state the ruling by the fiscal court of Rhineland-Palatinate (Germany) is therefore obsolete.”