hTTi

Hello,

I’ve just found out about

https://investor.vanguard.com/accounts- ... ns/sep-ira

and was wondering how would Finanzamt recognize it for tax purposes.
I am a German resident, working for a US company and I have an LLC in the States. I am paying taxes on both incomes here.

If I take up to 20% of my LLC profit and put it into SEP IRA would I still have to pay taxes on those 20% here in Germany?
Vanguard says that it is tax deferred IRA, but that would mean nothing if the Finanzamt doesn’t recognize it as that.

Thanks,

Nixon.

Nixon wrote: ↑Fri Aug 09, 2024 3:10 pm Hello,

I’ve just found out about

https://investor.vanguard.com/accounts- ... ns/sep-ira

and was wondering how would Finanzamt recognize it for tax purposes.
I am a German resident, working for a US company and I have an LLC in the States. I am paying taxes on both incomes here.

If take up to 20% of my LLC profit and put it into SEP IRA would I still have to pay taxes on those 20% here in Germany?
Vanguard says that it is tax deferred IRA, but that would mean nothing if the Finanzamt doesn’t recognize it as that.

Read article 18A of the double taxation agreement between Germany and the USA: http://pinkernell.de/dbausa.htm#Art18A

• 3. The provisions of paragraph 2 shall not apply unless:
  
  a) contributions by or on behalf of the individual, or by or on behalf of the individual’s employer were made before the individual began to exercise an employment or self-employment in the other State;
  b) the pension plan is accepted by the competent authority of that State as generally corresponding to a pension plan recognized as such for tax purposes by that State.

Condition a):
Germany will only do tax deferment, if this is an IRA into which you had paid into before you started working in Germany, i.e. if this is an "old" plan that you took along when you moved to Germany.

Condition b):
The SEP-IRA is an eligible US pension plan since it's listed in the protocol to the DTA: http://pinkernell.de/dbausa.htm#Protocol

• aa) In the case of the United States, qualified plans under section 401(a) of the Internal Revenue Code, individual retirement plans (including individual retirement plans that are part of a simplified employee pension plan that satisfies section 408(k), individual retirement accounts, individual retirement annuities, and section 408(p) accounts, and Roth IRAs under Section 408A), section 403(a) qualified annuity plans, section 403(b) plans, and section 457(b) governmental plans.

Thank you Panda, I will check it.