Obligations of foreign employers in Germany
von Peter Scheller
Foreign companies and expatriates are often under the impression that they do not have to fulfill any obligations for tax purposes if the following applies: namely that the foreign employer has no establishment in Germany; the employee is a foreign national; and the salaries are paid to a foreign bank account. However, this is not the case if the employee is tax resident in Germany and works there.
A German employer has to fulfill various obligations such as:
- Filing withholding wage tax returns (tax authorities) and social security declarations (social security agencies).
- Paying withheld wage tax to the tax authorities and social security contributions (employer’s and employee’s part) to the social security agencies.
- Fulfilling various formal obligations (payroll accounting, documentation, keeping and storing of accounts and documents, participation in tax or social security audits etc.).
A foreign employer without a permanent establishment is not considered to be a German employer for tax purposes. Therefore the employer is not required to fulfill above mentioned obligations. The employee has to declare his salaries in his German income tax return and has to pay tax installments if requested by the tax authorities.
However, an employer has to fulfill the above mentioned obligations in regard to social security contributions if he/she is situated in the European Union. Employers from non-EU-member states may fulfill the above mentioned obligations but are not obliged to. If a non-EU employer does not fulfill these obligations, the employee has to fulfill these respective obligations. In this case he/she has to pay the employer’s and employee’s part of the contributions.
A foreign employer from an no-EU-member state does not have to be involved in any tax or social security affairs if the employee fulfills the above mentioned obligations.
Author: Peter Scheller, German Tax Adviser, Master of International Taxation
Bildquelle: www.fotalia.com
Kommentare
Kommentar von Tulika |
In case, these taxes and contributions haven't been paid already while the income was earned, but income has already been taxed abroad, how will it be dealt with when I file my returns in Germany?
Antwort von Peter Scheller
It depneds on the income and the country were it come from.
Kommentar von emma |
A foreign employer having only sales office in Germany will be considered as a foreign employer or German employer for tax purposes ?
Antwort von Peter Scheller
How knows?
That depends on a lot of factors:
Kommentar von Vlad |
Hello, is a Romanian employer obliged to pay income taxes for their employees sent to do work in Germany? The Romanian employer is a subsidiary of a German company, at least its capital comes from the German company. Thank you!
Antwort von Peter Scheller
The Romanian employer may have the obligation to withhold, declare and pay social security contributions (if they are due).
The employee has the obligation to declare his or her taxes (if liable to German income tax). Probably the German company is obliged to withhold the tax.
Tax advice by a professional tax adviser is here required.
Kommentar von Nick |
Hello,
I'm a German resident and I'm going to work (full-remote) for a company based in Malta. The company will hire me as an employee but they don't have a base in Germany.
Every month they will give me a gross salary. I have to hire a tax consultant for the taxes calculation.
In the contract there is nothing written about social security contributions.
In the article is written:
> However, an employer has to fulfill the above mentioned obligations in regard to social security contributions if he/she is situated in the European Union.
So those contribution are mandatory and so for this reason are not mention in the contract?
Thank you!
Antwort von Peter Scheller
I don't know why social security obligations are not mentioned in the contract. However, if your employer is not fulfilling its obligations you have to do it instead.
Kommentar von Matej |
I would like to work for a foreign company from Germany. They asked me to look into the tax situation. Since it is slightly complicated, I was wondering if there exist any company that provide the service of calculating tax obligation for a foreign company. Does anybody have a specific provider in mind?
Antwort von Peter Scheller
We can give advice if you send us an e-mail explaining your situation.
Kommentar von Garima Singh |
My employer wants to shift his company to some other EU country and I would like to stay employed in Germany and pay my contributions here. I am not a German citizen and have just finished my studies in September 2020 and started working after that. I wanted to know if that will work out (that is even if my employer moves his company to some other company, I would like to stay employed in Germany and pay my social contributions here for PR purposes) or will that create some problems?
Antwort von Peter Scheller
You remain liable to German income tax and social security contributions. Whether your employer has to withhold the tax and contributions depends on various issues such as whether he has a establishment in Germany. If not you have to declare all that by yourself.
I think you need an experienced German tax adviser to get this sorted out in good order.
Kommentar von Aman |
I will be moving to Germany as a dependent on Family reunion visa(spouse visa) and will be working for a foreign company (non EU). If I continue to be employed for that foreign company and getting taxed there, do I have to pay taxes in Germany? If not , What kind of taxes will I have to pay and will the foreign company also need to pay the tax in Germany? How can people(Expats) work remotely in Germany in such cases?
Antwort von Peter Scheller
You have to pay taxes on your salaries as long as you perform the work in Germany. You have also to investigate whether you become liable to German social security contributions.
I suppose you have to ask an experienced German tax adviser in order to get this sorted out properly.
Kommentar von Kate |
Thank you for this useful info. How does one go about setting up the necessary payments to the necessary German authorities? In other words, who and how does one notify about foreign employment?
Thank you
Antwort von Peter Scheller
You questions require much more detailed information about your case to give proper advice.
Kommentar von ALP |
My husband works for a US employer and will be traveling to Germany for approximately four months to stay in temporary lodging and work. He will come home to the US for approximately a month and then will go back to Germany for two to three months. Will he be subject to German taxes?
Antwort von Peter Scheller
If he stays for more than 6 month within a year he will become tax resident in Germany.
Kommentar von Thomas |
Hello, I moved to Germany last year (January 2020) but kept working for my previous employer (for 2 months) located in Poland (and paid taxes there). I then started to work for a German company for the remainder of the year (living in Germany). Is the two-month period where I lived in Germany but worked for an EU-based employer subject to be taxed in Germany and added to my tax return? (the amount was more than 4K gross for the two months period)
Antwort von Peter Scheller
Your entire income 2020 (including the salaries from Poland) will be taxed in Germany. Whether you can reclaim the Polish tax or credit the German tax against the Polish tax must be verified by a Polish tax expert.
Kommentar von Sunil |
Hi
I have been living in germany for 6 years. I lost my job and currently searching. Recently, I got interviewed for a company based in Dubai and are willing to provide me an offer. Could you advise if I can work from Germany considering the employer accepts remote work. How will the German tax process be in my situation?
Antwort von Peter Scheller
You have to file German tax returns. You and your employer has also to consider obligations in regard to the German social security system.
Kommentar von Ahmil |
"Foreign companies and expatriates are often under the impression that they do not have to fulfill any obligations for tax purposes if the following applies: namely that the foreign employer has no establishment in Germany; the employee is a foreign national; and the salaries are paid to a foreign bank account."
This is TRUE, according to the Finanzamt! I asked them about it and they said that I am not even obligated to report this income to the German government. They said that if I had *also* made money in Germany, then my foreign income would increase the tax rate on my German earnings. But since this was not the case, they said that I do not have to file or pay anything.
Antwort von Peter Scheller
Your salaries of foreign sources are only tax exempt in Germany if the following applies:
a) You are not tax resident in Germany
b) You are tax resident in Germany but perform the work physically abroad
c) You have been send by your foreign employer to Germany and worked in Germany for less than 183 days in a 12 month period or calendar year
d) You work for NATO, UN etc.
I am not sure what you told the tax office. However, if you work the full year in Germany for a foreign employer you are liable to Germany income tax (and probably to German social security contributions) if you are tax resident in Germany.
Kommentar von Koren Wake |
I manage payroll for a very small US company with no current international presence. We have an employee who is an EU citizen, who intends to move to Germany and would like to continue to work for us remotely. What registrations would we need to set up in order to be compliant with US and German laws?
Antwort von Peter Scheller
Whether there are any tax obligations in the US depends on the fact whether the employee has a green card or not. However, you should ask your US tax adviser what is required.
In Germany the employee becomes tax resident. His salary is subject German income tax. He has to file German income tax returns.
He is also subject to German social security contributions if he is not in Germany on an assignment contract (see https://scheller-international.com/blog-beitraege/assignment-and-social-security.html). If he becomes member of the German social security system you have to appoint a authorized representative (https://scheller-international.com/blog-beitraege/german-social-security-the-need-for-an-authorized-representative.html).
Before mentioned consequences are only applicable if your employee does not constitute a "permanent establishment" in Germany (https://scheller-international.com/blog-beitraege/the-unwanted-permanent-establishment-in-germany.html).
Kommentar von Jack Zhao |
I am a Chinese resident and will working in Germany partly. I am payed by chinese employer and will work as a managing director for a GmbH company in Nuremberg. The stay mechanism will be 2-3 times per year and 1-2 month for each time. The German company will not pay me salary. Shall I need to pay the tax and social insurance in Germany? How long if I stayed in Germany need I to pay the tax and social insurance?
Antwort von Peter Scheller
To answer your questions we have to analyse your overall situation in more detail. This requires professional support.
Kommentar von Igor Mazor |
Hallo,
I have an offer to work 100% remotely from Germany for a company based in the Netherlands. The company mentioned that they will pay the nessasesry social security payments, but the wage tax I will have to pay by myself. Following questions:
- In Germany I have tax level 3, in case I have to pay wage taxes by myself, would those payments be calculated same as I was working for a German company? (Meaning that I am not expecting to pay more tax just because of working for an employer who is not based in Germany)
- In case of social security contribution from the employer side, does that have to be stated in the working contract?
- In regards to the social security contributions, would the foreign employer pay his part and my part directly to the German authorities? (As its done when working for a German company)
Many Thanks,
Antwort von Peter Scheller
(1) You have to file German income tax returns. The tax calculation is the same as if you would pay wage income tax.
(2) It should be stated in the labour contract.
(3) See https://scheller-international.com/blog-beitraege/german-social-security-the-need-for-an-authorized-representative.html
Kommentar von Pranav |
Hello. I will be moving to Germany on a familty reunion visa, and will be working as an employee for a foreign company (non-EU). From your article, I understand that if the employer does not cover social security contributions, the entire responsibility is on me.
My question is, if I cover the entirety of the pension contributions and then move out of Germany in less than five years, will I be eligible for a refund of just 9,35% of the gross income, or the full 18,7% after 2 years?
Antwort von Peter Scheller
First of all, from this year on foreign employers have obligations: https://scheller-international.com/blog-beitraege/german-social-security-the-need-for-an-authorized-representative.html
Refunded will only the employee's part of the contributions to the pension social security system.
Kommentar von Peter Scheller |
Please note that the following sentences is not correct any more:
"However, an employer has to fulfill the above mentioned obligations in regard to social security contributions if he/she is situated in the European Union. Employers from non-EU-member states may fulfill the above mentioned obligations but are not obliged to."
From 2021 on, all foreign employers have full obligations and have to have a authorized representative (see also https://www.scheller-international.com/blog-beitraege/german-social-security-the-need-for-an-authorized-representative.html).
Kommentar von Altin Islamaj |
Hello. I'm a foreigner working in Germany for almost 3 years now. I have a residence permit and a work permit to apply for all kinds of jobs. My actual company is a normal German company... Recently I got an offer from another company based i Czechia(Praga) and they are working full time here in Germany. Is possible for me to work for them?
Antwort von Peter Scheller
I would need more information to answer the question.
Kommentar von Bianca |
Hello. The minimum salary established by German law is mandatory for a German resident working for an EU employer? Or in other words, would the resident be able to register his work contract in this condition? Thank you.
Antwort von Peter Scheller
I think so but you may ask a labor lawyer.
Kommentar von Priya Sachdeva |
I was in Germany from Nov to Dec 2021 and filed for taxes. Now they are asking me for foreign income from jan to oct 2021. I already paid taxes for it in India. Why are they asking for it? And what are the implications of if on my tax? Also, what will happen if I do not show that income?
Antwort von Peter Scheller
Your income in the first 10 month will not be taxed in Germany but will have an effect on your German income tax rate (see also https://scheller-international.com/blog-beitraege/foreign-source-income-and-german-income-tax.html).
Kommentar von Gabrijela |
Hello!
In January I am moving to Germany and will continue working for my current US employer.
As I will be an authorized representative, I am not sure what should be my first steps.
Does my work contract need to be written in the German language?
Also, after submitting a request for a german tax number for the foreign employer, what should I as an employee-authorized representative do? Who do we need to let know that I will be paying the taxes in the name of the employer, and how to do them correctly?
Antwort von Administrator
Your contract must not be in German.
For the rest of your questions you have to contact an expirienced German tax adviser. There are certain issues to be considered for you and your employer.
Kommentar von Paula |
Hello, I am an owner of the Spanish registered model agency.
We would like to hire some German based models, who are tax residents of NRW for work at fashion show in Essen.
Should we pay taxes for them or we can transfer them amount brutto (salary+ taxes), and they will care there obligations themselves? We don't have any branch in Germany.
Antwort von Administrator
Whether you have to withdraw taxes for the models require more analysis of the the contractual backround.
However, you may have to consider that you have to pay social security contributions (Künstlersozialkasse). You find more information about this in another article on this website.
You better seek advice by a German tax adviser who is familiar with respective issues.
Kommentar von Liudmila Podsekina |
A German resident is going to be employed by a foreign non-EU employer who is not registered in Germany. The employment shall be carried out in Germany (distantly). How should the employee fulfil the social security obligations? Which forms should be filled in? Where he has to apply? What is the procedure of informing the social security on the planned employment and that the social security obligations shall be performed by the employee himself?
Antwort von Administrator
The employee can act a representative for his or her employer. However, to fulfill all obligations in general you need professional help.
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