Global Daily Tax News, Germany Offering Tax Exemption For Working Beyond Retirement Age, (Oct 16, 2025)

On October 15, 2025, Germany's Federal Cabinet approved the draft law on tax incentives for employees of retirement age (the Active Pension Act).

The measures are intended to boost economic growth in Germany, by encouraging older workers to stay in their jobs for longer. A key measure under the package is a tax exemption for salary income up to EUR2,000 per month, for taxpayers who reach the statutory retirement age of 67 and continue to work voluntarily.

The measure will be available only to employees subject to social security contributions (excluding self-employed persons and civil servants), starting from January 1, 2026. The concession is available regardless of whether the taxpayer receives a pension or has deferred their retirement. Beneficiaries will continue to be liable to social security contributions.

Federal Finance Minister and Vice Chancellor Lars Klingbeil said: "We are providing further impetus for economic growth in Germany. For this, the economy especially needs older and experienced workers and skilled workers. They can pass on their knowledge and continue to contribute. Those who voluntarily work longer will therefore benefit from the active pension in the future. This strengthens the labor market, strengthens the economy, and is a real plus for everyone who wants to remain professionally active. Those who reach statutory retirement age and continue to work voluntarily will receive their salary of up to EUR2,000 per month tax-free in the future."