January 2023
Since some changes have arisen in the wage tax law at the beginning of the tax year 2023, we have compiled a brief overview of the most important reforms for employers to be kept up-to-date.
Increased commuting allowance
With retroactive effect from 01.01.2022, the Federal Government has decided to increase the commuting allowance within the framework of the Tax Relief Act 2022. From the 21st distance kilometre, a flat rate of EUR 0.38 per full kilometre applies (up to 20 km still EUR 0.30). This measure was originally planned from 2024, but was brought forward to 2022 and applies accordingly for 2023.
For the employer, the increase has an impact on the wage tax flat rate for allowances for journeys between home and the first place of work. If the employer reimburses the costs of family journeys home in the case of double household tax-free in the amount of the distance allowance, the increased amounts can be taken into account here.
Basic tax-free allowance
Every employee is entitled to an income tax-free amount, the so-called subsistence minimum. For 2023, it will be raised by EUR 561 to EUR 10,908.
Increase of the official non-cash remuneration values
Meals which are provided to employees free of charge or at a reduced price on each working day are to be valued at the (pro rata) official non-cash remuneration value according to the Social Security Remuneration Ordinance (Sozialversicherungsentgeltverordnung, SvEV). Accordingly, the value for
meals granted from calendar year 2023 onwards is,
a) for a lunch or dinner 3.80 euros,
b) for a breakfast 2.00 euros.
In the case of full board (breakfast, lunch and dinner), the meals are to be assessed at a value of 9.60 euros.
The employer may tax the imputed income at a flat rate of 25% (plus 5.5% solidarity surcharge and, if applicable, flat-rate church tax).
Since 01.01.2023, the monthly non-cash benefit value for free or reduced-price accommodation is 265 EUR.
Solidarity surcharge
The exemption limit of previously EUR 16,956 will be raised to EUR 17,543 in 2023.
Tax treatment of travel expense reimbursements
As of 1 January 2023, the lump sums for the daily allowance and for accommodation costs for business-related trips abroad have been increased. The current amounts can be found in the overview of the applicable lump sums in the BMF letter dated 23 November 2022 (IV C 5 – S 2353/19/10010 :004).
Allowance for relocation expenses
In the case of a job-related change of residence, the employer may reimburse the costs incurred by the employee tax-free to the extent that they are deductible as income-related expenses. As a rule, the actual moving costs can be deducted as income-related expenses up to the maximum amount
that could be paid as a reimbursement of moving costs according to the Federal Moving Costs Act (Bundesumzugskostengesetz, BUKG) and the Ordinance on the Reimbursement of Moving Costs for Foreign Moves (Verordnung über die Umzugskostenvergütung bei Auslandsumzüge, AUV).
According to the new version of the Wage Tax Guidelines 2023, with regard to return relocation costs from abroad to Germany, an approach of 100% of the flat rates is permitted, and no longer 80% of the flat rates, as was previously applicable. This applies to all moves that take place from the tax year 2023 onwards.
Inflation compensation premium
The premium can be voluntarily paid out by the employer to employees free of tax and social security contributions in the amount of EUR 3,000.
The benefit period is limited in time. It starts on 26 October 2022 and runs until 31 December 2024. It is a one-time tax allowance that cannot be claimed for every year. Nevertheless, the premium can be paid out in several instalments. The premium applies to one employment relationship at a time – thus it can be granted several times in the benefit period in the event of a change of employer.
However, the tax exemption of the inflation compensation premium is subject to one condition: The bonus is to be granted in addition to the wages owed anyway.
Home office-lump sum / Working room
Taxpayers who do not have a working room can deduct a home office allowance of EUR 6 per day for each working day at home up to a maximum of EUR 1,260 per year (= 210 days).
In the case of a working room that forms the centre of the entire business and professional activity, the taxpayer has the right to choose. If the actual expenses amount to less than 1,260 euros, the deduction of the annual flat rate of 1,260 euros is also possible. In this case, no proof of the cost incurred is required – the deduction thus corresponds to the amount of the home office lump sum.
If the home office is not the centre of business and professional activity, the annual flat rate of 1,260 euros will be deductible in future.
A tax-free reimbursement by the employer continues to be excluded.
New Wage Tax Guidelines 2023 – changes regarding the application of the daily Wage Tax Table
Within the amendment of the Wage Tax Guidelines from 2015 by the federal government, there are some significant changes. In particular, the adjustment made in R 35b.5 para. 2 LStR requires critical attention.
Specifically, the regulation contains the view of the tax authorities on how to deal with cases of temporary taxation of wages in payroll accounting. The previous R 39b.5 para. 2 sentence 3 LStR provided for the application of the wage tax monthly table if the salary was paid monthly. According to the clear wording of the law, the decisive factor for the application of the wage tax table is the wage payment period. As of 1 January 2023, the application of the daily wage tax table is now planned. According to this (R 39b.5 para. 2 sentence 4 LStR 2023), “working days on which the employee received wages that are not subject to domestic wage tax deduction” (e.g. employment in Germany on a daily basis, drawing of tax-free wages according to a double taxation agreement) are no longer to be considered.
The consequence of this regulation is the higher tax burden, which should lead to a correct taxation according to the so-called benefit principle.
Foreign activity decree
The Foreign Activities Decree regulates the waiver of taxation of wages with respect to certain favoured activities performed abroad, provided that no double taxation treaty exists with that country (e.g. factories, constructions, commissioning of assets and exploitation of natural resources).
The Foreign Activities Decree has been revised with effect from the 2023 assessment period. The new version of the Foreign Activities Decree introduces minimum taxation abroad for the first time and confirms the scope of application also for employers with their registered office, management or permanent establishment in an EU/EEA state. In addition, the regulations were adjusted in some places (e.g. with regard to preferential and non-preferential activities, etc.). The waiver of taxation in the wage tax deduction procedure must be applied for by the employer or employee at the tax office of the permanent establishment (so-called exemption certificate).
Until now, no proof of foreign taxation was required for the exemption of preferential wages. With the new decree, a minimum taxation abroad is now also required, which must be proven by the taxpayer. The minimum taxation is set at 10% and must correspond to the German income tax.