Progression taxation and mini job

[Lettherebedrums56]

Hi…. I’m completely befuddled by the tax rules for my situation and I’m looking for advice….

I am 60 years old and UK citizen married to a German citizen. We live in NRW. I have Daueraufenthalt and Erlaubnis on my A.50 WA card and have been here since 2016. My sole income is from a UK Government pension and my income tax is paid in the UK as per the dual taxation agreement. I also have the usual income tax free allowance in the UK. My wife is a Beamte and pays German tax in tax class 4. As I have no income in Germany, and no other income at all besides my already taxed pension I don’t pay income tax here. I have been looking at the possibility of a mini job but I’m worried that I might fall foul of tax law and up paying my entire earnings out in some obscure tax grab. As I understand it mini job income would not normally bring you into the tax arena because the earnings are below the income tax free allowance in Germany… However (the confusing bit), (1). Would they subject my tiny mini job wage to progression rules and because my worldwide earnings would then be above the tax free allowance, start making me pay income tax on it in Germany…? Or is it the case that as the wage in Germany is too low to trouble the tax man, the progression issue would not kick in…. (2) Would they refuse me an income tax free allowance in Germany because I already receive one in the UK (I don’t think they should be able to do this, but the German tax system does appear remarkably vicious at times), thereby making a mini job, or any job at all, a waste of time for me…. Any advice or information would be very gratefully received…

[PandaMunich]

As I have no income in Germany, and no other income at all besides my already taxed pension I don’t pay income tax here.

You do understand that with you filing a joint tax return with your wife, your UK government pension drives up the tax rate on her income?
This is called Progressionsvorbehalt.
For an example with numbers, please scroll down to the section "Progressionsvorbehalt" on my website: https://expertise.tax/en/faq-german-tax ... /#resident

Though your wife does get to use your tax-free allowance when you file jointly.
--> as long as her gross salary as a Beamtin is higher than your UK government pension, filing jointly is still more advantageous, i.e. she still gets to save tax just through being married to you, even with the unpleasantness of your UK government pension being subject to Progressionsvorbehalt.

Only if her gross salary as a Beamtin were lower than your UK government pension, should you file separately, to save her tax.

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You do know that you should never take on German citizenship?
Because once you do, Germany gets to tax your UK government pension instead of the UK, see article 18 (2) of the double taxation agreement between Germany and the UK: https://www.bundesfinanzministerium.de/ ... onFile&v=3

• (2) Notwithstanding the provisions of paragraph 1, pensions
  and other similar remuneration paid by, or out of funds created
  by, a Contracting State, a “Land” or a political subdivision or a
  local authority of a “Land” or a Contracting State or some other
  legal entity under public law of that State to an individual in
  respect of services rendered to that State, “Land”, subdivision
  or authority or legal entity under public law shall be taxable only
  in that State. However, such pensions and other similar
  remuneration shall be taxable only in the other Contracting State
  if the individual is a resident of, and a national of, that State.

I have been looking at the possibility of a mini job but I’m worried that I might fall foul of tax law and up paying my entire earnings out in some obscure tax grab. As I understand it mini job income would not normally bring you into the tax arena because the earnings are below the income tax free allowance in Germany…

You misunderstood.
The standard way an employer deals with a mini job is that he pays 2% flat rate income tax (Pauschalsteuer) out of his own pocket, just so that you do not have to tax that mini job income.
These 2% tax are a business expense for your employer, just like the social security contributions he pays for you: https://www-minijob--zentrale-de.transl ... r_pto=wapp

The only social security contribution you would pay are 3.6% towards German public pension insurance (= 18.6% total - 15% contributed by employer).
While you could opt out of paying these 3.6%, the general consensus is that that would be a waste of the employer's 15%, since as soon as you co-pay these 3.6%, you collect pension months in German public pension insurance, and will get a (very small) pension because of them once you reach pension age. And there are also other advantages, see here: https://magazin-minijob--zentrale-de.tr ... r_pto=wapp

--> that was it, you do not mention your mini job income in your tax return.

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Only if your employer were very strange would they refuse to pay these 2% flat rate tax out of their own pocket and would instead tax it like a "normal" job, i.e. would issue you a Lohnsteuerbescheinigung at the end of the year.
--> in this most unlikely of cases, your employer would also report the mini job income to the Finanzamt and even if you hadn't declared the mini job income in Anlage N, the Finanzamt would add the mini job income to your tax return automatically.

For details please read: https://www-lohnsteuer--kompakt-de.tran ... r_pto=wapp

(1). Would they subject my tiny mini job wage to progression rules and because my worldwide earnings would then be above the tax free allowance, start making me pay income tax on it in Germany…? Or is it the case that as the wage in Germany is too low to trouble the tax man, the progression issue would not kick in….

No, see above.
Unless your employer is very strange, you have a "standard" mini job and your employer has already paid the 2% flat rate tax on it, just so that your mini job income does not appear in your tax return.

(2) Would they refuse me an income tax free allowance in Germany because I already receive one in the UK (I don’t think they should be able to do this, but the German tax system does appear remarkably vicious at times)

No, Germany does not care how many tax-free allowances you get in other countries.

As long as you are resident in Germany, you get the Grundfreibetrag (German personal tax-free allowance): https://de.wikipedia.org/wiki/Grundfrei ... utschland)
In 2024, it is 11,604€ per person.

If you file jointly, your wife also gets to use any parts of your Grundfreibetrag that you did not "use" yourself.
--> if your income is just the UK government pension and the "standard" mini job, you will not use up anything of your Grundfreibetrag, so she will get to use all of it.

[kiplette]

He's 60 and only has UK income, so he only has to make it to 67 or whatever the current state pension age is in order to go on an S1 and get his KK paid from the UK.

My vote is strongly that he doesn't pay the 3.5% which will get him a tiddly German pension and make him ineligible for an S1. I think he wants to avoid that pension at all cost.

Or I'm talking nonsense, always a possibility

It's brilliant to have these threads building up the info again.

[PandaMunich]

He's 60 and only has UK income, so he only has to make it to 67 or whatever the current state pension age is in order to go on an S1 and get his KK paid from the UK.

My vote is strongly that he doesn't pay the 3.5% which will get him a tiddly German pension and make him ineligible for an S1. I think he wants to avoid that pension at all cost.

Thanks!

You're completely right, I had totally forgotten about that aspect.
--> he should opt out of paying into German public pension insurance in his mini job. This will also mean that nothing will be deducted from it, i.e. his net minijob salary will be the same as the gross amount.

[Lettherebedrums56]

Thank you both so much…. It has all become very much clearer, especially the income tax arrangement around mini-jobs… On the face of it, it seems as if a mini job might well be suitable for me… I’m very grateful for your advice and I owe you both a beer…. Which, of course, I’ll probably now be able to afford to buy (Can I get it refunded on a tax return )