Withholding Tax on Your Base Margin Earnings

If you your country of residence or headquarters are in a country other than Germany, it may be necessary to subject your earnings to a tax deduction before payout. This so-called withholding tax only affects 60% of your earnings from the base margin, and not the performance bonus.
In which amount a tax deduction has to be made results (among other things) from a possible double taxation agreement (DTA) concluded between your country of residence and Germany.
If a DTA with Germany is in place, and you provided your Tax Identification Number prior to tax deduction, this could help avoid or minimise this deduction.
If there is no DTA in place or you didn't provide your correct tax identification number, we generally have to deduct a tax of currently 15% (withholding tax) on 60% of your earnings from the base margin plus 5.5% solidarity surcharge on the withholding tax.

What is a DTA?

In short, a double taxation agreement (DTA) is a treaty between two countries that determines the degree to which the right of taxation of one country should be applied to earnings generated in another country. The agreement is intended to prevent natural or legal persons who earn income in both countries from being taxed twice in both countries. If your country has concluded a DTA with Germany, it is currently possible to use the control reporting procedure (KMV) for income below €5,500 per month or €40,000 per year.

What is the KMV?

The control notification procedure (KMV) is a simplified procedure for the reduction of or exemption from withholding tax under §50d article 5 of the German Income Tax Act (EStG). The simplification implies that the tax relief is granted without a separate application by you as a foreign creditor. The Federal Central Tax Office can authorise Spreadshirt to apply the KMV for tax deduction. This is why it is possible that your earnings will not be taxed in Germany or only at a lower tax rate. For more information about DTAs and the KMV, please visit the website of the Federal Central Tax Office.

Do I need to pay withholding tax?

To find out how high the tax deduction is for you, select the situation that applies to you in the menu. If you do not know whether there is a double taxation agreement with your country of residence and what percentage is applicable for tax deduction, please look into this country overview.

Click on the situation relevant to you:

  • 1. Country of residence or headquarters in Germany
  • 2. Country of residence or headquarters in a country which has a DTA with Germany:
    2.1 Tax deduction 0%
  • 2. Country of residence or headquarters in a country which has a DTA with Germany:
    2.2 Tax deduction 1%-15%
  • 3. Residency (or company headquarters) in a country with no double tax agreement with Germany:

1. Country of residence or headquarters in Germany

Provided that your name, address and payment details are correct, you will receive your payment in full. However, if your name and address are not entered correctly, we cannot invoice you. Please check your address data here.

Please note: The information on this site can by no means make up for professional tax advice or be used to support individual tax positions. Please contact your accountant for tax advice.

2. Country of residence or headquarters in a country which has a DTA with Germany

If you’re unsure of whether the country in which you are a resident/based has a double taxation agreement with Germany and the percentage of tax that needs to be deducted, please refer to this country overview.

2.1 Tax deduction of 0%

Name and address

Stating your correct name, address and payment data is a prerequisite to receive an invoice. Please check your data.

Tax ID

You must also provide your correct tax identification number. In the event of non-compliance, we will have to deduct tax on part (60%) of your earnings from the base margin. The tax deduction is currently 15% withholding tax plus 5.5% solidarity surcharge on the withholding tax. Spreadshirt will register the withheld tax with the German Federal Central Tax Office and pay it to them.

As long as your earnings from the base margin subject to tax deduction are less than €5,500 per payment and less than €40,000 per year in total, the application of a simplified procedure (control notification procedure (KMV)) is possible.

If the tax identification number has been entered correctly and the KMV applies, your earnings from the base margin will continue to be paid in full, as the double taxation agreement with Germany reduces the tax deduction to 0%. Provide your Tax Identification Number here.

Income over €5.500 monthly/€40.000 annually

If the earnings from the base margin subject to the tax deduction exceeds one of these limits, the application of the KMV is no longer possible with the first payment leading to the excess. From this date, a tax deduction of currently 15% of the part of the earnings subject to the tax deduction from the base margin (withholding tax) plus 5.5% solidarity surcharge on the withholding tax will be retained. The performance bonus is paid out in full.

It is possible to apply for a certificate of exemption (Freistellungsbescheinigung) with the German Federal Central Tax Office. You can find the application for a certificate of exemption (Freistellungsbescheinigung) on the Federal Central Tax Office website. The procedure is regulated in §50d article 2 of the German Income Tax Act (EStG). If you hold a valid certificate of exemption at the time of payout, no tax will be deducted.

If tax has been deducted from your earnings for the above reasons, you can apply with the German Federal Central Tax Office (Bundeszentralamt für Steuern) for a refund of the tax already paid in accordance with §50d article 1 EStG.

Spreadshirt will issue you with a tax certificate detailing the tax deduction carried out. On presentation of this certificate, it may be possible to take the withheld tax into account in your personal tax assessment.

The following applies in all cases:

We would like to point out that the German tax authorities can inform the tax authorities of your country of residence about the payments to you.

Please note: The information on this site can by no means make up for professional tax advice or be used to support individual tax positions. Please contact your accountant for tax advice.

2. Country of residence or headquarters in a country which has a DTA with Germany (1%-15%)

2.2 Tax deduction of 1%- 15%

Name and address

Stating your correct name, address and payment data is a prerequisite to receive an invoice. Please check your data.

Tax ID

You must also provide your correct tax identification number. In the event of non-compliance, we will have to deduct tax on part (60%) of your earnings from the base margin. The tax deduction is currently 15% withholding tax plus 5.5% solidarity surcharge on the withholding tax. Spreadshirt will register the withheld tax with the German Federal Central Tax Office and pay it to them.

As long as your earnings from the base margin subject to tax deduction are less than €5,500 per payment and less than €40,000 per year in total, the application of a simplified procedure (control notification procedure (KMV)) is possible.

If the tax identification number was entered correctly and if the KMV applies, the part of your earnings that is subject to tax deduction will only be taken from the base margin at the reduced tax rate.

You can request Spreadshirt to issue you a tax certificate detailing the tax deduction. On presentation of this tax certificate, it may be possible to take the withheld tax into account in your personal tax assessment. Provide your Tax Identification Number here.

Income over €5.500 monthly/€40.000 annually

If the earnings from the base margin subject to the tax deduction exceeds one of these limits, the application of the KMV is no longer possible with the first payment leading to the excess. From this date, a tax deduction of currently 15% of the part of the earnings subject to the tax deduction from the base margin (withholding tax) plus 5.5% solidarity surcharge on the withholding tax will be retained. The performance bonus is paid out in full.

It is possible to apply for a certificate of exemption (Freistellungsbescheinigung) with the German Federal Central Tax Office. You can find the application for a certificate of exemption (Freistellungsbescheinigung) on the Federal Central Tax Office website. The procedure is described in §50d article

2 Income Tax Act (EStG). If a valid exemption certificate is available at the time of payout, tax is deducted at the reduced tax rate from the part of the earnings of the base margin subject to taxation.

If there is no certificate of exemption and if the limits have been exceeded or if the tax identification number has not been stated correctly (and therefore the full tax deduction from the earnings of the base margin has been made), you can apply for a partial refund of the tax payments made to the German Federal Central Tax Office (Bundeszentralamt für Steuern) in accordance with § 50d article 1 EStG.

Spreadshirt will issue you with a tax certificate detailing the tax deduction carried out. On presentation of this tax certificate, it may be possible to take the withheld tax into account in your personal tax assessment.

The following applies in all cases:

We would like to point out that the German tax authorities can inform the tax authorities of your country of residence about the payments to you.

Sample calculation for a payment with a tax deduction of 1%-15%

There’s a tax deduction for a Partner with a residence or headquarters in Ukraine (5% withholding tax) if a certificate of exemption of non-liability for tax is on hand or if the recording procedure (Kontrollmeldeverfahren) is applicable.

100,00 EUR earnings from the base margin
EUR 60.00 part (60%) of earnings subject to tax deduction from the base margin
- 5 EUR (3% withholding tax)
= 97.00 EUR total payout of earnings from the base margin

In this example, Spreadshirt is required to declare and pay €3.00 in tax to Germany’s Federal Central Tax Office.

Please note: The information on this site can by no means make up for professional tax advice or be used to support individual tax positions. Please contact your accountant for tax advice.

3. Country of residence or headquarters in a country which has not concluded a DTA with Germany

If no DTA is in place, we have to deduct tax on a part (60%) of your earnings from the base margin before payment is made. The tax deduction is currently 15% withholding tax plus 5.5% solidarity surcharge on the withholding tax.

If you do not know whether there is a double taxation agreement with your country of residence or headquarters, please refer to this country overview.

Name and address

The indication of your correct name, address and payment data is a prerequisite to receive an invoice. Please check your address data here.

Tax ID

As there is no double taxation agreement with Germany, we have to deduct tax on a part (60%) of your earnings from the base margin. The tax deduction is currently 15% withholding tax plus 5.5% solidarity surcharge on the withholding tax. Spreadshirt will declare and pay the taxes to Germany’s Federal Central Tax Office.

It is not possible to apply to the Federal Central Tax Office for exemption or refund of the tax amounts paid in accordance with §50d EStG.

You can request Spreadshirt to issue you a tax certificate detailing the tax deduction. On presentation of this tax certificate, it may be possible (where appropriate) to take the withheld tax into account for your assessment in your country of residence or headquarters. Provide your Tax Identification Number here.

Sample calculation

for a Spreadshop Owner with a country of residence or headquarters in Paraguay (15% withholding tax rate)

100,00 EUR earnings from the base margin
60.00 EUR earnings from the base margin subject to tax deduction
-15 EUR (9% withholding tax)
-0.50 EUR (5.5% solidarity supplement on withholding tax)
= 90.50 EUR total payout of earnings from the base margin

In this example, Spreadshirt is obliged to register and transfer tax in the amount of €9,50 to the Federal Central Tax Office of Germany.

Please note: The information on this site can by no means make up for professional tax advice or be used to support individual tax positions. Please contact your accountant for tax advice.

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