Withholding tax in Europe

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Withholding tax in Europe

Since 1 January 2019, France has introduced the withholding of tax. This system is already in place in other European countries, with different regulations depending on the Member State.

Withholding tax in Germany

Held directly from the salary by the employer, the income tax is calculated on the amount of the gross salary, and only on the basis of the wage income. Employees must pass on to the employer their family situation (married, single, divorced … etc) as well as any lump sum deductions. All employers established in Germany have the obligation to carry out withholding of tax. All employees working in Germany, whether resident or not, are subject to income tax in the country. Only certain cases require an annual declaration: income subject to tax exceeding € 410, multiple employers, movable or exceptional income, flat-rate allowances, among others.

Withholding tax in Italy

Answering to fairly complex rules, withholding of tax in Italy is applied to employee income as well as local taxes. Each year, employees provide their company with a certificate (including information on family situation and salary income) so that the correct rates can be calculated. The employers then pay online the remittance to the State, and the net salary to the employee. A certificate is issued each year to employees to detail taxes withheld and paid to the state on their behalf by their employer. Withholding of tax does not apply to all situations – for example in the context of home-based employment. Taxpayers do not fill in a declaration if they have no income other than their salary or if they have no deductible expenses.

Since 2017, the payment of taxes has been facilitated thanks to the form “Modello 730”, pre-filled with information received from third parties (banks, insurance, health system … etc)
Withholding of tax in Italy does not only apply to all: liberal professions for example are subject to a 20% withholding tax, financial products to a tax of 26%.

Are you a foreign company and do you need advise on withholding of tax in France? Contact our experts.

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