Withholding tax is a special form of taxation. In order to secure the fiscal tax claim, this regulation in particular confronts German companies which provide remuneration to taxpayers with restricted tax liability.
Withholding tax pursuant to § 50a EStG (Einkommensteuergesetz [German Income Tax Act]) affects a wide range of issues. These include license fees (e.g. software, patents, know-how, etc.), artistic work (e.g. commissioning artists, athletes, musicians, etc.) or even supervisory board compensation.
In this context, the legal assessment raises a variety of questions:
- What income is subject to withholding tax?
- What forms the assessment basis for withholding tax?
- Which tax clause (gross or net agreement) is used?
- In what form should advertising costs or business expenses be claimed?
- What is rate of withholding tax?
- What is the consideration of the solidarity surcharge?
- When should the tax deduction be reported and paid?
- Which records does the tax debtor have to keep?
As withholding tax does not accrue as part of the tax assessment, but already arises from the remuneration paid to the service provider, must be withheld and, consequently, paid to the tax authorities, it represents a particular challenge for companies.
Through the software solution we have developed, the WTS WHTmanager, we support our clients with the challenges posed by withholding tax in accordance with § 50a EStG:
Including technologies such as the Decision Model and Notation (DMN) creates an intelligent guided process, which supports the user in the identification and assessment of tax issues for withholding tax. In this way, tax-exempt employees can be led by means of a guided process to the correct result or to the correct valuation. The basis for this are decision trees on the respective issues such as Supervisory Board compensation, artistic works, designers, photo models, licenses or product placement.
The decision trees are integrated in the tax tool and can be adapted to the individual requirements and circumstances of the company. In addition, the WTS WHTmanager helps to correctly calculate the taxation in accordance with § 50a EStG. A preliminary analysis of the tax impact, taking into account the tax clause (gross or net agreement), minimises risk when validating the budget.
The tool-based mapping of customisable workflows for the inspection and approval steps ensures clear monitoring and adequate compliance. The flexible configuration of the workflow takes place via easily created process diagrams in BPMN (Business Process Model and Notation).
For the storage of the relevant evidence, the WTS WHTmanager includes an integrated document filing system, which ensures the required transparency regarding the documentation of facts according to § 50a EStG.In addition, the software supports both the automated creation of the tax filing application via the German Federal Central Tax Office’s (Bundeszentralamt für Steuern, BZSt) online portal, as well as the preparation of the tax certificates and applications for exemption certificates.