Germany

Tax-deferred employer plans

German employer pensions (betriebliche Altersvorsorge) come in five legal forms:

Pensionskasse: An independent insurance undertaking (a VVaG or AG) supervised by BaFin. Holds segregated assets for members. Most clearly trust-like: likely a foreign trust.

Pensionsfonds: External defined contribution fund regulated by BaFin. Holds segregated investment assets. Likely a foreign trust.

Direktversicherung: Life insurance contract taken out by the employer for the employee. Less clearly a trust: it is an insurance contract, not a funded trust. Whether it constitutes a trust for §6048 purposes is debated.

Unterstützungskasse (support fund): A legally independent pension institution (usually an e.V. or GmbH) that holds the assets; the employee has no legal claim against the fund itself, and the fund commonly lends assets back to the sponsoring employer or reinsures the promise. Not BaFin-supervised. Its trust status for U.S. purposes is uncertain.

Direktzusage (direct promise / book reserve): Unfunded promise on the employer's balance sheet. Not a trust.

§301.7701-7 classification: Pensionskasse and Pensionsfonds are most likely foreign trusts. They hold segregated assets under German law, are supervised by BaFin; failing either test makes a trust foreign, and these fail both. Direktversicherung and Unterstützungskasse have uncertain trust status; Direktzusage is unfunded and not a trust.

Rev. Proc. 2020-17 analysis: Whether a Pensionskasse or Pensionsfonds qualifies under Rev. Proc. 2020-17 depends on meeting all §5.03 conditions: the plan must be tax-favored, subject to annual information reporting to the tax authority, funded only from earned-income contributions with annual caps, restricted to withdrawal at retirement, disability, or death, and, for employer-maintained plans, satisfy the §5.03(6) nondiscrimination test. The exemption is available only to an 'eligible individual' under §5.02: someone who is compliant (or comes into compliance) with U.S. income-tax filing and has reported the plan's contributions, earnings, and distributions as income to the extent U.S. law requires; a participant who never reported plan earnings cannot rely on it until they do.

Treaty provisions: Article 18A (added by the 2006 Protocol) has two rules. For a U.S. citizen living and working in Germany, Article 18A(5) lets employment-linked contributions to a German plan be deducted or excluded for U.S. purposes and keeps benefits accrued and employer contributions during that employment out of U.S. taxable income, limited to the relief Germany gives and the relief a corresponding U.S. plan would get, and only for plans the U.S. competent authority accepts as corresponding. For a U.S. resident who holds a German plan, Article 18A(1) defers U.S. tax on the plan's income until it is paid. Both rules survive the saving clause (Article 1(5)(a)). Neither affects §6048 reporting.

3520/3520-A treatment: For Pensionskasse/Pensionsfonds, if they qualify under Rev. Proc. 2020-17, no forms are required. Otherwise, file Form 3520-A and Form 3520 Part II annually for the part your own contributions fund, once your own contributions exceed the employer’s, counted as the note at the end of this section explains (Treas. Reg. §1.402(b)-1(b)(6)), or for any part you otherwise own. For Direktversicherung and Unterstützungskasse, the trust classification is uncertain; filing protectively is safer than non-filing.

For a plan an employer contributes to, a trust holding it is generally a nonexempt employees’ trust described in §402(b). §6048(a)(3)(B)(ii) excepts transfers to §402(b), §404(a)(4), and §404A trusts from Part I, the participant’s own contributions included, and §679 does not make the participant the owner (see the Reporting Guide’s employer-plan section). Payouts the participant reports as compensation income are excepted from Part III. If the participant’s own contributions ever exceed the employer’s, the participant is treated as the owner of the part those contributions fund (Treas. Reg. §1.402(b)-1(b)(6)), reports it on Part II and Form 3520-A each year it is owned, and is taxed on its income each year. In that count, what the participant chose to put in, salary sacrifice included, is the participant’s, and anything the plan’s rules required taken from pay is the employer’s, as the IRS chief counsel read a national retirement fund in 1997. The rest is taxed when it vests and, after that, when paid out (§402(b)(1), (2)).

Tax-deferred individual plans

Riester-Rente: A government-subsidized private pension (Zulagenförderung and Sonderausgabenabzug). Structured as a contract with an insurance company, bank, or fund manager, holding segregated assets. Likely a foreign trust if the assets are individually segregated.

Rürup-Rente / Basisrente: Basic pension for the self-employed and supplemental pension for employees. Insurance-based with segregated assets. Similar trust analysis to Riester.

§301.7701-7 classification: Both are likely foreign trusts if they hold segregated assets for the individual. The analysis depends on the contract structure.

Rev. Proc. 2020-17 analysis: Both are individual plans; §5.03(6) (the employer-plan nondiscrimination condition) does not apply. Whether they meet §5.03(1)–(5) requires plan-specific analysis: key questions include whether contributions are limited to earned income (condition 3) and whether the withdrawal restrictions satisfy condition (5). Full reporting is required unless that analysis confirms qualification.

3520/3520-A treatment: If treated as foreign trusts, file Form 3520-A and Form 3520 Part II annually.

Statutory pension (gesetzliche Rentenversicherung / GRV): The GRV is a pay-as-you-go social insurance system. There are no segregated individual trust assets. Strong arguments that it is not a foreign trust. Some practitioners file protectively given the penalties for getting it wrong.

Gifts and inheritances

Gifts and inheritances totaling more than $100,000 in a year from one nonresident alien individual or foreign estate in Germany (adding together gifts from donors related to each other) trigger Form 3520 Part IV reporting. Gifts from foreign corporations or foreign partnerships exceeding $20,573 (for 2026, indexed for inflation) are also reportable.

Germany imposes its own Erbschaftsteuer und Schenkungsteuer (inheritance and gift tax). The U.S.–Germany estate and gift tax treaty may affect estate tax liability but does not change the Form 3520 reporting obligation. The U.S. obligation is informational: no U.S. tax is due on the gift.

Penalties and practical notes

German pension providers issue annual Standmitteilungen showing contributions, returns, and projected benefits. The German tax year is the calendar year: no conversion needed.

For funded plans classified as trusts, the cost of filing protectively is minimal compared to §6677 penalties. Given the uncertainty around several German structures, a protective filing approach is recommended.

Convert euros at the rate prevailing when each amount is received, paid, or accrued; the IRS has no official exchange rate and generally accepts any posted rate used consistently, so its published yearly average rate is a common choice for amounts arising evenly across the year.