Lohnsteuer
Subsequent payment of social security contributions pursuant to Section 28f para. 2 German Social Code Book IV (SGB IV) by the employer on the basis of a summary notice not qualified as wages
The lump-sum payment of income tax in accordance with Section 37b German Income Tax Act (GITA) (30% plus annex taxes) enables the employer to pay income tax due on benefits in kind to employees, third parties and business partners. However, this does not release employers from the obligation to pay social security contributions for their own employees. In practice, lump-sum taxation is often used in the context of larger events without the corresponding social security contributions being paid. In these cases, the social security authorities can issue a so-called summary notice for the subsequent collection of employee and employer contributions if it is not possible to clearly allocate the benefits to the individual employees. The employer alone assumes the total value of the notice, which raises the question of whether the assumption of the employee's contribution constitutes taxable wages. The Federal Fiscal Court (BFH) ruled on this in its judgment of 15 June 2023 (VI R 27/20, BStBl. 2023 II, p. 1066).
Wage tax principles and lump-sum taxation in accordance with Section 37b GITA
Wages include all income that the employee receives from the employment relationship (cf. Section 2 para. 1 Wage Tax Implication Ordinance (LStDV)). Apart from salaries and wages, this also includes benefits in kind (e.g. participation in events of a rewarding nature, cf. Section 8 para. 2 sentence 1 GITA). The assumption of employee social security contributions by the employer also generally constitutes taxable wages (cf. BFH decision of 30 August 2004, VI B 75/04 – not published – NWB VAAAB-35855).
From Jasmin Hanft, Johanna Wolter und Prof. Dr. Nikolaus Kastenbauer
Applicable income tax table for temporary employment in Germany (R 39b.5 para. 2 sentence 4 LStR) - Update
The amendment resp. insertion of R 39b.5 para. 2 sentences 3 and 4 Wage Tax Guidelines (LStR) continues to cause discussion. This became recently apparent due to a submission by eight leading head organizations of the German industry to the Federal Ministry of Finance (BMF). The associations intended to achieve an amendment to the aforementioned Wage Tax Guideline passage, or alternatively a letter of implementation for cases, for which there are no fiscal reasons for the day-by-day approach. According to the BMF, the publication of the Wage Tax Instructions (LStH) for 2024 should provide more clarity.
Effects of the amendment of the Wage Tax Guidelines
R 39b.5 LStR generally regulates the withholding of wage tax from current wages.
With the new regulation of the Wage Tax Guidelines, R 39b.5 LStR was also extended by a sentence 4 and sentence 3 was adjusted accordingly (effective from 1 January 2023). In the opinion of the tax authorities, working days that are not subject to domestic wage tax deduction may now not be counted for the wage payment period in Germany. The tax authorities therefore treat this period as a partial wage payment period for tax purposes, meaning that the daily wage tax table should be applied to the domestic taxable wages.
The calculation of wage tax according to the monthly wage tax table, which is more favorable for the employee, is therefore no longer applicable.
From Pia Stöben, Johanna Wolter und Prof. Dr. Nikolaus Kastenbauer
Amendments to the Double Tax Treaties (DTT) with Luxembourg and Austria
New provisions were made in both the DTT with Luxembourg (DTT-Luxembourg) and the DTT with Austria (DTT-Austria) by means of protocols of amendment, which have been in force since 1 January 2024. The adjustments to both DTT resulting from the amendment protocols also affect, among other things, activities from employment. The most important changes from a payroll tax perspective are outlined below:
Act on the Protocol of 6 July 2023 amending the Agreement of 23 April 2012 between the Federal Republic of Germany and the Grand Duchy of Luxembourg on the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital (German-Luxembourg Tax Treaty)
The protocol of amendment to the DTT-Luxembourg signed in Berlin on 6 July 2023 extends the existing de minimis rule for cross-border employees and integrates it, as well as other existing consultation agreements on the DTT-Luxembourg, into the DTT, implements the minimum standard of the BEPS project under treaty law in the bilateral relationship with Luxembourg and makes further adjustments to the DTT-Luxembourg. It was published in the Federal Law Gazette on 13 December 2023.
From Simeon Wahl, Johanna Wolter und Christina Neugirg
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