Tax class (SAP Business One)

The tax class determines how much income tax is deducted from an employee's gross salary. It is based on personal factors such as marital status, number of children and working conditions and therefore influences the amount of the net salary.

E-invoicing in Germany: How to implement the obligation with SAP Business One

Detailed explanation/description:

There are six tax brackets in Germany, which are based on different life situations. Classification into a tax bracket serves to ensure that earned income is taxed as realistically and fairly as possible.

The tax classes at a glance:

Tax class I: Single, divorced, widowed or permanently separated employees without children
Tax class II: Single parents with entitlement to relief amount
Tax class III: Married or registered partners with significantly higher income (partners in tax class V)
Tax class IV: Married or registered partners with roughly the same income
Tax class V: Partner with lower income if the other is in class III
Tax class VI: Second and part-time jobs

Relevance in SAP Business One:

In SAP Business One, especially when using payroll accounting systemsAdd ons or external HR systems, the correct recording of the tax class is essential. It determines the calculation of income tax in the payroll process and has an impact on the employee's net pay.

Determination and change of tax class:

Automatic assignment: Based on the reported personal data (marital status, number of children, other jobs)
Change: Application at the tax office or online via MAGPIE
Time: Since 2020, multiple changes per year are possible (effective from the following month)
Joint application: Required for married couples

Notes:

The tax class only affects the monthly wage tax, not the final tax burden (this is determined in the income tax return)
A change can be useful to optimise wage replacement benefits such as parental allowance or short-time working allowance