Payroll & Wage Tax - Processing and Advice from One Firm

Payroll Is Compliance with Personal Liability Attached

Payroll looks like routine until the tax office audits it. The employer withholds wage tax on someone else's account and is personally liable for it — for every benefit in kind valued incorrectly, every flat-rate taxation missed, every employee working abroad. A wage tax audit reaches back four years, and those items add up.

We combine both sides: running the monthly payroll and assessing the tax questions behind it. So that whether a voucher stays under the 50-euro threshold, or whether a home office in Hamburg creates a permanent establishment, does not fall between your payroll provider and your adviser.

Our clients are startups with equity programmes, family offices with management companies, funds with investment teams, and foreign companies hiring in Germany without setting up an entity.

Payroll Processing and Employer Obligations

We run your payroll and take on the obligations attached to it: registrations, filings, certificates, deadlines. You get one contact who processes the payroll and can answer the question behind it — not two.

What we do:

• Monthly payroll: Payroll runs including ELStAM retrieval, wage tax returns (Lohnsteuer-Anmeldung) and social security contribution statements
• Set-up: Company number (Betriebsnummer), registration as an employer with the tax office, payroll set-up for new entities
• Filings: Social security notifications, annual wage tax certificates, A1 certificates, statutory accident insurance
• Special arrangements: Mini-jobs, short-term employment, working students, temporary staff and the flat-rate taxation under § 40a EStG
• Employment status: Distinguishing freelance work from employment, status determination proceedings before the Clearingstelle
• Managing directors: Social security liability of shareholder-managing directors and third-party managing directors
• Interfaces: Alignment with your financial accounting, your annual accounts and your HR systems

Employees in Germany Without Your Own Entity

A foreign company hiring in Germany has three options: an Employer of Record, a German subsidiary, or registering directly as an employer. The third route is rarely explained, yet it is often the least expensive — and the only one where you remain the employer of your own people.

We assess which route fits your situation and implement it. That includes the question underlying all of them: whether your activity in Germany creates a permanent establishment — through an office, a home office, or a sales employee with authority to conclude contracts. More on our page on international tax — inbound.

What we do:

• Decision paper: Comparison of Employer of Record, subsidiary and direct wage tax registration, including a full cost calculation
• Permanent establishment: Assessment under § 12 AO, § 13 AO (permanent representative) and the applicable double tax treaty, including the wage tax permanent establishment
• Registration: Registering as a foreign employer with the competent tax office and setting up the payroll
• Assignments: Wage tax and social security for assignments to Germany, the 183-day rule, A1 certificates
• Net pay: Net pay agreements, hypothetical tax and tax equalisation for assignees
• Remote work: Tax assessment of home office abroad and workation arrangements
• Coordination: Working with your advisers at home, acting as your single point of contact in Germany if you prefer

We advise in English and in German.

Compensation Beyond Base Salary

Every benefit is a wage tax matter. Whether it stays tax-free, is taxed at a flat rate or goes fully into payroll turns on details — and surfaces at the latest during an audit. The same applies to equity programmes and to the remuneration of directors and board members.

What we do:

• Benefits in kind: Valuation under § 8 EStG, the 50-euro threshold, vouchers and prepaid cards including the requirements of the German Payment Services Supervision Act
• Flat-rate taxation: § 37b EStG for gifts and benefits in kind, § 40 EStG and § 40b EStG for further cases
• Mobility: Company cars under the 1 percent rule or logbook method, electric company cars, Deutschlandticket and public transport passes
• Travel expenses: Per diem allowances, employer-provided meals, dual household costs
• Equity programmes: Payroll treatment of VSOPs, ESOPs and profit participation rights, tax deferral under § 19a EStG, treatment on exit
• Director remuneration: Managing director salaries, bonuses, pension commitments and supervisory or advisory board fees, including the line to hidden profit distributions
• Pensions: Salary conversion and occupational pension schemes in payroll

We also advise on the design of equity programmes. See our page on tax advice for startups.

Wage Tax Audits and Employer Liability

The wage tax audit and the German pension insurance audit run separately but reach similar conclusions. Both look back four years, and both may end in a liability assessment against you as the employer. We stay with you through the whole procedure — as we do in any other tax dispute.

What we do:

• Preparation: Reviewing your payroll for the items auditors typically challenge, before the audit begins
• Representation: Handling the wage tax audit, the unannounced wage tax inspection (Lohnsteuer-Nachschau) and the social security audit
• Liability: Defending against liability assessments under § 42d EStG, objection proceedings and litigation before the tax courts
• Advance certainty: Binding ruling under § 42e EStG — the tax office's free and binding answer, obtained before you run the payroll
• Corrections: Retroactive adjustment of wage tax withholding under § 41c EStG, late filings and voluntary disclosures