Paying non-residents: the withholding tax under § 50a EStG

An event agency in Leipzig books a Dutch band for a corporate evening and transfers the agreed fee of 4,800 € in full to Amsterdam. Two years later the Federal Central Tax Office writes: the agency should have withheld 720 € of income tax and 39.60 € of solidarity surcharge, and it is now liable for both itself. The band has long moved on; the bill stays with the organiser.

Whoever pays collects the non-resident's tax

A person with neither a residence nor a habitual abode in Germany has only limited income tax liability there, covering the domestic income defined in § 49 EStG (§ 1 (4) EStG). Such a person is taxed here only on what is earned here, and that is precisely what is hard to capture.

The practical problem is obvious. A musician from Rotterdam, a licensor from Milan or a board member from Zurich usually files no German return, and the tax office cannot reach their assets. The legislator therefore turns to the payer, who is within reach in Germany.

For certain kinds of income, the income tax of non-residents is therefore collected by way of withholding (§ 50a (1) EStG). The German client does not pay out the full fee; it keeps part of it back and forwards that part to the treasury. The recipient remains the taxpayer, the payer becomes the collector.

For the recipient, the withholding is usually final. Under § 50 (2) sentence 1 EStG, the income tax on income subject to the § 50a withholding is deemed settled by the withholding for non-residents. An assessment only takes place in the exceptional cases that the law lists one by one.

The procedure is centralised at the Federal Central Tax Office, the Bundeszentralamt für Steuern. The office describes it itself as a special procedure for domestic income of foreign artists, athletes, licensors and supervisory board members. Filing, payment, exemption and refund all meet there, not at the local tax office of the paying business.

The four cases of subsection 1

Not every payment abroad triggers the withholding. § 50a (1) EStG lists four groups of income exhaustively. A business that buys a machine abroad or pays a foreign haulier is not concerned. What matters is what the payment is for, not where the money goes.

• Number 1: artistic, sporting, acrobatic, entertaining or similar performances given in Germany, including related services and regardless of who receives the income
• Number 2: the exploitation in Germany of such performances, for example broadcasting or recording a concert
• Number 3: granting the use of, or the right to use, rights, in particular copyrights and industrial property rights, and of experience, knowledge and skills such as plans, models and processes
• Number 4: fees paid to members of a supervisory board, administrative board or other persons charged with overseeing management

Number 1 is deliberately broad. It covers not only the performer's own fee but also services connected with the performance. And it applies whoever receives the income. If the fee is paid to a foreign agency or production company rather than to the artist, the withholding still applies.

The law makes one exception for wages. If the foreign musician is employed by a German employer and the wages are already subject to wage tax withholding, § 50a does not apply on top. The tax is then collected through wage tax, and the same payment is not caught twice.

Number 3 mainly concerns software licences, trademarks, patents and know-how made available. The statute speaks of granting the use of a right or the right to use it. A business that buys a right outright, by contrast, is not paying a price for its use. The line can be difficult to draw and should be settled before the first payment.

Ordinary services are not on the list. A foreign management consultant working from abroad does not fall under subsection 1. For such cases, however, the law provides a separate route: the tax office can order a withholding under subsection 7. The last section of this module deals with it.

The rate: 15 percent of gross, 30 for board members

The standard rate is 15 percent of the total receipts (§ 50a (2) sentence 1 EStG). The base is therefore the full amount, with no deduction for costs. For supervisory board fees under number 4, the law doubles the rate to 30 percent, again of the total receipts.

Travel costs reimbursed or borne by the client count as receipts only to a limited extent. Travel and accommodation expenses are included only where they exceed the actual costs. Subsistence allowances count only for the part above the statutory flat rates (§ 50a (2) sentence 2 EStG).

Small performances benefit from an exemption limit. For performances under number 1, no tax is withheld if the receipts per performance do not exceed 250 euros (§ 50a (2) sentence 3 EStG). This is a threshold, not an allowance: once it is exceeded, the whole amount is subject to withholding.

The limit applies per performance, not per year and not per contract. A street artist who performs on ten evenings for 200 euros each stays below it every time. A pianist with a single fee of 1,000 euros, on the other hand, is above it with the entire amount. The limit does not apply to numbers 2 to 4.

The solidarity surcharge comes on top of the withheld amount. § 3 (1) no. 6 SolZG bases it on the § 50a withholding amount, and § 4 SolZG sets it at 5.5 percent of that base. A payer who withholds 1,000 euros of tax also owes 55 euros of surcharge.

The net method: deduct costs, but at a different rate

Gross withholding hits performers with high costs hard, such as a band with equipment, crew and travel. § 50a (3) EStG therefore allows business expenses or income-related expenses directly and economically connected with the receipts to be deducted. The rate is then applied to the remaining net receipts.

The method is open only to numbers 1, 2 and 4, meaning performances, their exploitation and board fees. Licence payments under number 3 are excluded. The recipient must also be a national of a European Union or European Economic Area state and have a residence or habitual abode there.

The rule applies accordingly to a non-resident corporation that meets the conditions of § 32 (4) KStG. The costs must have been shown to the payer in a form the Federal Central Tax Office can verify, or the payer must have borne them itself, for example by booking the hotel directly.

The price for deducting costs is a higher rate. For individuals, the withholding is 30 percent of net receipts; for corporations, associations and estates it is 15 percent (§ 50a (3) sentence 4 EStG). For a company the net method is therefore never worse, whereas for an individual it is not always better.

The arithmetic for an individual is simple. 15 percent of gross and 30 percent of net give exactly the same result when costs equal half of the receipts. Above that, the net method is cheaper. Below it, proving the costs costs more tax than it saves.

File, pay over, be liable

The tax arises at the moment the fee flows to the recipient, and the withholding must be made at that moment (§ 50a (5) sentences 1 and 2 EStG). What counts is therefore the payment, not the day of the performance and not the date of the invoice.

Tax withheld within a calendar quarter must be declared to and paid over to the Federal Central Tax Office by the tenth day of the following month (§ 50a (5) sentence 3 EStG). For a payment made in May, the deadline therefore falls on 10 July; for a payment made in December, on 10 January.

The return is transmitted electronically in the officially prescribed data format (§ 73e sentence 4 EStDV). It names the recipient, the amount of the fee, any expenses deducted and the amount withheld. The Federal Central Tax Office has announced that from 7 December 2026 the filing form will only be available in its new online portal.

A return is due even when nothing is withheld. That applies where the 250 euro limit is met, where withholding is dropped at the second tier, or where an exemption under § 50c (2) EStG removes the withholding in whole or in part (§ 50a (5) sentence 4 EStG). A nil return is therefore not a formality.

The payer is liable for withholding and paying over the tax (§ 50a (5) sentence 5 EStG). Whoever forgets to withhold pays the amount out of their own pocket. The foreign recipient can be pursued as well, but the tax authorities will turn to the payer, who can be reached in Germany.

If it is unclear whether the recipient is a resident or a non-resident taxpayer, the payer may only skip the withholding if the recipient produces a certificate from their tax office confirming unlimited tax liability (§ 73e sentence 6 EStDV). A German postal address or a German tax number on the invoice is not enough.

On request, the payer must certify to the recipient, on the official template, who they are, what activity was paid for, when payment was made and how much tax was withheld and paid over (§ 50a (5) sentence 7 EStG). The recipient needs this certificate for their home-country tax and for any refund in Germany.

When a treaty helps: exemption and refund

Many double taxation treaties allocate the right to tax licences or certain fees wholly or partly to the state of residence. It does not follow that the payer may simply skip the withholding. § 50c (1) EStG requires withholding, payment and filing to take place regardless of the treaty.

The payer cannot invoke the recipient's treaty rights on its own. It is released from withholding only once the Federal Central Tax Office certifies to the recipient, on the recipient's application, that the treaty prevents German taxation (§ 50c (2) sentence 1 no. 1 EStG). This exemption certificate must be in place before payment.

The certificate is limited to a maximum of five years, running at the earliest from the day the application reaches the Federal Central Tax Office. A complete application must be decided within three months of all evidence being submitted (§ 50c (2) sentences 4 and 6 EStG). Anyone negotiating licence agreements should start the application early.

For small licence payments there is a simplified exemption option. If a treaty prevents German taxation, the payer need not withhold on number 3 income as long as the fees paid to the same recipient in the calendar year do not exceed 10,000 euros in total (§ 50c (2) sentence 1 no. 2 EStG). A return must still be filed.

If tax was withheld despite a treaty, the recipient only gets it back by applying to the Federal Central Tax Office. The application period is four years from the end of the calendar year in which the fee was received. The payer's certificate under § 50a (5) sentence 7 EStG must be attached (§ 50c (3) EStG).

Exemption and refund applications are transmitted electronically in the prescribed data format. The applicant proves residence in the other state with a confirmation from that state's tax authority (§ 50c (5) EStG). Without this residence certificate there is neither exemption nor refund.

The ordered withholding under subsection 7

For non-resident income not covered by the standard withholding, the recipient's tax office can order the payer to withhold anyway where this is expedient to secure the tax claim (§ 50a (7) sentence 1 EStG). Without such an order, this withholding does not exist.

The withholding is 25 percent of total receipts, and 15 percent for corporations, associations and estates. The tax office may adjust the amount to the tax likely to be owed (§ 50a (7) sentence 2 EStG). The rate that counts is therefore always the one stated in the order.

Unlike the standard withholding, the return does not go to the Federal Central Tax Office but to the tax office that issued the order. The quarterly rhythm applies in principle, but the office can require monthly filing by the tenth of the following month (§ 50a (7) sentence 3 EStG). The payer's liability applies accordingly.

The ordered withholding does not settle the recipient's tax, because subsection 7 sentence 4 disapplies § 50 (2) sentence 1 EStG. The recipient's tax is therefore not deemed discharged by it. The return is filed in ELSTER using the form for withholding to secure the tax claim against a non-resident.