Germany–U.S. Employment Scenario
German Employer – Employee Working in the U.S.
A German employer with an employee working in the United States can create U.S. payroll, federal and state withholding, social-security and employer tax obligations even if the employment contract and payroll remain in Germany. The employee's activities may also create a U.S. trade-or-business or permanent-establishment issue for the German company.
Übersicht
Work performed in the United States can create U.S. obligations for both sides
When an employee physically performs services in the United States, U.S. federal and state rules can apply even though the employer is based in Germany and salary continues to be paid from German payroll.
The analysis should separate the employee's personal income-tax position from the employer's payroll, social-security and business-tax exposure. These issues are often interconnected and should be reviewed together.
German tax perspective
The German TaxRep counterpart focuses on German payroll continuation, German departure or assignment issues and the interaction with U.S. payroll and social-security rules.
U.S. Payroll & Withholding
German payroll does not automatically replace U.S. payroll obligations
Federal wage withholding
Compensation for services performed in the United States can create U.S. federal withholding and payroll obligations depending on the employee's status and the employer's U.S. obligations.
State payroll
State income-tax withholding and employer registration can arise separately from federal rules and must be checked for the employee's work location.
Shadow payroll
In cross-border assignments, a shadow-payroll process may be used to preserve German payroll while calculating U.S. tax and reporting obligations.
Employer-Level Exposure
The employee's U.S. activities can create tax exposure for the German company
Regular U.S. business activity
Ongoing activities performed by the employee in the United States can require analysis of whether the German company is engaged in a U.S. trade or business.
U.S. trade or businessTreaty permanent establishment
Office use, fixed business locations and the employee's authority may affect whether the treaty protects the German employer from U.S. business taxation.
U.S. permanent establishmentContracting authority
Sales, negotiation and contracting authority can materially increase employer-level tax risk in the United States.
Dependent-agent exposureState nexus
An employee working from a particular state can create state payroll, income-tax or other nexus consequences independent of federal treaty protection.
State tax nexusEmployer–Employee Checklist
Information to collect before U.S. work begins
Assignment agreement
Document duration, work location, employing entity, compensation and expected return to Germany.
Immigration and tax status
Clarify visa, Green Card and expected U.S. tax-residency status before payroll is implemented.
State work location
Identify every state in which the employee will physically perform services and track workdays.
Authority and job function
Document whether the employee manages staff, negotiates contracts, signs agreements or represents the German company externally.
Social-security coverage
Determine whether German or U.S. coverage applies and obtain the relevant certificate where available.
Payroll process
Decide whether local U.S. payroll, shadow payroll or another compliant process is required.
Related U.S.–Germany Guides
Continue with the employment and employer issues
Beschäftigung und soziale Sicherheit
Cross-border employment, payroll and social-security coordination.
Explore employmentGerman Moving to the United States
U.S. residency-start and moving-year issues for German individuals.
Explore the moveUnternehmen und Beteiligungen
U.S. business-tax exposure for German companies and owners.
Explore businessesVereinigte Staaten–Deutschland
Return to the complete cross-border tax hub.
Zurück zu HubGermany–U.S. Employment Tax
German employer with an employee working in the United States?
We can coordinate the employee's U.S. and German tax position with the employer's payroll, social-security, state-tax and business-tax exposure.
Discuss the employment arrangement
Soziale Sicherheit
The U.S.–Germany agreement can prevent double contributions
Temporary assignment from Germany
A qualifying temporary assignment may allow continued German social- security coverage instead of immediate U.S. Social Security coverage.
Certificate of coverage
A certificate of coverage is important evidence when relying on the bilateral social-security agreement to avoid dual contributions.
Long-term U.S. employment
If the arrangement falls outside the temporary-assignment rules, U.S. Social Security and Medicare taxes may become relevant.
Multiple-country work
Employees who divide their work between Germany, the United States and third countries may require a more detailed coverage analysis.