The turn of the year is traditionally a time when legal and tax regulations come into force. Various important changes to be considered in Payroll accounting are described below.
For 2023, the range of changes extends from the newly set contribution rates for social insurance to new regulations on mid-job.
To be considered in payroll accounting
New calculation parameters for statutory health and pension insurance will come into force on January 1, 2023. They are based on the development of wages and salaries in 2021. Subject to the approval of the Bundesrat (upper house of the German parliament), the following new values are set out in the Social Security Calculation Ordinance 2023:
- The compulsory insurance limit for statutory health insurance (annual income limit) will rise from the previous 64,350 euros to 66,600 euros. Up to a gross annual income of this amount, employees are compulsorily insured in the statutory health insurance scheme (GKV); at a higher income, they can choose between GKV and private health insurance.
- The income threshold for health insurance scheme (GKV) contributions will be raised from 58,050 euros (2022) to 59,850 euros per year. This corresponds to a monthly gross income of 4,987.50 euros. Salary components above this limit are not included in the calculation of the GKV contribution
- The contribution assessment ceiling for the general pension insurance is not uniform throughout Germany: in western Germany, it will increase from the previous 7,050 euros to 7,300 euros per month, and in eastern Germany from the previous 6,750 euros to 7,100 euros per month.
- The reference amount (west) for social security will increase from 3,290 euros (2022) to 3,395 euros per month, while the reference amount (east) will increase from 3,150 euros to 3,290 euros per month. The reference amount corresponds to the average remuneration of the statutory pension insurance in the previous calendar year, rounded up to the next higher amount divisible by 420. It is important, among other things, for the assessment of contributions of voluntarily insured persons in statutory health insurance and the calculation of contributions of self-employed persons subject to compulsory insurance in statutory pension insurance.
In addition, the average rate of the additional contribution levied by the individual health insurance funds for 2023 was published on Oct. 31, 2022: it amounts to 1.6 percent.
The minimum wage has not been raised to twelve euros per hour until 01.10.2022. There will be no further increase in 2023. However, the minimum wage commission will also discuss an increase in 2023, which must be passed by June 30, 2023. However, this increase will not take effect until Jan. 1, 2024.
The nursing professions are an exception. Here, the minimum wage per hour increased to 13.90 euros for nursing assistants (without training), 14.90 euros for qualified assistants, and 17.65 euros for nursing specialists as of May 1, 2022. There will be a further increase to 14.15 euros (assistants) 15.25 euros (qualified assistants) and 18.25 euros (specialists) as of 01.12.2022.
In order to relieve employees with low incomes in the face of high inflation, the German government has extended the regulations on midi jobs in the so-called "Third Relief Package". In the transitional area between a mini-job (since 01.10.2022 up to 520 euros) and a general employment relationship (upper limit of the transitional area), employees are relieved of contribution payments, leaving them with a higher net amount of gross wages.
This upper limit for midi jobs was only increased from 1,300 euros to 1,600 euros on 01.10.2022. In order to relieve a larger group of employees, the federal government is increasing the upper limit to 2,000 euros as of 01.01.2023. Anyone earning between 521 and 2,000 euros gross per month will pay lower percentage contributions into the social security system than in a general employment relationship. The employer's contribution, on the other hand, corresponds to the general contribution rates.
As part of the Third Relief Package, the Bundestag passed the German government's Inflation Compensation Act on Nov. 10, 2022. This sets new income tax rates for 2023 and 2024. The increase in the so-called tariff benchmarks will shift income tax rates toward higher incomes. For an employee with a gross annual income of 50,000 euros, for example, this will reduce income tax. According to the German government, this will reduce the tax burden for 48 million Germans by roughly the same amount as the expected inflation rate. The tariff benchmarks in detail (in euros):
|Mode of calculation of income tax||2022||2023||2024|
(not taxed; § 32a (1) No. 1 EStG - German Income Tax Act)
|10.347 Euro||10.908 Euro||11.604 Euro|
Input tax rate
(Sec. 32a (1) No. 2 EStG)
|10.348 – 14.926 Euro||10.909 – 15.999 Euro||11.605 – 17.005 Euro|
Progression phase (Section 32a (1) No. 3 EStG)
|14.927 – 58.596 Euro||16.000 – 62.809 Euro||17.006 – 66.760 Euro|
Top tax rate: 42%
(Sec. 32a (1) No. 4 EStG)
|58.597 – 277.825 Euro||62.810 – 277.825 Euro||66.761 – 277.825 Euro|
|Maximum tax rate: 45% (Sec. 32a (1) No. 5 EStG)||from 277.826 Euro||from 277.826 Euro||from 277.826 Euro|
Other tax relief from the Inflation Adjustment Act includes:
- The solidarity surcharge now only has to be paid by those who pay more than 18,130 euros in income tax (previously 16,956 euros). In the case of joint assessment, the amount is now 36,260 euros (previously 33,912 euros).
- With retroactive effect from 01.01.2022, the child allowance (including the allowance for care, education and training needs) will be increased by 160 euros to 8,548 euros. On 01.01.2023 it will rise by a further 404 euros to 8,952 euros and on 01.01.2024 by a further 360 euros to 9,312 euros.
- Child benefit will be a uniform 250 euros for each child from 2023.
Further changes due to the Annual Tax Act 2022
The Annual Tax Act (Jahressteuergesetz - JStG) 2022 has not yet been changed. However, should it take effect as decided by the government, the following changes will affect taxpayers:
- Expenses for working in a home office can be claimed more easily for tax purposes. The home office allowance of five euros per day will be de-funded, thus becoming a regular means of tax simplification. The maximum deduction amount will be increased from 600 to 1,260 euros. These regulations apply regardless of whether a workroom is available and whether the home office constitutes the center of gainful activity.
- Employees who have to work at home because no other workplace is available to them can deduct their studies at a flat rate of 1,260 euros per year. the costs no longer have to be proven.
- Irrespective of this, expenses for a study can be deducted in full as business expenses or income-related expenses if it is the focus of the gainful employment and no other workplace is available.
- The special expenses for old-age pension expenses will be fully tax-deductible from 2023. At the same time, the basic pension supplement will be tax-free.
- The annual depreciation for wear and tear (AfA) for residential buildings will be increased from 2% to 3%. As a result, a house completed after June 30, 2023, can be depreciated in 33 years instead of the current 50 years. This is intended to provide an incentive to build homes, thus leading to more sustainable buildings and counteracting the housing shortage.