U.S.–Germany Employment Scenario
U.S. Employer – Employee Working in Germany
An employee of a U.S. company who works from Germany can create German payroll, wage-tax and social-security obligations even when the employment contract and payroll remain in the United States. The employer should also review whether the employee's activities create a German permanent establishment or other corporate-tax exposure.
Overview
Where the employee works matters more than where payroll is run
If an employee physically performs services in Germany, Germany can acquire taxing and compliance rights even if the employer is a U.S. corporation with no German subsidiary.
The analysis should separate the employee's personal income-tax position from the employer's payroll, social-security and corporate- tax exposure. A correct result often requires both sides to be reviewed together.
German tax perspective
The German TaxRep counterpart focuses on German payroll, wage-tax, social-security and employer registration obligations for employees working from Germany.
Payroll & Wage Tax
A U.S. payroll does not automatically prevent German payroll obligations
German workdays
Salary attributable to work physically performed in Germany can be subject to German income taxation. The number and pattern of German workdays should be documented.
German wage-tax withholding
Depending on the employer's German presence and the factual arrangement, German wage-tax registration and withholding may be required even if salary continues to be paid from the United States.
Employee tax return
The employee may need a German income-tax return even if the U.S. employer does not run German payroll or if withholding is incomplete.
Employer-Level Exposure
The employee's presence can create obligations for the U.S. company
Home office and fixed-place risk
A recurring German work location can require analysis of whether the U.S. company has a fixed place of business in Germany.
Home-office PE riskAuthority to negotiate or conclude contracts
Sales, negotiation and contracting authority can materially increase permanent-establishment risk.
Dependent-agent PEGerman business taxation
If a German taxable presence exists, profit attribution, registrations and corporate tax compliance may follow.
Businesses & Ownership InterestsEmployer registrations
Payroll, social-security and reporting obligations should be mapped before the employee starts working regularly from Germany.
Employment & Social SecurityEmployer–Employee Checklist
Information to collect before regular work from Germany begins
Employment contract
Review employer entity, work location, duration, reporting lines and any assignment agreement.
Workday calendar
Track German, U.S. and third-country workdays separately for tax and payroll analysis.
Authority and job function
Document whether the employee manages staff, negotiates contracts, signs agreements or represents the U.S. business externally.
Home-office arrangement
Clarify whether the employer requires, funds or controls the German home office and whether another workplace is available.
Social-security coverage
Determine whether U.S. or German coverage applies and obtain the appropriate certificate where available.
Payroll implementation
Decide whether German payroll withholding, shadow payroll or another compliant process is required.
Related U.S.–Germany Guides
Continue with the employment and employer issues
Employment & Social Security
Cross-border employment, payroll and social-security coordination.
Explore employmentResidency & Moving
Employee residence and moving-year consequences.
Explore residencyBusinesses & Ownership Interests
Permanent establishment and German business-tax exposure.
Explore businessesUnited States–Germany
Return to the complete cross-border tax hub.
Back to hubU.S.–Germany Employment Tax
Employee of a U.S. company working from Germany?
We can coordinate the employee's German and U.S. tax position with the employer's wage-tax, social-security, payroll and permanent-establishment risks.
Discuss the employment arrangement
Social Security
The U.S.–Germany agreement can determine which system applies
Temporary assignment
A qualifying temporary assignment can allow continued U.S. Social Security coverage rather than immediate German 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.
Local German employment pattern
If the arrangement does not qualify for continued U.S. coverage, German social-security contributions may become relevant.
Remote-work arrangements
Long-term remote work from Germany should not be treated automatically like a short business trip or temporary assignment.