Update: Payroll accounting for employees working across borders
Since 1 January 2023, wage tax for employees whose salary is partly taxable in Germany and partly abroad must be calculated on the basis of the often less favourable daily wage tax table due to a change in the Wage Tax Directive. Until now, however, there were still some uncertainties. Now the BMF letter of 8 October 2024 finally provides clarity.
Check payslips for 2024
The most important news first: The tax office will not object if employers do not take the new regulation on the application of the daily pay scale into account until 1 January 2025.
As the application of the daily wage tax table results in higher wage tax for many employees, the 2024 payslips should be checked, the wage tax calculated using the monthly wage tax table and the excess wage tax withheld refunded to the employees. This is particularly important for employees with limited tax liability who do not submit an income tax return in Germany.
Application of the daily table from 2025
The daily pay scale must be used for payroll accounting from 1 January 2025. The following principles apply:
- As before, the salary that cannot be directly allocated to employment at home or abroad must be divided up on a percentage basis.
- The employer has various alternatives for determining the taxable salary for the monthly wage tax calculation. They can use the actual working days, the agreed working days or a flat rate of 20 monthly working days. They can also calculate the taxable salary either for the individual month or as a forecast for the entire calendar year. It is not possible to change the method during the year, but the calculation must be adjusted if the forecast of actual working days changes.
- For the months in which employees only work in Germany part of the time, income tax must be calculated on the basis of the daily table. Alternatively, the tax days to be used for this purpose may be determined as follows:
- (working days in Germany / total working days) x 30 tax days or
- Working days in Germany x 1.5 or
- Days of presence in Switzerland (proof of presence must be provided by the employee).
- All payslips must be reviewed at the end of the year or period of employment in an overall assessment. The correction of the withheld income tax is then made
- for all calendar months
- on the basis of the day table
- based on the actual working days in Germany and abroad.
BMF letter still leaves questions unanswered
In its letter dated 8 October 2024, the Federal Ministry of Finance has answered the main question, namely how the tax days are to be calculated. Nevertheless, there will still be many constellations in practice that cannot be clearly answered with the BMF letter.
Of course, we are still happy to provide you with advice and assistance.