Taxes/Statutory Deductions

The following are the statutory insurances all employees must pay, the figures are reviewed annually with regard to the percentage payment required and the maximum/capped rate. Please see 'Insurances' for further explanations of coverage for these insurances, also please see 'Healthcare' for details of State and Private health insurances. As at 01.01.2002 the following is applicable:-

The following notes are provided as a guideline of the German Taxation and Social Security system, and it does not refer in any way to any Assignment Benefits/contractual benefits whilst on Assignment in Germany for BAES employees, as you may well have special Assignment contractual terms affecting tax and statutory social security payments in Germany.

In addition, BAES secondees will receive full advice from our German Taxation Advisors (Guenter Wollsdorf), the following is given as a guideline only, the latest figures and rulings can be confirmed by Guenter Wollsdorf, or your respective Personnel Department.

the individual elects to join, or this could be a one-off monthly if in a Private Health Insurance (see notes on Healthcare). If in private healthcare an example of the costs for a 37 year old female with good health/no pre-existing health conditions would be charged approximately �337 per month (actual cost to individual is halved, as the healthcare costs are matched with employer paying an equal 50% - See Healthcare).

If the main wage-earner is registered in a State Health Insurance scheme, membership is free of charge for accompanying marital partners and children. However if a spouse decides to work, it is only possible to remain a 'free' member of the State Health Insurance if the hours worked are less than 15 per month, and the earnings do not exceed �325 per month. If you exceed either of these two you must become "self-insured", i.e. join a State Health insurance scheme in your own name. (NB a dependent child can work up to 20 hours per month). In addition, if your salary are subject to full taxation (starting with 15% tax rate) and statutory insurance deductions.

Casual low-paid work (as long as no other contributory employment is pursued) is exempt from health insurance and pension scheme contributions. The employer is, however, required to solely submit standard rate contributions to the employee's health insurance (10% of the wages) and pension scheme (12% of the wages).

German residents have an unrestricted liability to German tax on their world-wide income. The German taxation year runs from January to December each year. If an individual wishes to work in Germany a taxcard (Lohnsteuerkarte) is required. The first tax-card is provided during the initial registration process, and this will cover the period from arrival up to 31st December of that year. New taxcards are issued and sent to home addresses in approximately October of each year.

Each individual taxcard will show the applicable tax coding. The tax coding directly reflects the taxation levels that will be applied to salary and is based on whether an individual is married or single, whether there are any dependant children accompanying, and if married, whether the spouse is working.

Depending on the tax Class taxation rates on salary vary progressively depending on earnings in any one month. In the year 2000 from 22.9% to 51%, and in the year 2001 from 19.9% to 48,5%. In addition, a surcharge of 5.5% of the paid income tax is also deducted for the so-called "Solidarity Tax". The following is an example of a Single-person's taxation (Tax Class I):-

DIV>

Monthly Income band EUROYear 2000	Marginal tax rate %	Monthly Income band EURO Year 2001	Marginal tax rate %
0 - 575	0	0 - 602	0
576 - 2,300	22.9 - 33.3	603 - 2,556	19.9 - 33.3
2,301 - 5,112	33.3 - 51	2,557 - 4,833	33.3 - 48.5
From 5,113	51	From 4,834	48.5

Tax is deducted on a monthly basis and the percentage of tax will vary according to the gross payment; i.e. if you have a bonus payment in one month this will push your taxation levels up, however the following month you will return to your normal tax level. This is different from the UK system which works on a cumulative basis for taxation.

As a rule, the income tax return (Einkommensteuer-Erkl�rung) should be filed by May 31st of the year following the one in which the income was received. BAESG have secured the services of English-speaking taxation advisors for all taxation filing requirements.

What can be reclaimed via Tax Rebates? Generally all expenses that are necessary to obtain, maintain or preserve the employment or are caused by the profession are possible to be claimed for a tax rebate. Certain limitations exist for: expenses for daily travel to work, for a double household, for a home office, for work material and typical work clothing. Private expenses normally cannot be deducted from taxable income. However, there are two categories of private expenses - special and extraordinary - which have special provisions:-

Extraordinary costs*
These are costs which the individual is obliged to meet - on legal, practical or moral grounds - which are disproportionately large in comparison to his or her income and means. Examples are divorce costs, storm damage, and expenses associated with an illness or accidents.

Before departure from UK a declaration to the Inland Revenue should be made in which you confirm you are leaving the UK taxation system. This is administered by the completion of form P85, and your P45 should be attached to this form and sent to the Inland Revenue for them to review and consider for any applicable tax rebate due from tax paid in UK. Full assistance should be sought from the BAES UK Taxation advisors; KPMG.

For the duration of individuals working in Germany and paying tax on salary in Germany there should be no liability to UK income tax or social security contributions on salary received in Germany. However, if income is earned from private investments or properties in UK, this may be taxable in UK. It is the responsibility of each individual to declare these earnings to the Inland Revenue on annual UK tax returns. Please see website: http://www.inlandrevenue.gov.uk.

In addition to the various forms of income tax there are also a series of sales taxes that impact heavily on both individuals and businesses. Mehrwertsteuer (value added tax), accounts for a quarter of the government's revenue and is second only to the Lohnsteuer in this regard. The Mehrwertsteuer puts a levy on each step in the production and delivery of most of the items one buys.

The Mehrwertsteuer applies to services as well as goods. The standard rate is 16 percent. A reduced rate of 7 percent applies to some products, including food and printed material. Medical and insurance services are generally exempt, as are exports of goods.

Please be aware that you must ensure your taxcard indicates correctly whether you are a member of the German Roman Catholic church and if this is indicated on your taxcard you are liable to pay the German church taxes (Kirchensteuer), of 8 to 10 percent of the Einkommensteuer/Lohnsteuer. You do not need to pay this unless you wish to be officially affiliated with one of Germany's two established churches; Catholic or Protestant (Evangelisch).

*
These notes are given as a guideline of the German Taxation and Social Security system, and it does not refer in any way to any Assignment Benefits/contractual benefits on Assignment in Germany for BAES employees, as you may well have special Assignment contractual terms affecting tax and statutory social security payments in Germany.

In addition, BAES secondees will receive full advice from our German Taxation Advisors (Guenter Wollsdorf), the information given is as a guideline only, the latest figures and rulings will be confirmed by Mr Wollsdorf.

Special expenses*
Special expenses do not relate to business or professional expenses, but are allowable exclusions from taxation, either fully or partially. For example; Fully deductible: Church tax, Tax consultants' fees. Partially deductible items: agreed regular payments to dependants (up to �13,805 p.a.), provided that payments are treated as taxable income by the recipient , Professional education costs (up to Euro 1,227), Donations for scientific, charitable or cultural purposes or to political parties with a certain limitation.