BMF Adopts BFH Principles on Pension Provisions
BFH, decision of 4 September 2024 – XI R 25/21: On this basis, the Bundesministerium der Finanzen (BMF, Federal Ministry of Finance) issued a letter dated 17 September 2026 (IV C 6 – S 2176/00030/001/054) commenting on the treatment of pension provisions in the tax balance sheet under § 6a EStG (German Income Tax Act). The subject matter is pension commitments whose benefit amount depends on future events, in particular on the performance of underlying securities.
The BMF letter therefore concerns, in particular, pension commitments where there is a legally binding entitlement to pension benefits upon the occurrence of the pension event, but the amount of the benefit is subject to a condition precedent. A decisive factor may be, for example, the value reached by a reinsurance life insurance policy investing in fund units when the pension event occurs.
According to the decision of the Bundesfinanzhof (BFH, Federal Fiscal Court), the going-concern value of a pension obligation is determined under § 6a para. 3 EStG even in the case of contribution-based defined benefit commitments without a guaranteed minimum benefit. Following coordination with the highest tax authorities of the federal states, the tax administration applies these principles beyond the individual case decided to all cases that are still pending.
Significance of the Decision for § 6a EStG
§ 6a EStG contains the tax requirements for the recognition and valuation of pension provisions. The provision is of considerable practical importance for the tax balance sheet because it determines the conditions under which obligations arising from occupational pension commitments can be taken into account for tax purposes and the standards by which they are to be valued.
Pension Commitments with Value-Dependent Benefits
The BFH had to decide on a situation in which the subsequent pension benefit was linked to the value of a unit-linked reinsurance life insurance policy. The entitlement to pension benefits had been granted in a legally binding manner, but the specific benefit amount depended on the value of the underlying investment when the pension event occurred.
The BMF joined the appeal proceedings because of their fundamental significance. In this context, the view was taken, among other things, that securities-linked commitments did not serve pension provision, but solely asset accumulation. The BFH did not follow this view.
Application to All Cases Still Pending
The tax administration adopts the principles of the BFH decision for all cases still pending. This changes the previous administrative view insofar as it was contrary to the decision.
In particular, the BMF letter of 17 December 2002 with reference number IV A 6 – S 2176 – 47/02 is rescinded. It had provided that pension provisions could be recognised only to the extent that the pension entitlement related to a guaranteed minimum benefit.
Valuation in the Case of Uncertain Future Events
The new BMF letter addresses, in a separate section, pension benefits whose amount depends on future developments. This includes, in particular, cases in which the performance of securities is relevant at a specific point in time, for example when the pension event occurs.
The Reporting-Date Principle Remains Decisive
For valuation under § 6a EStG, the value conditions existing at the balance sheet date must be used, taking into account the reporting-date principle. In the case of securities-linked commitments, this may in particular be the quoted market value of the underlying securities.
If a guaranteed minimum benefit exists, it must be recognised at least in the valuation. The minimum benefit therefore remains relevant as a lower limit insofar as it forms part of the pension commitment.
No Offsetting Against the Reinsurance Claim
According to the BMF letter, offsetting the pension provision against the reinsurance claim in the tax balance sheet remains excluded. The valuation of the pension obligation under § 6a para. 3 EStG is generally linked to the values relevant to the commitment as of the balance sheet date.
The BMF letter does not bring about an approximation to the commercial balance sheet valuation of securities-linked commitments. Any further-reaching change to this valuation regime would only be possible on a statutory basis.
Deferred Compensation and Minimum Present Value Comparison
The BMF letter also contains statements on the valuation of deferred compensation arrangements. The minimum present value comparison under § 6a para. 3 sentence 2 no. 1 sentence 1 alternative 2 EStG applies only to deferred compensation within the meaning of § 1 para. 2 BetrAVG (German Occupational Pensions Act).
Accordingly, two requirements must be met:
- The beneficiary falls within the personal scope of the Betriebsrentengesetz (German Occupational Pensions Act).
- In substantive terms, occupational pension provision exists under the Betriebsrentengesetz.
Only if these requirements are satisfied is the minimum present value comparison under the aforementioned provision applicable. The BMF letter does not provide for an extension to other structures.
Rescission of the Previous Administrative View
By rescinding the letter of 17 December 2002, the tax administration is changing its previous position. The earlier restriction to guaranteed minimum benefits will not be continued insofar as it is incompatible with the principles established by the BFH.
According to the information published by the BMF, the letter of 17 September 2026 is available under the title “Occupational pension provision; recognition and valuation of pension provisions in the tax balance sheet under § 6a EStG for pension commitments that depend on future events such as the performance of underlying securities”. It is divided into four thematic areas:
- uncertain future events,
- valuation of deferred compensation arrangements,
- rescission of the letter of 17 December 2002,
- prohibition on retroactive additions.
The tax administration has therefore not opted for a non-application decree, but instead adopts the BFH principles for tax practice in the cases that are still pending.
Transitional Rule on the Prohibition on Retroactive Additions
A special transitional rule concerns the so-called prohibition on retroactive additions under § 6a para. 4 sentence 1 EStG. If the new BMF letter is applied for the first time in a financial year ending before 1 January 2028, the tax administration will not object if the prohibition on retroactive additions is not observed.
This statement expressly relates to first-time application in the financial years mentioned. It therefore does not concern the applicability of the prohibition on retroactive additions in general, but describes transitional treatment permitted by the tax administration for this area of application.
Effects on Tax Valuation
The change may be significant for companies with securities-linked pension commitments with regard to the amount of provisions in the tax balance sheet.
However, the decisive factor remains the respective commitment and its specific structure. Particularly important are the legal binding nature of the pension entitlement, the valuation date, the underlying value conditions and any guaranteed minimum benefit that may have been promised.
Tax Law Assessment by MTR Legal
The BMF letter of 17 September 2026 creates an amended basis for the tax balance sheet treatment under § 6a EStG for securities-linked pension commitments and pension commitments dependent on future events. Companies, investors and high-net-worth private individuals may therefore be faced with questions relating to accounting, tax classification and the structuring of occupational pension commitments.
MTR Legal Rechtsanwälte advises clients in tax law as well as at the interfaces with corporate, commercial and business law. For legal questions concerning pension provisions, pension commitments and their tax treatment, MTR Legal is available to provide individual legal advice in tax law.
