U.S. pension · German tax perspective
U.S. occupational pension while resident in Germany
If you worked in the United States and later move to Germany, you may continue to hold or receive benefits from a U.S. employer retirement plan. For German tax purposes, the result depends on the type of plan, how contributions were taxed during the accumulation phase and whether benefits are paid as a pension, partial withdrawal or lump sum. The Germany–U.S. tax treaty generally protects the accumulation phase, while distributions must be classified separately under German tax law.
Germany–U.S. tax treaty
Private U.S. occupational pensions are generally taxable in Germany once the recipient is treaty-resident here
Article 18(1) of the Germany–U.S. tax treaty generally assigns pensions and similar remuneration arising from former private-sector employment exclusively to the recipient's state of residence. If the recipient is treaty-resident in Germany, the regular taxing right therefore generally belongs to Germany.
The U.S. source of the pension is not enough by itself to determine the German tax treatment. Once the treaty allocation is established, the benefit must be classified under German domestic income tax law.
Article 18A
Income inside a qualifying U.S. pension plan is generally sheltered until distribution
Article 18A(1) generally provides that income accruing inside a pension plan established in the other contracting state is not taxed at participant level until and to the extent an amount is distributed.
Moving to Germany therefore does not generally cause interest, dividends and capital appreciation inside a qualifying U.S. pension plan to become annually taxable German investment income.
- accumulation phase generally protected
- no current participant-level tax on plan earnings in principle
- distribution triggers the main German tax analysis
- transfers to another qualifying plan require separate review
- plan type and contribution history should be documented
Which U.S. plans?
Common U.S. employer plans are expressly recognized by the treaty
The treaty protocol expressly identifies several U.S. retirement arrangements as pension plans. These include qualified plans under Section 401(a) IRC, typical 401(k) arrangements, 403(a) and 403(b) plans, and certain governmental 457(b) plans.
IRAs are also covered but are not employer occupational pension plans in the narrower sense and are discussed separately on dedicated pages.
Distribution phase
German taxation depends on the actual structure of the benefit
Once benefits are paid, it must first be determined whether the U.S. pension institution is structurally comparable to a German qualifying retirement arrangement such as a pension fund, Pensionskasse or direct-insurance structure. For corresponding foreign pension benefits, Section 22 No. 5 EStG may be particularly relevant.
Other employer pension promises may require a different German income classification. A U.S. plan should therefore not be assigned to a German tax category solely because it is described as a “pension” or “retirement plan.”
Recurring pension
Regular lifetime or long-term payments must be classified based on the plan structure and contribution history.
Partial withdrawals
Periodic or flexible withdrawals can become taxable in the calendar year in which they are received.
Lump sum
A one-time capital payment can also constitute taxable retirement income in Germany.
Rollover
A transfer to another U.S. pension plan must be distinguished from a distribution made to the participant.
Section 22 No. 5 EStG
Since 2025, foreign tax relief for pension contributions is expressly relevant
From tax year 2025, Section 22 No. 5 EStG expressly takes into account contributions to a foreign pension institution where comparable tax exemption or tax relief was granted in Germany or another country.
This can be highly relevant for U.S. employer plans. Traditional employee contributions and employer contributions were frequently tax-favored or tax-deferred in the United States. To the extent a later benefit is attributable to those contributions, German downstream taxation can apply.
Pre-tax, after-tax and Roth
A U.S. employer plan can contain several components with different tax histories
Pre-tax contributions
Traditional employee contributions were generally made before U.S. income tax and can be especially relevant for German downstream taxation.
Employer contributions
Employer matching contributions and other employer-funded amounts were often also tax-deferred.
After-tax contributions
Nondeductible employee contributions may represent already-taxed contribution basis and should be tracked separately.
Roth contributions
Roth 401(k) or comparable Roth contributions were generally made from already-taxed income and should be separated from Traditional components.
Treaty taxing rights
U.S. withholding does not automatically determine which country may tax the pension
Even if a U.S. pension provider withholds U.S. federal tax from a distribution, that does not automatically mean that the United States has the final treaty taxing right.
For an ordinary private occupational pension paid to a person treaty-resident in Germany, Article 18(1) generally assigns the taxing right to Germany. Whether U.S. tax was correctly withheld and how relief is obtained must be analyzed separately on the U.S. side.
401(k), 403(b), 457(b)
Common U.S. employer retirement plans
401(k)
The most common private employer plan. Traditional, Roth and after-tax components can exist within the same arrangement.
403(b)
Common for schools, universities, nonprofit institutions and certain public employers. 403(b) plans are expressly referenced in the treaty protocol.
Governmental 457(b)
Certain 457(b) plans maintained by governmental employers are also expressly listed among treaty pension plans.
Defined benefit pension
For traditional employer-funded defined benefit pensions, the precise plan structure and funding arrangement should be reviewed for German classification.
Rollover after employment
A rollover to an IRA may simplify administration, but it does not erase tax history
After U.S. employment ends, employer retirement plans are often transferred to a Rollover IRA. Under the treaty, such a transfer may be treated differently from a distribution made directly to the participant.
For later German taxation, however, it remains important to document which amounts originally came from employee contributions, employer contributions, after-tax contributions and Roth components. A rollover does not automatically reset the tax history of the assets.
Documentation
Which records should be kept for U.S. occupational pensions?
For long U.S. employment histories, the later German tax calculation may be difficult to reconstruct unless historical plan and contribution records have been retained.
Summary Plan Description
Explains the plan type, contribution rules, vesting and distribution options.
Annual statements
Historical account statements document plan balances and development over time.
Contribution records
Employee, employer, Roth and after-tax contributions should be tracked separately.
Forms 1099-R
Document later distributions but do not by themselves determine the German tax base.
Rollover documentation
Trustee-to-trustee transfers and prior rollovers should be documented continuously.
Payroll records
Older U.S. payroll records can help identify pre-tax, Roth and after-tax employee contributions.
Moving to Germany
Significant pension transactions should ideally be reviewed before the move
The start of German tax and treaty residence can materially affect large distributions, rollovers and other pension transactions. Before moving, it is therefore advisable to identify all U.S. retirement plans and review any planned transactions.
The exact timing can be particularly important in the year of relocation.
- inventory all U.S. pension plans
- document account values at the move date
- archive contribution history
- review planned lump-sum distributions
- analyze rollovers before execution
- document the start of German treaty residence
Common mistakes
Common mistakes with U.S. occupational pensions in Germany
Treating the plan like an ordinary investment account
Qualifying U.S. pension plans generally receive Article 18A protection during the accumulation phase.
Using the U.S. taxable amount
The taxable amount shown on Form 1099-R does not automatically determine the German tax base.
Mixing pre-tax and Roth components
The historical taxation of contributions can materially affect later German taxation.
Ignoring employer contributions
Employer-funded amounts can represent a significant part of the retirement balance and should be included in the tax history.
Treating U.S. withholding as final tax
The treaty may assign the taxing right to Germany even where U.S. tax was initially withheld.
Discarding records after a rollover
The original contribution and tax history remains relevant even after assets are transferred to an IRA.
Related guidance
Related topics
Frequently asked questions
U.S. occupational pension while resident in Germany
Where is a U.S. occupational pension taxed if I live in Germany?
Does Germany tax income inside my U.S. pension plan every year?
Which U.S. employer plans are recognized by the treaty?
How is the distribution taxed in Germany?
Why does the 2025 law change matter?
What about Roth or after-tax contributions?
Is U.S. withholding automatically creditable in Germany?
Which records should I keep?
Germany–U.S. tax advice
Do you receive a U.S. occupational pension or still hold an employer retirement plan in the United States?
We review the plan type, contribution history, treaty protection under Article 18A, the German classification of distributions and the rules of Section 22 No. 5 EStG from 2025, and coordinate the German treatment with the U.S. tax side.
Schedule an initial consultation