TAX LAW EMPLOYER GERMANY

CONTRIBUTIONS

1.INSURANCES

a. Health insurance/Krankenversicherung b. Nursing Care Insurance/Pflegeversicherung c. Pension contributions/Rentenbeiträge

TAX

a. Wage tax b. solidarity tax

EMPLOYEE VS EMPLOYER GERMANY CONTRIBUTIONS

In Germany employer and employee share the contributions the insurances and pay equally taxes ie. wage tax and contributions to the insurances. The employer transfers the net amount to the employee, but nevertheless pays the gross amount as the rest is the tax and the insurances contributions. The sums of the taxes and the insurances differ from salary category and are based on the salary sum, the tax class and other taxes.

The contributions to the insurances and the taxes are accumulated each year by taking into account and forecasting the economy growth, the professionally active population and the applications for the pension

This is called the Index of the monthly taxed salary

There is a differentiation between the states of the East Germany and the states of the West Germany when it comes to taxation and the contributions to the insurances due to division of Germany in West and East and the following differentiation in the economic growth of the two parts of Germany

INSURANCES – 2018-2019

AN EXAMPLE ON A PAYSLIP

SALARY VS BONUS

  • Salary is protected by law
  • It cannot be confiscated
  • It needs to be paid at the end of the month
  • It needs to be documented
  • Bonus is at the discretion of the company
  • It cannot be claimed
  • There is no right to that
  • Not binding for the employer
  • Both salary and bonus are submitted to taxes and social contributions
  • Salary is accumulated for the welfare benefits and pension schema, whereas the bonus is not, even if it is submitted to the same taxes and social contributions

Another example of a payslip with bonus

TAXES

There are six different tax classes depending on the personal and professional situation, ie. Single,divorced, widowed, married people when the both work, married when one does not work, single parents, people with two jobs etc and the wage tax is accumulated accordingly.

The wage tax is accumulated on the grounds of the income tax. It is actually the income tax. That is why employees in Germany are not obliged to do their taxes at the end of the tax year, they are paying this tax in advance with their salaries every month.

As with the contributions the tax is divided between employees and employer, 50-50

Besides the wage tax, the employer pays the solidarity contribution (Solidaritätszuschlag), ie for unemployed people and the tax that goes to the church (Kirchensteuer) (for people that are registered with the church) – slide follows

Businesses that employ more than twenty (20) employees are obliged to pay another contribution for the support of the office for integration for disabled people, slide follows

Accumulation of this sum is based on the positions that the business offers to disabled employees or students

This amount is indeed accumulated according to the positions that the company offers to disabled people or students as a mandatory internship, in order to get their degree (not our students) and the more disabled people a business employees, the less this amount is.

5% of the positions of the company employing more than 20 people need to be offered to people with disabilities.

For companies from 20-40 employees it has to be one position only offered to a person with disability

For companies with less than 60 employees, at least two positions should be taken by employees with disabilities.

In case there is none position offered, the above amount is to be paid out.

Alternatively, there can be purchases from the ateliers of the disabled people, Behindertenwerkstätten, so as to lower this amount.

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