Living in Germany with a Danish Pension

Cross-border commuters who receive a Danish pension must take the double taxation agreement between Denmark and Germany into account. Since the Folkepension and the ATP pension are considered state pensions, the right to tax these pensions lies exclusively with Denmark.

Similarly, if a person lives in Denmark but receives a German pension, the right to tax that pension lies exclusively with Germany. In principle, the taxation right therefore belongs to the country that pays the pension.

However, if the pension recipient lives in Germany, these pensions must still be declared in the German income tax return as progression income.

The amount to be considered must be determined according to German tax rules. This generally means that the pension is not included in full for progression purposes, but only a certain portion is taken into account.

Other Types of Pensions, if the pension is not a statutory pension — for example a company pension, private pension, or occupational pension scheme — the situation is different. Such pensions are generally taxable in Germany.

In many cases, these pensions may initially be taxed in both countries. Since double taxation is not permitted, Germany applies the tax credit method, meaning that the Danish tax paid is credited against the German tax liability on the same income.

Special Case: Moving to Germany Before 1996, if the pension recipient moved to Germany before 1996, the old double taxation agreement may still apply. In this case, Danish pensions may even be tax-free in Denmark and taxable only in Germany.