Introduction

From payslip to assessment

For most employees, the German system taxes earnings at source via the employer. Withholding relies on your electronic payroll attributes (ELStAM) and the annually published program flowchart (PAP). At year-end, the personal assessment reconciles allowances, deductions and cross-border adjustments where applicable.

Why deductions still matter

Even with withholding, your final tax depends on deductible employee expenses (Werbungskosten). If they exceed the standard €1,230, you can claim the higher actual amount. Typical items are commuting, travel for business trips (per diems), work equipment, professional training, and certain home-office costs.

Cross-border employment

International assignments add treaty allocation rules (commonly Article 15 “Employment income”) and employer PE considerations. Your payroll may need to track German workdays separately and apply exemptions/credits under the relevant treaty during assessment.

1) Base juridique et sources principales

• §19 EStG — Employment income. :contentReference[oaicite:0]{index=0}
• LStH 2025 — §19 & tables (e.g., pensions allowances). :contentReference[oaicite:1]{index=1}
• BMF — Payroll program flowchart (PAP) 2025 (+ PDF). :contentReference[oaicite:2]{index=2}
• §9a EStG — Employee standard deduction €1,230. :contentReference[oaicite:3]{index=3}
• §9 EStG — Commuting allowance (0.30 / 0.38). :contentReference[oaicite:4]{index=4}
• LStH 2025 — Annex 14: Distance allowances. :contentReference[oaicite:5]{index=5}
• Home-office allowance (from 2023, permanent): €6/day up to €1,260/year — see current guidance. :contentReference[oaicite:6]{index=6}
• LStH 2025 — Non-cash benefits: €50 monthly limit. :contentReference[oaicite:7]{index=7}

2) What Counts as Employment Income

Employment income includes salaries, wages, bonuses, benefits in kind, and similar items arising from an employment relationship. Certain pension-like payments are also covered with special allowances. See §19 EStG and LStH 2025 tables. :contentReference[oaicite:8]{index=8}

3) Payroll Withholding (Lohnsteuer)

• ELStAM & classes: Employers withhold wage tax using your ELStAM (tax class, allowances, religion). The 2025 PAP governs the formulas. :contentReference[oaicite:9]{index=9}
• Surcharges: Solidarity surcharge and church tax (if applicable) are computed on the wage tax and withheld with it.
• Year-end true-up: Your assessment can adjust for deductions, allowances, and cross-border allocations not fully reflected in payroll.

4) Employee Deductions (Werbungskosten)

• Standard deduction: €1,230 per year automatically applied unless higher actual expenses are claimed. :contentReference[oaicite:10]{index=10}
• Commuting allowance (Entfernungspauschale): €0.30/km for the first 20 one-way kilometres; €0.38/km from the 21st km (valid 2022–2026). Caps and public-transport rules apply per §9 EStG / LStH 2025. :contentReference[oaicite:11]{index=11}
• Home-office allowance: €6 per day, jusqu'à €1,260 per year (210 days). Applies regardless of a separate office room; additional work-related costs remain deductible where permitted. :contentReference[oaicite:12]{index=12}
• Work equipment & training: Profession-related expenses (e.g., laptop, professional books, job training fees) are deductible if directly connected to employment.
• Business travel: Per-diem rules apply for trips away from the first workplace; follow LStH/official per-diem tables for domestic/foreign travel.

If you expect high expenses (e.g., long distance commute), you can request an adjustment of wage-tax withholding during the year by having allowances recorded in ELStAM.

5) Tax-Free Employer Benefits (selected)

• Non-cash benefit limit: Vouchers and certain non-cash benefits can be tax-free up to €50 per month if they qualify as non-cash remuneration and are provided in addition to salary (see LStH 2025 guidance). :contentReference[oaicite:13]{index=13}
• Job tickets / public transport subsidies: Often tax-free if provided in addition to salary (specific §3 EStG provisions apply; coordinate with payroll).
• Company bicycle (non-electric and e-bike up to certain specs): Can be tax-favoured; check current BMF guidance for valuation and exemptions.

6) Cross-Border Workdays (basics)

Where work is performed across borders, treaties typically allocate taxing rights based on the place of work, employer residency/PE, and day-count thresholds. Payroll may need to track German vs. foreign days; the final German assessment will apply exemptions/credits accordingly. See LStH 2025 sections on DTA implementation and employer instructions. :contentReference[oaicite:14]{index=14}

8) Compliance checklist & useful links

• Verify your ELStAM entries (class, allowances, church tax) are up to date.
• Track commuting kilometres, home-office days, and major work equipment purchases.
• Coordinate any tax-free benefits with payroll to ensure they meet statutory conditions.
• For cross-border roles, keep a workday calendar and confirm treaty treatment early.

• §19 EStG (employment income). :contentReference[oaicite:19]{index=19}
• PAP 2025 (payroll flowchart). :contentReference[oaicite:20]{index=20}
• §9a EStG — €1,230 standard deduction. :contentReference[oaicite:21]{index=21}
• §9 EStG & LStH 2025 — commuting allowance €0.30/€0.38. :contentReference[oaicite:22]{index=22}
• Home-office allowance €6/day up to €1,260. :contentReference[oaicite:23]{index=23}
• LStH 2025 — €50 monthly non-cash limit guidance. :contentReference[oaicite:24]{index=24}

9) FAQ