Active pensions, electronic allowances, income thresholds, electric cars – as 2026 begins, employers are again facing numerous challenges in payroll and social security. These have come about from recent court decisions, the authorities changing their interpretations and new legal regulations.
Wage tax
Active pension – consequences for employers
Starting from 1 January 2026, those who have reached the state pension age (currently 67, transitional rules may apply) may receive pay of up to 2,000 euros tax free for work on which social insurance payments are due.
In an earlier Insight, we already told you about the main requirements during the legislative process (Insight active pension). But is cannot be ruled out that the new rules will be subject to challenge in the courts. Employers should therefore familiarise themselves with the practical and legal effects of this in good time.
Reimbursement of expenses incurred those with a company car – changes for employers
Since 1 January 2026 a new tax authority simplification is in force that affects the reimbursement of expenses for charging electric company cars. The goal is to make calculating electricity costs much simpler if charging is initially paid for privately, such as by using a charging box at home.
In so doing, the tax authorities have departed from flat-rate reimbursement, which they tolerated until now. The change particularly concerns how the relevant electricity price is calculated: for dynamic electricity tariffs, in future the average monthly electricity costs per kilowatt hour are to be taken. If electricity from a private solar panel system is used, the costs may be calculated based on the household electricity tariff, taking into account a pro rata amount of the basic price.
Alternatively and independently of actual electricity consumption, the total electricity price for private households published every six months by the Federal Statistical Office may be used. This is determined by the total average electricity price for the first six months of the previous year (rounded to the nearest cent), including taxes, charges and surcharges at an annual consumption of 5,000 to 15,000 kWh. According to the Federal Statistical Office, for 2026 this is currently 34 cents per kilowatt hour.
Flat rate for company events
In a judgement handed down on 27 March 2024 (file ref. VI R 5/22), the Federal Fiscal Court (Bundesfinanzhof) held that a flat rate of 25 percent plus solidarity surcharge under section 40(2) sentence 1 no. 2 of the German Income Tax Act (GITA) is also permissible if a company event is not open to all employees.
But a modification to the law will in future restrict the scope of this – charging a flat rate will only be possible if taking part in the event is open to all the employees of the business or business unit. This rule applies to all events starting from 1 January 2026.
However, in a wage tax audit, employers may appeal to the favourable rule for periods up to 31 December 2025.
Duties to correct and report after a tax audit
Under section 153(4) of the Fiscal Code, since 2025 tax returns must be corrected and matters reported if a final tax assessment notice is issued after a tax audit and the concerned matter has an effect on other bases.
Businesses should therefore not waste time to analyse whether they need to report anything – particularly where things are unclear or doubtful.
Social security legislation
Income thresholds and rules for marginal employment (mini- and midi-jobs)
Since 1 January 2026, new income thresholds apply to state statutory health and pension insurance. As every year, these have been adjusted to match the trend of incomes.
The income threshold in statutory health insurance has risen to 69,750 euros per year (5,812.50 monthly). The threshold for compulsory insurance has risen to 77,400 euros per year (6,450 euros monthly). The income threshold in general pension insurance is 8,450 euros a month (2025: 8,050 a month). This income threshold in the Knappschaft pension insurance is 10,400 euros (2025: 9,900 euros). These figures apply to the whole of Germany.
The dynamic marginal earnings threshold means that this changes every time the statutory minimum wage changes. Since January 2026 it is 603 euros. With the rise in the mini-job threshold, the income threshold for work on which social insurance has to be paid in the transition zone has also been adjusted. A midi-job is when the employee regularly makes more than 603 euros and less than 2,000 euros a month. Employees who earn an amount in the transition zone pay reduced contributions to social insurance.
Separation by legal zone in contribution statements ended and gender-neutral structure of new social security numbers starting from 2026
Starting from 1 January 2026, contribution statements are no longer to be submitted separately by legal zone (West/East). Employers now transfer contributions jointly in one contribution statement data record; stating the legal zone indicator has been discontinued. From 1 January 2026 the new German Self-Determination Act 2026 (SBGG) also abolishes the code for sex in social security numbers – the digits 10 and 11 will in future be allocated in order, meaning that conclusions about gender can no longer be made. Existing numbers remain valid without change.
New electronic car procedure
Starting from 1 January 2026, the old paper-based procedure for reporting contributions to private health and long-term care insurance has been replaced by an electronic data exchange procedure. In future, insurers, employers and the Federal Central Tax Office (BZSt) will send the data in an automated way, so pension contributions and tax-free employer’s allowances will be correctly taken into account directly. The basis for this is the Secondary Credit Market Act (KrZwMG) and a Ministry of Finance Circular from 3 July 2025, which regulate the new digital process.
Invitation to new year’s seminar held on 28 January 2026
Don’t miss out: In our new year’s seminar, we’ll give a concise overview of these topics and other crucial developments in legislation, court decisions and administration. Take the opportunity to freshen up your knowledge. Benefit from in-depth expert knowledge and practical recommendations for action for a successful start to the new year. The event is free of charge.
-
Thomas Felzmann Thomas Felzmann is an expert in tax control frameworks (tax compliance management systems). With his combination of payroll tax expertise and understanding of processes, he has been successfully implementing TCF projects for many years.View Profile -
Maria Harder Maria Harder is Payroll Manager at Grant Thornton in Leipzig and has many years of experience in payroll accounting.View Profile -
Sandra Guyot Sandra Guyot has gathered extensive experience in employment tax consulting for medium-sized companies and international groups of companies since 2013.View Profile -
Jasmin Ochsmann Jasmin Ochsmann has many years’ experience providing advice on wage tax to national and international business of various sizes.View Profile -
Ekatarina Petrusevych Ekaterina Petrusevych has many years’ experience in national and international employee taxation and processing payroll. She is part of the payroll tax subservice line and works in the Düsseldorf office.View Profile -
Stephanie Saur Stephanie Saur has many years of experience in advising on payroll tax. As a Partner, she is responsible for the extension of professional specialisation in the field of employee taxation.View Profile -
Michael Schäfer Michael Schäfer has specialized in all aspects of employee taxation for over 15 years. His main focus is on payroll services for companies across nearly all industries and sizes — both nationally and internationally and across multiple jurisdictions (multi-country payroll).View Profile -
Hannes Zug Hannes Zug specializes in comprehensive structuring and defense advice on employment tax issues and annex areas. As a partner at the Hamburg office, he is primarily responsible for the expansion of consulting services in the North/East regions of the Germany-wide employment tax service line.View Profile