Yorkshireman Dec 9, 2013:

@Kirsten There is a difference between non-taxable and tax exempt income - but I must admit, I hardly understand a word of it.

What happens with the contributions deducted for a Direktversicherung is that they are not included in the equation for determining the income tax to be paid, and thus affect the tax rate levied. Tax is paid only on the remaining earnings. This may be tax free, but I'm almost certain I read somewhere that it is something different from tax exemption in some weird way or other.

Not certain what it was, but perhaps something like "Steuerbegünstigend"

Kirsten Bodart Dec 9, 2013:

paragraph 3 of the Act starts with 'Steuerfrei sind' and then No. 1 through to No. 63 we are talking about. So the contributions we are discussing are exempt from income tax. That's also what I understood from the accountant. They are formally included in your income on the tax return, but are deducted before payable taxes are calculated on your net income. Unless I misunderstood him.

Yorkshireman Dec 9, 2013:

@Sabine Not quite tax exempt - the employee contributions are taken from the employee's wage before tax and therefore reduces the overall tax burden on what remains and the employer contribution is paid into the pension fund (which is offered by the company), which in turn reduces the overall tax the employer has to pay.

Direktversicherung means that the contribution is deducted at source. Something like the old PAYE (pay as you earn) system in the UK.

FishX (asker) Dec 9, 2013:

If you go right up to the top there's something about tax exemption there.

philgoddard Dec 9, 2013:

There's nothing about tax exemptions in the relevant article of the act. It's about employers' contributions.

FishX (asker) Dec 9, 2013:

Right, I also thought the point here was that the government is subsidising by granting a tax exemption

Sabine Reynaud Dec 9, 2013:

subsidized and/or tax-exempt can gefördert imply both?

Yorkshireman Dec 9, 2013:

@Ramey I would also go for subsidis(z)ed - as in the sense of "bezuschusst"

I suggest Googling on Vermögensbildendeleistung or Arbeitgeberanteil.

Ramey Rieger (X) Dec 9, 2013:

funded or government funded. But I believe subsidized is more general.

Kirsten Bodart Dec 9, 2013:

It's a lemma or something. It's in the margin. I couldn't find it at first either, but if you enter the whole thing it comes up second on Google (or via FishX's link).

FishX (asker) Dec 9, 2013:

http://www.gesetze-im-internet.de/estg/__3.html

philgoddard Dec 9, 2013:

What does it say? I can't find an article 3 no. 63, but I may be looking in the wrong country's EStG.

FishX (asker) Dec 9, 2013:

Yes, I did look at the EStG. I was thinking subsidised too.

philgoddard Dec 9, 2013:

Subsidised?
Have you looked up the EStG?