German Tax Guide for ABO members
This Tax Guide pertains to the laws and taxes of: Germany
Non Resident Entertainers
Germany
Definition of “artist”
Artists are musicians, actors and dancers as well as any other person in the field of show business, who perform in public or before an audience. Non-performers e.g. directors, costume designers and authors, are not considered as artists and therefore are excluded.
Definition of “residence” and “habitual place of abode”
An individual is resident in Germany, if he/she has a dwelling or domicile in Germany. Residence is presumed where an individual is domiciled in Germany on a long-term basis and has a place where he/she maintains a residence under circumstances that indicate that he/she will keep and use the residence on a more than temporary basis.
A habitual place of abode is created, if an individual is physically present for an extended period of time under circumstances that indicates that the stay will not be temporary only. A physical presence of more than six months is other than of a temporary nature and therefore constitutes a habitual place of abode. The six-month-period is calculated from the beginning of the stay until the end and can run from one year to the next. Short interruptions due to holidays etc. are ignored.
Income Tax
Basis
- Individuals who have their residence or habitual place of abode in Germany are subject to unlimited German income taxation. Thus they are taxed on their worldwide income.
- Non-resident individuals are taxed on their German-sourced income only.
General Tax Rules in Germany
- Tax rates as of January 01, 2009 for single residents in Germany are progressive between:
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Annual taxable income[1]
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Income tax rate
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Up to € 7,834
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0 %
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From € 7,834 up to € 52,552
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14.0 % - 42.0 %
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From € 52,552 up to € 250,400
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42.0 %
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Over € 250,400
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45.0 %
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- A solidarity surcharge of 5.5 % is levied on the income tax.
- Individuals without residence or habitual place of abode in Germany, who have German income that amounts to at least 90 % of their worldwide income or income not subject to German taxation does not exceed 7,834 €, may elect to be taxed as a resident in Germany.
- Expenses are deductible as long as they are related directly and economically to a particular source of income. General allowances are applicable in kind of resident taxation.
Taxation of foreign artists in Germany
Decisive for the way of taxation of residents as well as non-residents is the fact, whether the artist is an employed or a self-employed person.
In general artists, who are integrated into a theatre’s workflow as a result of a season-contract, participants in film and television productions or all activities on a continuing basis, are bounded by instructions. Thus these entertainers are employed persons like vocalists, dancers, actors, members of orchestras, producers, cameramen or directors and their assistants for example.
Persons, who are performing only for a short term, such as in guest performances, and are not subjects to directives, could use their manpower freely and thus they are self-employed. In general this applies for (film-) authors, composers, choreographers, stage and costume designers, directors, solo-artists without a group or an ensemble, statuaries, soloists in instrumental or vocal music and other performers in this context.
Please consider that this explanation could only be for general information. Appropriate professional advice could only be given after a thorough examination of the particular situation as there are numerous exceptions existing.
Self-employed entertainers
Special rules for non-resident entertainers apply to income arising from performances in Germany. The following explanations are applicable to income received after December 31, 2008:
- No withholding tax applies, if the entertainer’s receipts per performance are lower than EUR 250.
- In general a withholding tax rate of 15 % applies on the gross remuneration (usually gross remuneration without refund of travelling costs according to the German tax rules) for activities performed in Germany. In this case there is no deductibility for any expenses.
- A withholding tax rate of 30 % applies on the net remuneration (income-related expenses are deductible), if the entertainer could verify his expenses to the tax authorities or the expenses were already reimbursed. In this case the entertainer has to be a citizen of a state of the European Union (EU) or the European Economic Area (EEA) and his residence or habitual place of abode has to be in one of these states.
- There is no obligation for filing an annual income tax return where the withholding tax applies. The tax deduction has to be made independently of the provisions in the double tax treaties.
- Under certain conditions no withholding tax is levied, if the artist presents a certificate of exemption (Freistellungsbescheinigung) issued by the Federal Finance Office upon application. The withholding tax will end from the date of issue of the certificate of exemption. In case of overpaid taxes an application for tax refund could be filed.
- The non-resident entertainer, performing in Germany, can apply for the general income tax rate on the net income (remuneration less direct expenses) plus base allowance of € 7,834. Hereby the entertainer has also to be a citizen of a state of the European Union (EU) or the European Economic Area (EEA) and his residence or habitual place of abode has to be in one of these states.
- A solidarity surcharge of 5.5 % is levied on the income tax.
Employed entertainers
- Employer is resident in Germany:
o Monthly wage tax deduction is falling due for salary payment, if the employer is resident in Germany and no exemption according to a double taxation treatment is applicable (e.g. cultural exchange). The general tax rates are applicable as described above.
o There is possibility to file an annual German income tax return for non-resident entertainers, performing in Germany. For this purpose the entertainer has to be a citizen of a state of the European Union (EU) or the European Economic Area (EEA) and his residence or habitual place of abode has to be in one of these states. Further the above mentioned general conditions concerning the election for tax assessment are applicable.
- Employer is not resident in Germany:
o Withholding tax is applicable according to the tax rates as described for self-employed entertainers.
Groups and ensembles
Non-residences could be exempted from German income tax partly or completely or a blanket assessment could be made, if there is a certain public interest in their performance in Germany. The following items are seen as a “certain public interest”:
- An international competition has to be organized about the arrangement of the international significant cultural performance in Germany.
- Performances of foreign cultural organizations in Germany have to be promoted from public refunds essentially.
This special exemption from all taxation applies to performances by certain cultural organizations, including orchestras and other groups of artists, who present a common performance. The following conditions must be met to receive the special exemption[2]:
- The performance must be financially sponsored by German or foreign official authorities. The sponsoring must encompass at least one third of costs incurred in relation with the performance.
- The authority must issue a certificate stating the fact of sponsorship and the amount. German sponsorships are certified by the sponsoring authority e.g. the Foreign Office or the Ministry of Culture. Foreign sponsorships may be certified by any legal authority sponsoring the group or ensemble, or by the embassy of the state the sponsor is located in.
The sponsorship can comprise all costs related directly to the performance e.g. travelling costs, advertising costs, costs for additional staff, rent. However the salaries of the group’s employees must not be sponsored.
This exemption does not apply to soloists!
Tax planning
To decide whether the withholding tax or the wage tax deduction are applicable in the case in question, the double tax treaties must be considered as well, as the treaty often contains an exemption. In order to avoid withholding tax or wage tax deduction, an application must be filed with the German Federal Finance Office to receive a certificate of exemption, which states that all requirements are satisfied.
Social Security Contributions – applicable from January 1st, 2009 on
- Agreements between Germany and the member states of the European Economic Area (EEA) and Switzerland as well as agreements between Germany and several non-EU countries concerning social security must be considered when deciding upon a foreign entertainer’s liability to the German social security system.
- There are the following compulsory social security contributions in Germany as of the year 2009:
o Pension insurance: 19.9 %
o Unemployment insurance: 2.8 %
There is a ceiling of € 64,800 per year, or € 5,400 monthly. For the newly-formed German states the maximum yearly amount of which the contributions are calculated amounts to € 54,600 per year or € 4,550 monthly.
o Health insurance: 15,5 %
o Nursing care insurance: 1.95 % (individuals with children)
2.2 % (individuals without children)
There is a ceiling of € 44,100 per year, or € 3,675 monthly. There are no compulsory health and nursing care insurance contributions for individuals receiving a higher salary than 48,600 per year or 4,050 monthly.
- Generally all compulsory social security contributions are paid equally by employer and employee, one half each. Since July 2005, there is a special contribution to the health insurance of 0.9 %, which must be paid by the employee exclusively.
- Non resident employed entertainers with their residence within the EU can avoid payments to the German social security contribution system, if they were delegated to Germany. Under certain conditions for these delegated entertainers it is possible to pay the social security contributions in that country, where they have paid their contributions before, if they have an E-101-declaration.
- For self-employed artists (executing or teaching music, fine or performing arts) and journalists there exists a special “social security system for artists and journalists” (Künstlersozialversicherung KSK) in Germany, if their income is over a minimum level of 3,900 € per annum. Generally a foreign artist is obligated for membership in the German KSK, if his stay in Germany is not only temporarily, in particular lasts longer than a year. In case the artist is performing in several states of the European Union (EU) or the European Economic Area (EEA) the social law of the country of residency is applicable. When the artist is not performing in his state of residence, social law of the country with focal point of his activity is applicable. For performances in other countries the circumstances of each individual case must be checked. In case of returning to the home country there is possibility to receive a refund of pension insurance contributions only.
Value Added Tax (VAT)
- VAT is charged on all goods and services for consumption in Germany.
- The current standard VAT rate is 19 %. Additionally there is the reduced tax rate of 7 % on some special goods such as food or cultural products such as books and newspapers.
- Services performed by artists are subject to German VAT if the services are physically performed in Germany.
- Should the recipient of the performance services be a German resident entrepreneur, the reverse-charge procedure may apply.
- If the artist’s manager is responsible for taxation matters, he is also required to deal with VAT obligations, including recording the turnover for VAT purposes and filing the VAT returns with the German tax authorities.
For further information please contact:
Baker Tilly Deutschland GmbH
Wirtschaftsprüfungsgesellschaft
Peter Fabry
Mies-van-der-Rohe-Str. 6
80807 München
Germany
This tax profile is intended to give a general outline of the issues facing artists who perform in Germany. It is designed for the information of readers. Whilst every effort has been made to ensure accuracy, information contained in this profile may not be comprehensive and recipients should not act upon it without seeking professional advice. Facts and figures as presented reflect the situation as of April 2009.
Munich, April 2009