What is withholding tax?

You will certainly have already made acquaintance with the withholding tax and the withholding tax itself is an income tax. There are different withholding taxes which are regulated in general tax law in Germany and in foreign tax law. In foreign tax law this tax is limited, because here also the corresponding tax liability is limited. You yourself will hardly notice this tax, because without a special assessment this tax is simply withheld at source. For you, withholding tax is a common tax because, for example, your income tax is simply withheld by the employer and this tax is also a withholding tax. Withholding tax is particularly important if it is generated from capital gains, for example. You may have already signed an exemption order, for example if you have a savings contract and wish to exclude withholding tax from low tax revenues.

The payment of withholding tax and how it works

If you are in an employment relationship, then you pay income tax and this tax portion of your income is simply paid by the employer according to a certain table to the tax office. As I said, this wage tax is also a withholding tax. You don’t really have to worry about anything with this type of tax, because your employer pays attention to the correct amount of tax to be paid and your gross salary is responsible for the amount of this tax. But there are even more factors. For example, marital status, allowances for children and journeys to work, which then reduce the tax amount of the withholding tax in its amount. You are already realising that these taxes are always levied on income that you earn each month. Capital gains and interest are also subject to this taxation. The amount of these taxes can be calculated as follows I don’t want to make a sweeping statement about the altitude. As already mentioned, the individual requirements are always the measure of things. At the same time, existing tax law is applied to determine the level. The employer orientates himself on the valid tables, which are used digitally today to pay taxes. In the case of capital gains tax as a withholding tax, this is somewhat different.

Reimbursement and other withholding tax provisions

As you now know, all income earned must be taxed. There is a comprehensive body of tax legislation on this subject. Exceptions are permitted here and all important rules form a balanced relationship, which is determined in its amounts by the legislator accordingly. As already mentioned, foreign income and earnings must also be taxed at source in accordance with tax law. Many terms exist here and you will hardly have an overview of the legal regulations yourself. What you should be interested in, however, is the fact that you can have certain tax amounts that were paid as withholding taxes refunded by the state through a corresponding tax return. You as a taxpayer should therefore get professional advice and even with small capital yields already once an exemption order place, so that the amounts which are considered as small in the tax law, are not paid by the bank as tax to the tax office at all. They also notice that withholding taxes are permanently available, because the state has an interest in taxing all income through these taxes and thus strengthening its revenues. Capital gains, wages, many other types of income are subject to these taxes and you yourself have little to do with these taxes, because employers and banks simply pay these taxes to the relevant tax authorities. Only when you have a tax return, you can reclaim these amounts proportionately in accordance with tax law and claim certain debits that were incurred in the year as special expenses or income-related expenses for the withholding tax refund.