Child Allowance
The child allowance is a term from German social and tax law. It refers to financial benefits granted to individuals who care for at least one child who meets certain requirements. German law recognizes different types of child allowances in various contexts, such as in the areas of retirement provision, statutory accident insurance, and in some cases, collective agreements. The aim of the child allowance is to support families with children, thereby implementing the concept of state welfare and support.
Overview and Definition
The term child allowance covers various benefits whose purpose, amount, and legal framework vary. Child allowances must be distinguished in particular from other benefits such as child benefit and the child tax allowance.
The most important areas of application are:
- Allowance for retirement provision (in particular Riester pension)
- Child allowances in statutory accident insurance
- Child-related allowances in the public sector and individual collective agreements
Distinction from child benefit and child tax allowance
Child allowance and child benefit refer to different benefits. While child benefit is paid under the Income Tax Act as a tax family benefit, child allowance generally means an additional or other financial grant. The child tax allowance is also a tax relief, but not an allowance in the narrower sense.
Child allowance in retirement provision (Riester pension)
Legal foundations
The most well-known form of the child allowance exists within the private retirement provision promoted under the Retirement Assets Act. The central legal regulation is Section 79 of the Income Tax Act (EStG) in conjunction with the following provisions.
Entitlement
Persons directly eligible for a Riester pension child allowance are those for whom at least one child is eligible for child benefit during the relevant period. For details, see § 85 EStG.
Special requirements:
- For the entitlement period, the child must receive child benefit under the Income Tax Act or the Federal Child Benefit Act.
- The allowance is generally attributed to the mother; assignment to the other parent is possible.
Amount of the child allowance (Riester pension)
The annual amount of the child allowance depends on the child’s year of birth:
- Per child born before January 1, 2008: 185 euros per year (as of 2024)
- Per child born on or after January 1, 2008: 300 euros per year (as of 2024)
The payment is made in addition to the basic Riester allowance.
Special features and proof requirements
A separate allowance application is required. This can be submitted annually or as a permanent allowance application. Changes in eligibility requirements, e.g., loss of child benefit entitlement, must be reported immediately. The statutory pension insurance verifies the conditions.
Child allowance in statutory accident insurance
Legal bases
In the area of statutory accident insurance, the child allowance is granted in connection with pension benefits. The legal basis is Section 67 of the Seventh Book of the Social Code (SGB VII).
Scope of application and requirements
Child-related allowances are, for example, paid with pensions to widows, widowers, or surviving registered partners if there is a child in the household who meets the relevant requirements. Thus, survivors are entitled, provided they are entitled to a pension from statutory accident insurance and care for one or more children, e.g., minor children or adult children in training.
Amount of the child allowance
The child allowance amounts to 10% of the relevant reference value (§ 18 SGB IV) per child and is added to the main benefit (pension). The exact amount depends on the applicable reference value, which is adjusted annually.
Child allowance in the public sector and collective agreements
Collective bargaining foundations
Some collective agreements—such as former versions of the Federal Employees’ Collective Agreement (BAT) or current regulations in the Collective Agreement for the Public Service of the Länder (TV-L)—recognize child-related allowances. These were and are paid in addition to the basic remuneration, provided certain family-related requirements are met.
Eligibility requirements and extent
The actual requirements and amount of child-related allowances are set out in collective agreements and vary depending on industry, federal state, and bargaining party. In many cases, these specific allowances have been abolished or integrated into other salary components through reforms.
Tax and social security treatment of the child allowance
Tax treatment
Child allowances within the Riester pension are state-supported but not taxable income. However, the resulting annuity is subject to subsequent taxation (income tax) during the pension phase. Other child allowances, such as those in the public sector, may be subject to wage tax if considered part of salary.
Social security treatment
Child allowances are generally exempt from social security contributions, provided they are granted as specifically designated income or explicit government social benefits. In individual cases—especially with collectively bargained child allowances—the social security treatment may differ, depending on whether the payments are considered part of salary.
Legal consequences of unjustified receipt
Any person who receives child allowances without actual entitlement may be required to repay benefits received without justification in accordance with social law and civil law repayment provisions (e.g., Sections 45 et seq. SGB X). In certain cases, administrative offenses or criminal offenses (such as benefit fraud under Section 263 of the Criminal Code) may occur.
Procedural aspects
Application and proof of eligibility
In almost all cases, applying for the child allowance requires a formal application and, if necessary, proof of eligibility, such as submission of certificates or evidence of child benefit. The examination and approval are carried out by the relevant authorities (e.g., Central Allowance Office for Retirement Assets or pension insurance agencies).
Duration and end of entitlement
Entitlement to a child allowance exists only as long as the statutory or collectively agreed conditions are met. The entitlement ends automatically, e.g., when entitlement to child benefit ceases or the child exceeds the relevant age limit.
International aspects and EU law
In certain cases, international circumstances—such as regulations of the European Union (EU)—affect entitlement to child allowance. According to EU social security regulations, entitlements to child allowance in cross-border cases may be coordinated, especially when there is employment or residence in different EU Member States.
Literature
- Income Tax Act (EStG)
- Seventh Book of the Social Code (SGB VII)
- Social Code Book IV (SGB IV)
- Collective agreements for the public sector (e.g., TV-L, TVöD)
- Administrative instructions for the Riester allowance
Weblinks
- Federal Ministry of Finance – Allowance support for retirement provision
- German Pension Insurance – Child allowance
- Gesetze im Internet – SGB VII
Note: The term child allowance is a collective term for various benefits. An independent review of the eligibility requirements in the respective context is necessary. The above legal situation is based on the status as of June 2024. Changes through legislation or case law are possible.
Frequently Asked Questions
Who is legally entitled to the child allowance?
In general, persons insured who have taken out certain government-supported retirement pension contracts (e.g., Riester pension) and receive child benefit for at least one child eligible for child benefit are entitled to the child allowance. The legal criterion is that entitlement is tied to the existence of a child benefit claim according to §§ 62 et seq. of the Income Tax Act (EStG). Merely considering the child for tax purposes is not sufficient; there must be an actual entitlement to child benefit. The entitled person must have at least one of their own retirement provision contracts certified in accordance with the Retirement Pension Contracts Certification Act (§ 79 et seq. EStG). This applies regardless of whether the person lives in the same household with the child eligible for child benefit (e.g., also in cases of separation or divorce with division of child benefit according to § 64 EStG). Apart from the biological parent, adoptive parents, foster parents as well as, in certain cases, grandparents or other custodians may also be eligible, provided they are legally recognized as eligible for child benefit.
For which children can the child allowance be claimed?
The law stipulates that the child allowance can be applied for each child for whom there is an entitlement to child benefit under the provisions of the Income Tax Act. This means eligible children are those who have not yet reached the age of 18. For children between 18 and 25 years of age, entitlement to the allowance continues, provided they are still in education, a voluntary social year, federal voluntary service, or similar situations entitling them to child benefit. If a child dies during the calendar year or entitlement to child benefit ends for other reasons, the child allowance is granted proportionally for the whole calendar year, provided there was entitlement for at least one day (§ 85 EStG).
What needs to be considered legally when several persons are eligible for child benefit?
In principle, the child allowance is only paid to the person who actually receives the child benefit. In the case of joint custody (e.g., separated parents), child benefit is paid under § 64(2) EStG half each to both parents, and a written declaration by the parents is legally binding in this respect. The child allowance can also be split accordingly. Otherwise, the allowance is paid to the person who, after legal examination and proof of child benefit eligibility, receives the child benefit. An application to change the recipient of the child allowance may be submitted until the end of the second calendar year following the allowance year (§ 89(2) EStG).
How is the application for the child allowance submitted from a legal perspective?
The application for child allowance must be submitted annually in accordance with § 89 EStG together with the application for the retirement provision allowance. This can be done either by means of a signed form or a permanent allowance application. The application is bound to the statutory deadline: It must be submitted no later than the end of the second year following the contribution year. If insured persons miss this deadline, entitlement lapses irrevocably. The accuracy of the information, especially regarding child benefit eligibility, is legally required, as incorrect information may result in repayments or administrative fines.
What are the legal consequences if family circumstances change (e.g., birth, adoption, divorce) regarding the child allowance?
Any change in the person entitled to claim child benefit (e.g., due to birth of another child, adoption, loss of child benefit entitlement, divorce or death of the child) has a direct impact on entitlement to and the amount of the child allowance. Legally, the policyholder is obliged to inform their provider and the responsible Central Allowance Office for Retirement Assets (ZfA) of changes immediately. If this notification is omitted, unduly received allowances can be reclaimed by administrative order under § 90 EStG. The change is taken into account retrospectively as of the respective date of change. In cases of adoption, the child allowance applies from the date the adoption becomes legally effective; in the case of birth with a child benefit entitlement, from the month of birth.
How is the child allowance handled legally when an entitled person has several contracts?
If an entitled person owns several certified retirement provision contracts (e.g., several Riester contracts), the ZfA can credit the child allowance to only one contract per child and calendar year. Legally, the policyholder is required to specify in the application to which contract the child allowance should be assigned. If there is no clear assignment, the allowance office makes the allocation at its discretion, favoring only the first-mentioned contract (§ 90 EStG). A later change of assignment is only possible within the stipulated deadline.
What are the tax consequences of receiving the child allowance?
The receipt of the child allowance is legally considered a government subsidy as part of the so-called ‘subsequent taxation’. This means that the allowances received during the accumulation phase—including the child allowance—are generally taxable upon payment of the supported retirement benefit at retirement age (§ 22 No. 5 EStG). There is no separate taxation of the allowance during the accumulation phase. In the context of the ‘Günstigerprüfung’ (§ 92 EStG), it may also be the case that, instead of the allowance, the additional special expenses deduction is more advantageous; in this instance, the received allowance is offset against the tax saving, and any overpayments must be refunded.
