The Taxation of Employment Income
It is extremely important for foreign investors to understand how employees are taxed in Germany, as the country can be considered to be high‐tax country. Consequently, the burden of employees paying income tax on their earnings constitutes a major cost factor in the company’s overall calculations regarding labour costs. Furthermore, the system in Germany, unlike in many other countries, involves the taxation of employment income at source. The state requires the employer to take on financial administration tasks by deducting employees’ income tax from their salaries and paying it directly to the public treasury. The claim of the state to tax salaries thus never comes under the sphere of influence of employees. The employer is responsible to the state for carrying out these tasks in a proper manner.