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Frequently Asked Questions

Witholding Taxation

Can I effectively pass on the taxation on my earnings in Germany to the German promoter through a corresponding contractual arrangement?

No, that is an urban legend promoted by agents unfamiliar with the German system! Only the foreign artist and/or his/her production company are liable for the income tax owed in Germany. If the domestic party paying compensation did not properly withhold the income tax, the German Inland Revenue Service can bring a claim against the tax-liable foreign party as well.

Can I still be held liable for the income tax to be paid in Germany if my German contracting party and I have agreed on net compensation?

Of course! German law does not even mention net compensation, since it effectively assumes that every business person is responsible for his/her own taxes. If a net deal is concluded, you will have to calculate back to the gross amount in order to determine the earnings on which withholding is owed. This back-calculation then yields the amount of tax that is likewise a part of the earnings of the artist/production company. For this reason only the artist and/or the production company remain(s) the tax liable party even in a net deal and can be subjected to claims by the German Inland Revenue Service in the event of non-payment.

Can production companies/tour promoter also claim the exemption?

No. The exemption can only be claimed by natural persons.

Can I still claim the exemption of €250 if we as a five-member band agreed to earnings of €1,250 Euro with the German promoter?

Yes. Essentially, according to the wording of the law, tax rates apply per artist and per performance. If the creditor for owed compensation is actually several persons, the mitigation rule applies to each person who is owed compensation. The total compensation is to be distributed per person, to the extent that no other standard for distribution was arranged.

In the case of a music group consisting of five persons, whose total compensation comes to €1,250.00 gross, a per-person distribution of the honorarium of 5 x gross €250 thus leads to tax exemption for the individual earnings. Correspondingly, the creditors of these earnings can also agree to unequal distribution of the total honorarium to the individual participants. For example, if the band leader receives €450, and the remaining 4 musicians only €200 per artist gross, the €450 must be taxed at 15%. The tax rate for the remaining payments is 0.
 

 

 

Does the rule above also apply if the promoter assumes our travel and lodging costs?

Yes, since travel and lodging costs do not count in the basis for calculating the withholding tax, as long as they do not exceed the actual costs. If they are borne by the artist himself/herself, they can be calculated form the gross earnings.

How can I be sure that my German contracting partner has actually paid the tax to the responsible tax office?

Your contracting partner is obligated to confirm the amount of compensation paid; the date of payment and the amount retained for withheld taxes on an official form. If you want to be completely sure, you should ask your contracting partner to send a matching payment confirmation from the tax office.

When can I request the form for the tax statement from my contracting partner?

The domestically liable party must pay the tax withheld in a given calendar quarter to the responsible tax office by the tenth of the month following that quarter. The amount of earnings through that date is the deciding amount for withholding.

Can my German contracting partner refrain from withholding the tax if I have submitted an application for exemption with the Central Office German Inland Revenue Service?

No. Your contracting party is obligated to withhold taxes until the exemption has been issued. Since the application for exemption, however, can already be completed before any service is performed in Germany, it is certainly possible if the application is submitted in a timely fashion that the certificate will be in-hand at the time payment is rendered. The certificate [of exemption] will, however, be valid at the earliest when the application is received by the Central Office of the German Inland Revenue Service.

Where must I send my application for tax exemption in Germany?

Bundeszentralamt für Steuern [Central Office of the German Inland Revenue Service]
Referat St III 3
53221 Bonn
Germany

Can my German contracting partner also submit applications for net-lump sum taxation or assessment on the progressive scale or exemption for me?

No. All applications to the Central Office of the German Inland Revenue Service must be submitted only by the tax liable party himself/herself. However, a member of the tax consulting trades or a solicitor with standing can submit the applications. The domestic contracting partner is not authorized to apply.
   
For other questions, see the index: taxation/withholding tax    
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