Tax Aspects of Financing German Company Pensions

When financing a German company pension do not just think about risk and return, but also about specific tax regulations which might be favourable in your case.

Effects of a very long investment horizon:

If you are planning to buy investment funds for financing your company pension, tax deferral effects are particularly important due to the very long investment horizon.

Tax benefits for company pensions:

Investment income is normally taxed immediately. The tax burden is often roughly a quarter of it. Under certain circumstances investment income from German company pensions is not taxed directly and therefore can fully be reinvested and additionally finance the company pension.

Speed of fully financing the company pension:

When using the tax deferral option a full financing of the company pension can be reached quicker and earlier. Afterwards free cash flow can be used for other investments in the company.

Organization when using the tax benefit for company pensions:

The German tax law on investment funds is rather complicated. It is therefore highly recommended to organize a perfect information flow between the different functions such as financing, accounting and tax.

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