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Withholding tax on design price earnings

If the country in which you are resident/based is not Germany, it may be necessary for us to deduct a certain amount of tax from your remuneration before payout. This so-called withholding tax affects only your remuneration from the Design Price, and not your Affiliate Commission or your Volume Commission. Whether tax needs to be deducted depends on the existence of a double taxation agreement (DTA). If a DTA with Germany is in place, then providing your Tax Identification Number prior to tax deduction could help you avoid or minimise this deduction. If there is no DTA in place or if you do not provide your correct Tax Identification Number, we will generally be required to retain tax of 15% of your remuneration from the Design Price (withholding tax) plus a 5.5% solidarity surcharge (German Solidaritätszuschlag) on the withholding tax.

What is a DTA?

In short, a double taxation agreement (DTA) is a treaty between two countries that determines the degree to which the right of taxation of one country should be applied to earnings generated in another country. The agreement is designed to prevent natural or legal persons which generate earnings in both countries from paying tax in both countries, so to prevent their double taxation. If your country has concluded a DTA with Germany, then a recording procedure known as the KMV can be applied to earnings below €5,500 per month or €40,000 per year.

What is the KMV?

The KMV recording procedure is a simplified procedure for the reduction or exemption of withholding tax pursuant to Section 50d Para. 5 of the German Income Tax Act (EStG). It is simplified because tax relief is granted without you having to submit a separate request as a foreign creditor. Germany’s Federal Central Tax Office (BZSt) can authorise Spreadshirt to apply the KMV for tax deduction. This makes it possible for your remuneration to be exempt from tax, or only taxed at a lower rate, in Germany. For more information about DTAs and the KMV, please visit the website of the BZSt (in German).

Do I need to pay withholding tax?

To find out how much tax will be deducted from your remuneration, please select the situation relevant to you from the menu. If you’re unsure of whether the country in which you are resident/based has a DTA with Germany and how much tax has to be deducted as a percentage, take a look at this country overview.

Click on the situation relevant to you:

  • 1. Place of residence or headquarters in Germany
  • 2. Place of residence or headquarters in a country which has concluded a DTA with Germany:
    2.1 Tax deduction 0%
  • 2. Place of residence or headquarters in a country which has concluded a DTA with Germany:
    2.2 Tax deduction 1%-15%
  • Place of residence or headquarters in a country which has not concluded a DTA with Germany

1. Place of residence or headquarters in Germany

You don’t need to provide a Tax Identification Number. As long as your name and your address information are correct, you’ll be paid your remuneration in full. However, if your name and address are not stored correctly, we will be unable to pay you. Check your address details here.

2. Place of residence or headquarters in a country which has concluded a DTA with Germany (0%):

2.1 Tax deduction of 0%

If you’re unsure of whether the country in which you are resident/based has concluded a double taxation agreement with Germany and the percentage of tax that needs to be deducted, take a look at this country overview.

Name and address

To receive payment from us, you must have provided your correct name and address. Check your address details here.

Tax Identification Number

You also need to provide your correct Tax Identification Number. If you fail to do this, then when paying you we will be required to deduct tax (15% withholding tax plus 5.5% solidarity surcharge – the German Solidaritätszuschlag – on the withholding tax) from your remuneration from the Design Price. Spreadshirt will declare and pay the withheld tax to Germany’s Federal Central Tax Office (BZSt).

If your monthly remuneration from the Design Price is less than €5,500 and your annual remuneration from the Design Price is below €40,000, then a simplified recording procedure known as the KMV may be applied.

If you have provided a correct Tax Identification Number and if the KMV is applied, your remuneration from the Design Price will continue to be paid out in full, because the double taxation agreement with Germany reduces tax deduction to 0%. Provide your Tax Identification Number here.

Earnings of more than €5,500 per month / €40,000 per year

If your remuneration from the Design Price exceeds one of these threshold values, then from the first payment that results in you exceeding the limit it will no longer be possible to apply the KMV. From this point in time, we will retain 15% tax on your remuneration from the Design Price (withholding tax) plus a 5.5% solidarity surcharge (German Solidaritätszuschlag) on the withholding tax. All other remuneration (Affiliate Commission and Volume Commission) will be paid out in full.

You can request a certificate of exemption (Freistellungsbescheinigung) from the Federal Central Tax Office (BZSt). The procedure is regulated in Section 50d Para. 2 of the German Income Tax Act (EStG). If you hold a valid certificate of exemption at the time of payout, no tax will be deducted.

If you have not provided a certificate of exemption and you exceed one of the threshold values, or if you have provided an incorrect Tax Identification Number, and tax has therefore been deducted from your remuneration from the Design Price, then pursuant to Section 50d Para. 1 EStG you can apply at the Federal Central Tax Office for the tax already deducted to be reimbursed. The deadline for requesting reimbursement is in principle four years after the end of the calendar year in which the remuneration was received.

Spreadshirt will issue you with a tax certificate detailing the tax deduction carried out (see PDF form). If you present this tax certificate, it may be possible for the withheld tax to be considered as part of your personal tax assessment.

The following applies in all cases:

We would like to point out that Germany’s financial authorities may inform the financial authorities in the country in which you are resident/based of remuneration payments made to you.

2. Place of residence or headquarters in a country which has concluded a DTA with Germany (1%-15%)

2.2 Tax deduction of 1%-15%

If you’re unsure of whether the country in which you are resident/based has concluded a double taxation agreement with Germany and the percentage of tax that needs to be deducted, take a look at this country overview.

Name and address

To receive payment from us, you must have provided your correct name and address. Check your address details here.

Tax Identification Number

You also need to state your correct tax identification number. If you fail to do this, then when paying you we will be required to deduct tax (15% withholding tax plus 5.5% solidarity surcharge – the German Solidaritätszuschlag – on the withholding tax) from your remuneration from the Design Price. Spreadshirt will declare and pay the withheld tax to Germany’s Federal Central Tax Office (BZSt). If your monthly remuneration from the Design Price is less than €5,500 and your annual remuneration from the Design Price is below €40,000, then a simplified recording procedure known as the KMV may be applied.

If you have provided a correct Tax Identification Number and the KMV is applied, then tax will only be deducted at a reduced rate from your remuneration from the Design Price and the remaining amount will be paid out to you.

Spreadshirt will issue you with a tax certificate detailing the tax deduction carried out. If you present this tax certificate, it may be possible for the withheld tax to be considered as part of your personal tax assessment. Provide your Tax Identification Number here.

Earnings of more than €5,500 per month / €40,000 per year

If your remuneration from the Design Price exceeds one of these threshold values, then from the first payment that results in you exceeding the limit it will no longer be possible to apply the KMV. From this point in time, we will retain 15% tax on your remuneration from the Design Price (withholding tax) plus a 5.5% solidarity surcharge (German Solidaritätszuschlag) on the withholding tax. All other remuneration (Affiliate Commission and Volume Commission) will be paid out in full.

You can request a certificate of exemption (Freistellungsbescheinigung) from the Federal Central Tax Office (BZSt). The procedure is regulated in Section 50d Para. 2 of the German Income Tax Act (EStG). If you hold a valid certificate of exemption at the time of payout, tax will be deducted at a reduced rate from your remuneration from the Design Price and the remaining amount will be paid out to you. If you have not provided a certificate of exemption and you have exceeded one of the threshold values, or if you have provided an incorrect Tax Identification Number, and tax has therefore been deducted from your remuneration from the Design Price, then pursuant to Section 50d Para. 1 EStG you can apply at the Federal Central Tax Office for partial reimbursement of the tax already deducted. The deadline for requesting reimbursement is in principle four years after the end of the calendar year in which the remuneration was received. Spreadshirt will issue you with a tax certificate detailing the tax deduction carried out. If you present this tax certificate, it may be possible for the withheld tax to be considered as part of your personal tax assessment.

The following applies in all cases:

We would like to point out that Germany’s financial authorities may inform the financial authorities in the country in which you are resident/based of remuneration payments made to you.

Sample calculation for a payment with a residual tax rate

Tax deduction for a Partner resident or based in Ukraine (5% withholding tax rate)
100.00 EUR remuneration from the Design Price
-5.00 EUR 5% withholding tax
-0.27 EUR 5.5% solidarity surcharge on withholding tax
= 94.73 EUR remuneration payment from the Design Price

In this example, Spreadshirt is required to declare and pay €5.27 in tax to Germany’s Federal Central Tax Office.

3. Place of residence or headquarters in a country which has not concluded a DTA with Germany

If you’re unsure of whether the country in which you are resident/based has a DTA with Germany, take a look at this country overview.

Name and address

To receive payment from us, you must have provided your correct name and address.Check your address details here.

Tax Identification Number

Since no double taxation agreement with Germany is in place, Spreadshirt is required to deduct 15% tax from your remuneration from the Design Price (withholding tax) plus a 5.5% solidarity surcharge (German Solidaritätszuschlag) on the withholding tax. Spreadshirt will declare and pay the taxes to Germany’s Federal Central Tax Office.

It is not possible to apply at the Federal Central Tax Office for exemption or the reimbursement of deducted tax pursuant to Section 50d EStG.

Spreadshirt will issue you with a tax certificate detailing the tax deduction. If you present this tax certificate, it may be possible for the withheld tax to be considered as part of your personal tax assessment. Provide your Tax Identification Number here.

Sample calculation

Tax rate for a Partner resident or based in Paraguay (15% withholding tax)
100.00 EUR remuneration from the Design Price
-15.00 EUR 15% withholding tax
-0.82 EUR 5.5% solidarity surcharge on withholding tax
= 84.18 EUR remuneration payment from the Design Price

Spreadshirt is required to declare and pay €15.82 in tax to Germany’s Federal Central Tax Office.

Please note: The information provided on this page should not be regarded as official tax advice or used to support tax items. Please contact your accountant for tax advice.

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