Germany: New wage tax bulletin from Ministry of Finance for tax deductions in 2010
The bulletin of the Ministry of Finance concerns wage tax class
combination and new “Faktorverfahren” for wage tax deductions for the
In Germany, for income tax purposes, there are six wage “classes”.
Every employee will have a tax card and will be subject to a wage tax
class. The applicable class will vary according to a variety of factors,
including whether, for example, an employee is single, married or has a
number of employments.
German income tax law allows spouses, who are not permanently
separated and who are subject to German income tax without any
limitations, to combine wage tax classes III, IV or V, in the
combinations III/V or IV/IV.
The bulletin provides information on which combination is most
beneficial for the spouses in certain situations, depending on the
spouses’ income. From 2010, a new “Faktorverfahren” will give a precise
wage tax withholding ratio, depending on the individual income of each
spouse, by calculating best wage tax class combination for those
individuals. A formal application to the tax office must be made to
obtain this precise ratio, which must also set out the approximate gross
salary of both spouses in the year.
German Federal Ministry of Finance: Bulletin dated 21.10.2009
For further information or to discuss any of the issues raised,
please contact Joachim Menz (email@example.com)
on +49 89 24 22 30 0.
This article was produced by, and re-produced with kind permission
of, our correspondent firm in Germany, Keller Menz Rechtsanwälte. www.keller-menz.de