Posting of employees to Germany
Global Mobility and expatriates management
More and more international companies operate across borders and send their employees to Germany. Be it to set up a production or sales structure in or to carry out long-term assembly work or other projects in Germany. Global mobility and expatriate management have become established terms in the world of work - especially in the HR departments of larger companies. A number of complex legal and tax requirements are associated with international assignments to Germany, which can pose great challenges for all involved. We would be happy to do this with you if you would like to send employees to Germany.
We are your contact for international staff assignments related to Germany. We are consulting the posting company as well as the deployed employees comprehensively, with regard to the legal and tax implications in the run-up to establishment of a posting company - and also support all subsequent reporting and tax declaration obligations in Germany.
From our range of employee secondments:
- Examination and consulting on the tax conditions of posting from or to Germany for the employer and employee (German wage, income tax and social insurance)
- Preparation of the employee's personal income tax return in Germany, taking into account personal circumstances and choosing the appropriate form of assessment
- Examination of the creation of permanent establishments for income tax purposes through secondments of employees (representative or construction and assembly operations) and their tax consequences
- Examination of the applicable social security law and conditions for the social security obligation for employers and the posting company employee
- Assistance in applying for the necessary certificates under social security law (e.g. certificate A1, D/USA 101, exception agreements)
- Preparation and review of posting agreements with the inclusion of German labor and social security law
- Creation and calculation of remuneration agreements including German labor and social security law (e.g. net wage agreement or Hypotax procedure)
- Examination of the wage tax effects in Germany of certain cost assumptions by the employer (e.g. housing allowance, flights home, school costs, language lessons, tax return)
- Taking over the German tax returns for employees posted to Germany or foreign expatriates on behalf of the employer
When employees from foreign companies are posted to Germany, there are usually extensive tax consequences for both employers and employees alike. Here, the basic question always is in which country the salary is taxable (and in which not) or even a splitting of the taxation right takes place ("salary splitting").
For the foreign employer, this has an impact on wage tax in the home country and under certain circumstances wage tax obligations in Germany must be taken into account. In this case, an exemption for wage tax deduction in the home country is often required if there is wage tax liability in Germany. Added to this, there are questions about the classification of wage tax of the additional costs of posting, such as relocation, travel costs, increased or additional cost of living in Germany ("Housing cost"), language training, which are often borne by the employer (cost reimbursement or pecuniary benefit). In Germany, there is the possibility for the employer to reimburse the employee various costs exempt from tax.
A posting can also trigger a permanent establishment in Germany and this often goes unnoticed. In these cases, tax consequences and obligations can be triggered for the foreign employer in Germany, which can lead to a tax liability of the company in Germany. Of course, we also keep this pitfall in mind during our consultation.
In the case of employees, the question of wage taxation plays a role at the personal income tax level. Personal factors such as family and place of residence in Germany and abroad must also be taken into account. In the personal income tax return of the employee in Germany, it is also important that all facts that have occurred in a foreign country are correctly and completely presented. We are happy to do this for you and often on behalf of your employer.
In the context of the posting of foreign employees in Germany, a special employment contract is necessary, since the employee's foreign posting is usually not covered by his existing employment contract. Additional assignment agreements can be made here so that the foreign employment contract can remain unchanged. Or an inactive foreign employment relationship is agreed and a new, fixed-term employment contract under German labor law is concluded for the period of posting. A free choice of the applicable labor law is basically possible. However, it should be noted that the minimum standards of German labor law also apply in favor of an employee if the activity is carried out in Germany. Foreign employment contracts should therefore be checked for compatibility with German labor law and, if necessary, be able to make necessary or suggestive adjustments. An essential component of the need for regulation in the employment contract is the employee's remuneration, which will often change as a result of the posting, also to create financial incentives and to include the various costs of such posting. In some situations, people like to fall back on net wage agreements that guarantee the employee a certain fixed net salary, regardless of the amount of taxes, duties and other charges at home and abroad. We are happy to support you with tax-optimized remuneration agreements that take advantage of the possibilities of tax-free lump-sum remuneration according to German wage tax rules. From a German perspective, the labor law and tax regulations for a company car must also be observed if the vehicle is mainly used in Germany.