Digital Payroll Interface: Extended Requirements as from 2027
The Digital Payroll Interface (Digitale LohnSchnittstelle, DLS) has been mandatory since 2018 and enables employers to provide data relevant for wage tax purposes in a standardized format during tax audits. This is intended to streamline processes, save resources and reduce the risk of transmission errors.
From a practical perspective, the key change is that, while the DLS has so far been essentially limited to data from the payroll system, the tax authorities are pursuing a significantly more complex approach with the extended requirements applicable as from 1 January 2027. With the amended version of § 4(2a) German wage tax ordinance (LStDV), the requirements for data provision are now being further specified and standardized.
Changes as from 2027
Until now, the data required for wage tax audits often had to be compiled manually from multiple sources. Under the revised version of § 4(2a) LStDV, introduced by the Seventh Ordinance Amending Tax Regulations, employers will be required to provide not only payroll account data recorded pursuant to § 4 LStDV and § 41 GITA, but also the data generated and used for these purposes in upstream and ancillary systems.
By Stefan Sperandio, Frank Kaiser and Bartos Kaminski
Electric or Hybrid Company Cars: a Tax Trap rather than a Tax Advantage?
Electric or hybrid company cars are known as an attractive benefit – and, at first glance, appear to be a clear win-win situation from a tax perspective. Yet this is precisely where an underestimated risk lies: what is favorable for income tax purposes can quickly become an expensive trap when it comes to VAT. This is because income tax and VAT do not follow the same rules when it comes to private use.
The crux of the matter: two taxes, two worlds
Electric and hybrid electric vehicles benefit from special tax relief under income tax legislation. Depending on the type of vehicle, the gross list price applicable to private use is significantly reduced (by a quarter respectively half). This appears attractive at first glance to both employees and employers – the monetary benefit is noticeably lower.
By Stefan Sperandio, Johanna Wolter and Julia Klein
Draft Income Tax Reform Act 2027
On 2 September 2026, the Federal Government introduced a draft bill for the 2027 Income Tax Reform Act. In particular, the draft provides for higher tax-free allowances, adjustments to child benefit and the flat-rate allowance for employees, as well as changes to the taxation of craftsman services and mini-jobs. The provisions are still subject to the outcome of the further legislative process.
Extension of the tax exemption for Sunday and public holiday allowances
The basic wage, which determines whether allowances are tax-exempt, is to be increased. The current maximum of 50 EUR per hour is to rise to 75 EUR.
This will particularly affect employers with staff who regularly work on Sundays and public holidays or at night; however, in the case of night work, it should be noted that the maximum permissible basic wage remains unchanged at 50 EUR. The change may mean that allowances can continue to be treated as tax-free even where basic wages are higher, provided the other statutory requirements are met.
By Stefan Sperandio, Johanna Wolter and Norbert Nikolai Wahnsiedler
A fresh look at voluntary employer benefits: the Federal Fiscal Court clarifies the ‘additionality’ criterion
Tax-free benefits, flat-rate taxed allowances and more take-home pay – many attractive employer benefits stand or fall on the ‘additionality’ criterion. It is therefore worthwhile for companies to take a closer look at existing remuneration and benefits models: a clear distinction between the basic salary owed and voluntary additional benefits can open up new structuring options whilst also increasing the net benefit for employees.
One criterion, many tax advantages
The ‘additionality’ criterion applies to numerous tax-free or flat-rate taxed employer benefits. These include, amongst others:
- commuter tickets under sec. 3 no. 15 GITA,
- nursery subsidies under sec. 3 no. 33 GITA,
- benefits for workplace health promotion under sec. 3 no. 34 GITA,
- the provision of company bicycles and e-bikes under sec. 3 no. 37 GITA,
- the €50 exemption limit for benefits in kind,
- flat-rate taxed travel and internet allowances, and
- the contribution amount for occupational pension schemes.
This criterion is intended to prevent cash wages, which are normally subject to tax and social security contributions, from simply being converted into tax-privileged remuneration components.
By Stefan Sperandio, Johanna Wolter, Hosay Güvenisik and Alicia Tippmann
Private Retirement Savings in Transition: The Retirement Savings Reform Act and Its Impact
The German pension system has been under pressure for years now, the Pension Reform Act ("Altersvorsorgereformgesetz") is intended to provide a new momentum for private retirement savings. Tax-subsidized private pension plans are set to undergo fundamental reform starting in 2027. The focus is on new product structures more closely aligned with capital markets, simplified tax incentives, and broader accessibility for retirement savers.
The goal is to make private retirement savings more attractive and to encourage a broader segment of the population to build up additional retirement savings. But what specific changes will the reform bring, and what challenges will arise as a result?
By Stefan Sperandio, Anne Dechow and Serena Spataro
© 2017–2026 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.
Follow us
