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How does the payroll tax deduction procedure work?

To carry out the wage tax deduction, the employer electronically retrieves the wage tax deduction characteristics (ELStAM) of the persons employed by him (e.g. tax class, child allowance, income-related expenses allowance) in the database of the tax authorities. The employer is obliged to register its employees in the database when the employment relationship commences and to request the ELStAM. For this purpose, the employer requires the following information from the employee:

  • Tax identification number (ID no.)
  • Date of birth,
  • Main or secondary employment,
  • if applicable, information as to whether an allowance applies in the secondary employment relationship.

This also applies to trainees. Upon termination of the employment relationship, the employer must deregister the employee from the database again.

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