Tax withholding amount

If the payee (i.e. recipient) bears the withholding tax (gross agreement), the following rates must be applied to the revenue (tax base):

• 15% for remuneration pursuant to Section 50a (1) no. 1 to 3 EStG
• 30% for directors fees pursuant to Section 50a (1) no. 4 EStG

Solidarity surcharge

According to Section 3 (1) no. 6 of the Solidarity Surcharge Act 1995 (SolzG), a solidarity surcharge must be levied in addition to the tax deduction amounts in accordance with Section 50a EStG on those with limited tax liability.

The solidarity surcharge amounts to 5.5% of the tax deduction amount (Section 4 sentence 1 SolzG).

Additional note: If the tax deduction is reduced due to double taxation agreements (so-called residual tax), this reduction must first be applied to the solidarity surcharge (Section 5 SolzG).

Example:

Remuneration for licenses amounting 4,000 euros, tax deduction according to Section 50a EStG 15% = 600 euros plus 5.5% SolZ = 33 euros. According to the relevant DTA, the domestic tax burden is limited to 10%. There is a corresponding exemption certificate in accordance with Section 50c (2) sentence 1 no. 1 EStG: the remuneration debtor must withhold and pay 400 euros in income tax/corporate tax for the foreign remuneration creditor, but no solidarity surcharge.

If there is no exemption certificate, the debtor of the remuneration must make the full tax deduction despite the DTA (i.e. a total of EUR 633 in the example). Alternatively, he can choose the exemption option in accordance with Section 50c (2) sentence 1 no. 2 EStG. As in the case of this exemption certificate, the tax deduction to be made is reduced to EUR 400 due to the residual tax rate (details on the exemption option can be found on the topic page ("Exemption option pursuant to Section 50c (2) sentence 1 no. 2 EStG").

Net agreement

The withholding tax base is increased whenever the withholding tax is borne by the payer and not the payee (net agreement). To calculate the tax withholding, the following calculation rates should be applied to the net remuneration plus any costs assumed by the payer:

Tax threshold for artists and athletes

According to Section 50a (2) Sentence 3 EStG, withholding tax is not levied on artistic, athletic, entertainment or similar performances if the revenue for each performance is EUR 250 or less.

If several people (e.g. members of a band) are owed remuneration for a performance, this tax threshold applies to the remuneration owed to each person individually.

If the payee is a non-resident corporation (soccer club, choir, symphony orchestra, artist staffing agency, etc.), the corporation is considered to have earned the income from the performance as a legal person, and so the remuneration cannot be “apportioned” to the various artists or athletes involved in the performance.

For tax threshold purposes, a "performance" is understood to refer to a single show or game. If several shows or games are performed on a single day, the tax threshold is applied to each show/game separately.

The tax threshold only applies to revenue obtained directly from performances given in the territory of Germany. It does not apply to revenue relating to the exploitation of performances.

Amount of tax withholding when operating / work-related expenses are claimed

The tax withholding rate is 30% of the net revenue when the payee is a natural person and operating or work-related expenses are claimed, according to Section 50a (3) Sentence 4 EStG. The tax withholding rate is (still) 15% of the net revenues when the payee is a legal person or corporation. In both cases, net revenue is the positive difference between revenue and the work-related/operating expenses that are directly economically related to the revenue.

For net agreements, the withholding tax for natural persons works out to 43.89% (plus 2.41% solidarity surcharge) of the positive difference between revenue and expenses; for corporations, it ends up at 17.82% (plus 0.98% solidarity surcharge).