EMPLOYER REGISTRATION
without german establishment
Employer Responsibilities for Payroll in Germany without a German Establishment
When a foreign employer without a permanent establishment in Germany hires an employee in Germany, certain responsibilities and regulations apply regarding payroll and taxes.
Wage Tax Responsibilities:
If a foreign employer has no residence, habitual abode, management, office, permanent establishment, or permanent representative in Germany, they are not required to withhold wage tax on wages paid to employees in Germany. Instead, employees must report and pay taxes on their wages through their own income tax returns, a process known as mandatory assessment.
Par. 38 (1) EStG and Directive R 38.3 on Wage Tax Withholding:
– General Rule: All domestic employers are required to withhold income tax from wages.
– Temporary Assignments: For foreign employers, if an assignment or construction project in Germany exceeds six months, they are considered a domestic employer and must withhold income tax, regardless of whether the project constitutes a permanent establishment under a double taxation agreement.
– 183-Day Rule: If the project does not create a permanent establishment under the applicable double taxation agreement and employees stay in Germany for no more than 183 days in a calendar year (or specific period under certain agreements), their wages may be exempt from income tax withholding.
Social Security Contributions:
Foreign employers must register with German social security authorities and contribute to the social security system for their employees in Germany. This includes health insurance, pension insurance, unemployment insurance, and long-term care insurance.
Local Representation:
Even without a physical establishment, foreign employers might need to appoint a local representative to handle payroll obligations and ensure compliance with German regulations.
Assistance with Employer Registration:
WW+KN, a Baker Tilly company, has a longstanding history of assisting numerous foreign companies and multinational corporations with subsidiaries in Germany.
We provide comprehensive payroll services for their employees and support them in registering as employers. Additionally, we act as a domestic representative for authorities, ensuring compliance with all local regulations.
Our extensive experience and expertise allow us to offer seamless payroll management and regulatory assistance, making the process straightforward for our international clients.
If you are interested in collaborating with us or have further questions, please feel free to send us an email at info@payrollgermany.de
with german company or pe
Employer Responsibilities for Payroll in Germany with a German Subsidiary or Establishment
When hiring employees in Germany, employers must adhere to various legal and administrative requirements to ensure compliance with local laws.
Employee Documentation:
Before finalizing employment, employees must provide the following documents:
- Electronic income tax withholding features (ELStAM)
- Tax identification number and date of birth
- Social security card
- Health insurance membership certificate
- Residence and work permits (for foreign employees)
- Documents for capital-forming benefits (if applicable)
- Certificate of vacation already granted or compensated during the current year (if applicable)
Registration and Payroll Requirements:
1. Company Number:
Employers need a company number for reporting to health insurance providers. This can be obtained online from the Federal Employment Agency.
2. Tax Withholding:
Employers must withhold income tax from wages and report it to the tax office using the ELStAM database. This requires the employee’s tax identification number and date of birth. Employers must maintain payroll records for six years and register for electronic tax filing.
Additionally, employers must withhold and pay the solidarity surcharge (5.5% of the income tax) and, if applicable, church tax.
3. Social Security Contributions:
All employees are subject to social security contributions, which are shared between the employer and employee. Employers must register employees with their chosen health insurance provider, which acts as the collection agency for all social security contributions.
4. Accident Insurance and Trade Association Registration:
Employers must register all employees, including part-time workers, with the relevant trade association for accident insurance. The association can be identified through the German Social Accident Insurance (DGUV). There are for example Verwaltungsberufsgenossenschaft (VBG) or Bauberufsgenossenschaft (BauBG).
5. Immediate Reporting for Specific Sectors:
For industries such as construction, hospitality, transport, and others, immediate electronic reporting to the pension insurance data center is mandatory upon employment commencement. Employers must also inform employees of their obligation to carry identification documents at all times.
WW+KN, a Baker Tilly company, has extensive experience supporting foreign businesses and multinational corporations with subsidiaries in Germany. We provide comprehensive payroll services, assist in employer registration, and act as local representatives for authorities, ensuring compliance with all local regulations.
If you are interested in collaborating with us or have further questions, please feel free to send us an email at info@payrollgermany.de