German tax perspective · U.S. Roth retirement account
Roth IRA in Germany
A Roth IRA can provide tax-free distributions in the United States if the applicable U.S. requirements are met. After a move to Germany, however, that U.S. tax exemption does not automatically carry over into German income taxation. The Germany–U.S. tax treaty expressly recognizes Roth IRAs as pension plans and generally protects tax deferral inside the plan, but important differences remain compared with Traditional IRAs and 401(k) plans.
Germany–U.S. tax treaty
Roth IRAs are expressly listed as pension plans under the treaty
The protocol to the Germany–U.S. tax treaty expressly includes Roth IRAs under Section 408A of the Internal Revenue Code among the U.S. pension plans relevant for Article 18A.
A Roth IRA therefore should not simply be treated as an ordinary U.S. brokerage account after the owner becomes tax resident in Germany.
Article 18A(1)
Income accruing inside a Roth IRA is generally deferred for German tax purposes until distribution
Article 18A(1) of the Germany–U.S. tax treaty generally provides that the country of residence may tax income accruing in a qualifying pension plan only when that income is distributed to the participant or beneficiary.
For a Roth IRA owner resident in Germany, this generally means that dividends, interest and capital appreciation inside the plan are not taxed annually as German investment income.
- identify the Roth IRA as a U.S. pension plan
- determine German treaty residence
- apply Article 18A(1)
- generally no annual taxation of plan earnings
- taxation generally deferred until distribution
- analyze the distribution under German law
Roth contributions
Roth IRA contributions are generally made from already-taxed income
The main difference from a Traditional IRA lies in the contribution phase. Roth IRA contributions are generally not deductible from U.S. taxable income. The individual contributes funds that have already been subject to income tax.
This contribution history can be highly relevant for German tax purposes. It may be necessary to distinguish between amounts representing previously taxed contributions and amounts representing investment growth inside the Roth IRA.
Distributions in Germany
A Roth IRA distribution that is tax-free in the United States is not automatically tax-free in Germany
U.S. tax treatment does not directly determine German income taxation. Even where a Roth IRA distribution qualifies as fully tax-free in the United States, Germany must classify the payment independently under German domestic tax law and the treaty.
The analysis may depend on the structure of the account, the type and history of contributions, earlier Roth conversions and investment earnings accumulated inside the plan.
Original contributions
Regular Roth contributions are generally funded from already-taxed income. The historical contribution basis should therefore be documented.
Investment earnings
Capital gains, dividends and other earnings accumulated inside the Roth IRA were generally tax-deferred and may require a separate German analysis when distributed.
Conversions
Amounts arising from a Traditional-to-Roth conversion may have a different tax history from ordinary Roth contributions.
EUR conversion
For German tax purposes, current distributions and potentially historical contribution amounts may need to be translated into euro.
Traditional IRA vs. Roth IRA
For German tax purposes, the contribution phase creates the key distinction
Traditional IRA
Contributions may have been deductible in the United States. The tax burden is therefore typically deferred from the contribution phase to the later distribution phase.
Roth IRA
Contributions are generally made from already-taxed income. The U.S. tax benefit typically arises through later tax-free growth and qualified distributions.
German consequence
The different treatment of contributions must be taken into account when Germany analyzes a later distribution. Treating both IRA types identically would often be too simplistic.
Documentation
Historical records matter for both account types. For a Roth IRA, evidence of previously taxed contributions is particularly important.
Section 22 No. 5 EStG
The 2025 German law change makes the contribution history even more important
Since the 2025 tax year, Section 22 No. 5 of the German Income Tax Act expressly takes into account tax exemptions or comparable tax benefits granted for contributions to foreign pension arrangements in another country.
This is particularly important for Traditional IRAs and classic 401(k) plans, where contributions may have received tax relief during the accumulation phase. Regular Roth IRA contributions are generally different because they are funded from already-taxed income.
This does not mean that every Roth IRA distribution is automatically tax-free in Germany. The applicable German tax provision and the composition of the distribution still have to be determined.
Treaty exception
Germany does not treat Roth IRAs entirely like corresponding German occupational pension plans
The treaty protocol contains an important special rule for Roth IRAs. Germany generally recognizes the listed U.S. pension plans as corresponding to German occupational pension arrangements, but expressly excludes Roth IRAs from that treatment.
This exception is particularly relevant for the treaty rules governing cross-border tax relief for contributions. A Roth IRA therefore does not automatically receive the same German contribution treatment as a qualifying U.S. 401(k) or Traditional IRA.
Roth conversion
A conversion from Traditional IRA to Roth IRA while resident in Germany should be reviewed in advance
Under U.S. law, assets can be converted from a Traditional IRA into a Roth IRA. For U.S. tax purposes, a conversion generally causes previously untaxed amounts to be included in income in the conversion year.
Where the taxpayer is resident in Germany, the U.S. treatment should not be considered in isolation. The transaction changes the legal and tax characteristics of the retirement assets and may also have German tax consequences.
Before the conversion
Traditional IRA balances, original contributions and prior rollovers should be documented.
Conversion amount
The amount converted and the tax history of the converted assets should be identified.
German tax residence
Before executing the conversion, it should be determined whether and to what extent Germany treats the transaction as taxable.
Later distributions
After the conversion, records should continue to distinguish regular Roth contributions, converted amounts and later investment earnings.
Moving to Germany
Document the complete Roth IRA history before the move
For an existing Roth IRA, original contributions, conversions, rollovers and the account value before or at the beginning of German tax residence should be documented as fully as possible.
Relevant records may include prior Forms 5498, Forms 8606, Forms 1099-R, brokerage statements and documentation of Roth conversions.
U.S. tax perspective
The U.S. Roth IRA rules are covered separately on taxrep.us
On the U.S. side, relevant topics include qualified distributions, the Five-Year Rules, Roth conversions, possible early distributions and the treatment of U.S. citizens living abroad.
These U.S.-specific issues are covered in more detail on taxrep.us. This page focuses on the German tax treatment of a Roth IRA.
- qualified distributions
- Five-Year Rules
- Roth conversions
- ordering rules
- early distributions
- U.S. citizens abroad
Common mistakes
Common mistakes with a Roth IRA after moving to Germany
Assuming U.S. tax exemption applies in Germany
A qualified distribution may be tax-free in the United States without automatically receiving the same treatment in Germany.
Treating the Roth IRA as a brokerage account
Article 18A generally protects tax deferral inside the plan, so annual income should not automatically be treated like private investment income.
Treating Traditional and Roth IRAs the same
The tax treatment of contributions differs fundamentally and can affect the German treatment of later distributions.
Failing to document contribution basis
Without historical records, it may be difficult to prove which amounts were contributed from already-taxed income.
Mixing conversions with regular contributions
Roth conversions have a different tax history from ordinary Roth contributions and should be tracked separately.
Converting after the move without analysis
A Roth conversion that is routine under U.S. law can create additional German tax questions once the taxpayer is resident in Germany.
Related guidance
Related topics
Frequently asked questions
Roth IRA in Germany
Is a Roth IRA recognized as a pension plan in Germany?
Does Germany tax dividends and capital gains inside my Roth IRA every year?
Is a Roth IRA distribution tax-free in Germany?
Will Germany tax my original Roth contributions again?
Why is a Roth IRA treated differently from a Traditional IRA?
What does the 2025 amendment to Section 22 No. 5 EStG mean for Roth IRAs?
Can I make a Roth conversion after moving to Germany?
Which records should I keep for my Roth IRA?
Germany–U.S. tax advice
Do you have a Roth IRA and now live in Germany?
We review the treaty classification, treatment during the accumulation phase, contribution basis, Roth conversions and the German taxation of planned or completed distributions, and coordinate the German treatment with the U.S. tax side.
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