The German „Steuerfortentwicklungsgesetz“ (Tax Development Act), effective in 2024, brings several important changes to payroll and income tax regulations. Businesses operating in Germany should be aware of these updates to ensure compliance and avoid potential penalties. Below are the key points from the legislation that will impact payroll administration:
- Increase in Employee Allowances: The annual employee allowance (Arbeitnehmer-Pauschbetrag) will be raised from €1,230 to €1,300. This adjustment aims to relieve the tax burden on employees, reducing their taxable income.
- Extended Deadline for Tax-Free Employer Payments: Employers will have until the end of March 2024 to make tax-free inflation compensation payments to employees. This is part of ongoing efforts to mitigate the financial impact of inflation.
- Changes to Commuting Allowance: The commuting allowance for employees traveling long distances (above 21 kilometers) will increase from €0.38 to €0.40 per kilometer starting in January 2024.
- New Requirements for Electronic Filing of Payroll Data: As part of the digitalization of the tax system, businesses must submit payroll data electronically using specific standards and interfaces. Failure to comply with these requirements could result in fines.
- Social Security Contributions: While social security rates remain unchanged, the income thresholds (Beitragsbemessungsgrenzen) for contributions will be adjusted. These thresholds, which vary by region, determine the maximum amount of income subject to social security contributions.
These changes highlight the importance of keeping payroll systems updated and ensuring that HR departments are familiar with the new regulations. Employers should consult their payroll providers or tax advisors to ensure all necessary adjustments are made before the new rules take effect.
For further information or assistance on how these changes affect your business, WW+KN, a Baker Tilly Company, is available to help. Contact us at info@payrollgermany.de.