A so-called direct payment mechanism is intended to enable fast disbursement of state aid.
What is changing
The Annual Tax Act (JStG) 2022 established the legal framework for storing bank account details in the tax identification number database. The central storage of this data forms the basis for setting up a direct payment mechanism (Direktauszahlungsmechanismus, DAM).
It is intended to enable a fast and at the same time fraud-resistant disbursement of public benefits (e.g. in the event of pandemics or flood disasters).
With the DAM, in anticipation of future direct payments, a simple and digital disbursement channel for bank transfers is being provided.
Entry into force
Applies from the day after its promulgation.
Disability Lump Sum: Authorities Must Exchange Information
If, from 2026 onwards, the tax office does not grant the disability lump sum, the error may lie within the system.
What is changing
If in future the disability lump sum is to be granted on the basis of a new determination, the office issuing the disability determination must transmit the information electronically to the tax office. This also applies where the determination of a disability is amended.
Entry into force
Applies from 1 January 2026.
Foreign Occupational Pension Institutions: Benefits Are Taxable
Benefits from foreign occupational pension institutions will in future qualify as other income and are therefore taxable.
Background
Under the law as it currently stands, benefits from foreign occupational pension institutions are not taxed in full pursuant to § 22 No. 5 sentence 1 EStG even where the benefits subject to taxation are based on contributions that were granted preferential tax treatment or tax exemption abroad.
In such constellations, a more favourable treatment compared to the standard domestic case may arise, for example where foreign taxation granted an exemption for contributions and Germany taxes only the income portion of the pension benefit.
What is changing
In order to prevent this more favourable treatment, it is being clarified by statute that not only a tax exemption of contributions under German taxation, but also a comparable tax exemption or preferential treatment of contributions under foreign taxation, results in benefits within the meaning of § 22 No. 5 sentence 1 EStG.
Entry into force
Applies from the 2025 assessment period.
Frequently asked questions
Frequently asked questions
What is the Direct Payment Mechanism (DAM)?
The Direct Payment Mechanism is a digitalized disbursement channel that enables government benefits to be paid out to citizens quickly and securely via bank transfer. It is intended for use particularly in crisis situations such as pandemics or flood disasters. It is based on the central storage of bank account details linked to the tax identification number.
Where is the bank account data for the direct payment mechanism stored?
The Annual Tax Act 2022 created the legal basis for storing bank account details centrally alongside the tax identification number database. This central storage forms the technical foundation enabling government agencies to make payments directly, without any further data collection.
How will the disability lump-sum allowance be transmitted electronically from 2026?
From 1 January 2026, the authorities that determine or modify a disability assessment must transmit the relevant information electronically to the tax office. Only on this basis will the tax office grant the disability lump-sum allowance (Behinderten-Pauschbetrag). If the allowance is not granted, the cause may lie in missing or incorrect data transmission by the assessing authority.
How are benefits from foreign occupational pension schemes taxed from 2025 onwards?
From the 2025 assessment period, benefits from foreign occupational pension schemes qualify as other income under § 22 Nr. 5 Satz 1 EStG and are fully taxable. This applies even if the underlying contributions were tax-exempt or tax-privileged abroad.
Why was the taxation of foreign occupational pension schemes adjusted?
Under the previous rules, foreign cases could be treated more favorably than domestic ones if contributions were tax-exempt abroad and only the income portion was taxed in Germany. The legislative clarification ensures that a comparable foreign tax exemption or preferential treatment of contributions also leads to full taxation of the subsequent pension benefits in Germany.