Accountancy in Germany

>> Employment in Germany

Social Security

The German social security system provides that a portion of the employee’s gross salary must be withheld for:  pension insurance, unemployment insurance, health insurance, supplemental insurance to cover long-term nursing care and workmen’s compensation insurance. With the exemption of the workmen’s compensation insurance, which is solely borne by the employer, payments are equally shared by the employer and the employee; it is the employer who is ultimately liable for making the social security withdrawal on a monthly basis. The employer’s portion is not considered taxable income of the employee. Exemption from German social security may be granted under the EU rules or under the provisions of certain  bilateral treaties.

Employment of foreign personnel

Staff may be assigned between the subsidiary and the parent to work within Germany. Non-EU employees must obtain valid visas and working permits. Most double tax treaties concluded by Germany provide that income from employment earned working abroad is taxable in the state of residence if the employee is present in the other state for not more than 183 days during the calendar year/ tax year and further requirements are met (e.g. an employee of a foreign company located in a treaty state who is in Germany for more than 183 days during the calendar year is subject to German  income taxation).


The German compulsory health insurance protects not only the employee but also the whole family. The health insurance benefits cover e.g. hospitalization, surgery, preventive examinations, medical and dental treatment and the prescribed medicine. In many cases the insured person has to make additional payments, because the costs of the medical care are only partly covered by the insurance. Recently there is a trend towards more, and higher, additional payments because of financing problems of the insurance companies.

Wage Taxation

If an individual is a German resident, then all employment income (whether relating to activities carried out in Germany or abroad) is in principle subject to German income taxation (PAYE). Incentives and fringe benefits received by an employee through employment in Germany are generally taxable in the same way as income from employment and subject to wage taxation at source. Employers are liable for withholding the appropriate tax amount from salary.

Latest version updated 12th October 2017

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