Lohnsteuer, ELStAM and German tax classes: the employer's job

Lohnsteuer: the employer collects, the Finanzamt receives

Lohnsteuer is not a separate tax — it is income tax on employment income, collected at the source. The ELSTER employer handbook states the duty in one sentence: „Gemäß § 38 Absatz 1 Satz 1 EStG ist jeder inländische Arbeitgeber verpflichtet, bei einer Lohnzahlung Lohnsteuer einzubehalten und an das Finanzamt abzuführen" — "under § 38(1) sentence 1 EStG, every domestic employer is obliged to withhold wage tax at a wage payment and remit it to the tax office" (our translation). The amount is determined „anhand der jeweiligen individuellen Lohnsteuerabzugsmerkmale eines jeden Arbeitnehmers" — from each employee's individual wage-tax deduction attributes.

Three consequences follow for anyone running German payroll:

• It's the employer's compliance problem, not the employee's. The employee bears the tax economically, but retrieval of the attributes, the calculation, the withholding and the remittance to the Betriebsstättenfinanzamt are statutory employer duties. A wrong deduction lands on the employer first.
• The inputs are served, not asked for. Since the ELStAM procedure replaced the paper Lohnsteuerkarte, the employer does not take the employee's word for their tax class or children — it retrieves the authoritative attribute set electronically from the Bundeszentralamt für Steuern (BZSt).
• The calculation is prescribed, not designed. The machine computation of the Lohnsteuer — and of the Solidaritätszuschlag and the church-tax base — is fixed by the BMF's Programmablaufplan (PAP), announced in agreement with the Länder under § 39b Abs. 6 and § 51 Abs. 4 Nr. 1a EStG. Payroll software implements the flowchart; it does not interpret the tariff.

Withholding is not the end of the story for the employee: the definitive income tax is settled, where an assessment happens, after year-end in the employee's own Veranlagung. The classes and attributes below steer when and how much is withheld monthly — not the final annual liability.

ELStAM: what you pull, and what you need at hire

ELStAM — elektronische Lohnsteuerabzugsmerkmale — is the BZSt-hosted database of every employee's wage-tax deduction attributes, held ready for the employer's free automated retrieval. Per § 39 Abs. 4 EStG (as restated in the ELSTER employer handbook), the attribute set comprises:

• Steuerklasse and factor (§ 38b, § 39f EStG) — the headline withholding parameter;
• Number of child allowances (Kinderfreibeträge) for classes I–IV;
• Freibetrag and Hinzurechnungsbetrag (§ 39a EStG) — a personal allowance, or add-back, applied to the monthly calculation;
• Private health and care insurance premium amounts, on the employee's application; and
• A DBA notice — that the wage is exempt from Lohnsteuer under a double-tax agreement;
• plus the church-tax attribute (Kirchensteuerabzugsmerkmal), because the employer must also withhold church tax for members of a levying religious community (§ 51a Abs. 2a EStG).

At hire, the trigger is two data points. Under § 39e Abs. 4 EStG the employee must tell each employer, at entry into the employment, their Identifikationsnummer (the 11-digit Steuer-ID) and date of birth — and whether this is the main or a secondary employment. The employer then retrieves the ELStAM from the BZSt by remote data transfer and takes them into the employee's Lohnkonto. The BZSt puts the duty plainly: „Der Arbeitgeber ist verpflichtet, den Arbeitnehmer bei Aufnahme des Dienstverhältnisses bei der Finanzverwaltung anzumelden und zugleich die ELStAM anzufordern" — "the employer is obliged to register the employee with the tax administration on commencement of the employment and at the same time request the ELStAM" (our translation).

Mechanics worth knowing:

• The employer-side key is in transition. The retrieval authenticates the employer by its Wirtschafts-Identifikationsnummer (W-IdNr); § 39e Abs. 9 EStG substitutes the Steuernummer of the Betriebsstätte for as long as the W-IdNr is not (fully) introduced. A third party running the withholding (a payroll provider) must authenticate itself and additionally supply its own W-IdNr.
• Retrieval is not one-off. The employer must query and retrieve BZSt change notifications monthly (§ 39e Abs. 5 EStG) — ELStAM change automatically, fed by registry-office events such as a marriage — must report the end of the employment to the BZSt without delay, and must show the ELStAM in the ordinary payslip. Retrieved ELStAM count as officially notified to the employer.
• No Steuer-ID yet? The first-time IdNr application runs through the employee's Wohnsitzfinanzamt (or the Betriebsstättenfinanzamt in the § 39 Abs. 2 cases, e.g. no German residence), and the employer can apply on the employee's behalf if authorised (§ 39 Abs. 3 EStG).

The six tax classes, read as payroll inputs

Wage-tax withholding uses six classes, I to VI (§ 38b EStG); the PAP's input parameter STKL enumerates exactly these. ELStAM forms the class automatically for each employee — the employer applies what arrives. Per the ELSTER employer handbook:

• Class I — single employees, and married/partnered/widowed/divorced employees who don't qualify for III or IV. Employees with only limited German tax liability are also class I.
• Class II — class-I employees entitled to the single-parent relief amount (Entlastungsbetrag für Alleinerziehende, § 24b EStG).
• Class III — married employees and registered partners (both with unlimited tax liability, not permanently separated) whose spouse or partner is placed in class V on the joint application of both; also the recently widowed for a transitional period.
• Class IV — the default for both spouses/partners where no other combination has been jointly applied for. A factor variant (§ 39f EStG) exists: IV/IV with a factor that fine-tunes each side's withholding.
• Class V — the counterpart of III: the spouse/partner who, on the couple's joint application, takes the other side of the split. The handbook's verbatim definition: „In die Steuerklasse V gehören Arbeitnehmer, die verheiratet/verpartnert sind, wenn beide Personen unbeschränkt einkommensteuerpflichtig sind, sie nicht dauernd getrennt leben und auf Antrag beider Personen der Ehegatte/Partner des Arbeitnehmers in die Steuerklasse III eingereiht wird" — class V is for married/partnered employees where both are subject to unlimited income tax, are not permanently separated, and on the application of both the employee's spouse/partner is placed in class III (our translation).
• Class VI — wage from a second or further concurrent employment: „Die Steuerklasse VI gilt bei Arbeitnehmern, die nebeneinander von mehreren Arbeitgebern Arbeitslohn beziehen, für die Einbehaltung des Arbeitslohns vom Arbeitslohn aus dem zweiten oder weiteren Arbeitsverhältnis" (our translation: for employees drawing wages from several employers concurrently, class VI applies to the withholding on the second and any further employment) — and, as above, the § 39c fallback when ELStAM can't be retrieved.

What the class actually changes is which tariff treatment and allowance set the PAP applies to the month's wage — couple-related values are doubled through the PAP's splitting-table parameter (visible in the flowchart, e.g. the SolZ Freigrenze scaled by KZTAB). The combination a couple picks (III/V vs IV/IV, with or without factor) redistributes monthly withholding between two salaries; the definitive annual tax is settled at assessment. For payroll the operational rules are simpler: read the class from ELStAM, expect it to change mid-year (marriages, separations, registry events flow in automatically), and never hand-set it from a form the employee filled in.

The PAP: the calculation isn't yours to design

The BMF announces, in agreement with the Länder top finance authorities, a Programmablaufplan for the machine calculation of wage tax — covering the Lohnsteuer itself, the Solidaritätszuschlag, and the assessment base for church tax on wages (§ 39b Abs. 6, § 51 Abs. 4 Nr. 1a EStG). The PAP for 2026 was announced on 12 November 2025 and applies to wage-payment periods ending after 31 December 2025 and before 1 January 2027 — it is the calendar-2026 calculation spec, and payroll engines implement it constant for constant. For 2026 it encodes, among other things:

• Grundfreibetrag €12,348 (2026) — the flowchart constant GFB = 12348;
• Kinderfreibetrag €4,878 / €9,756 (2026, single/doubled);
• SolZ Freigrenze €20,350 (2026) — SOLZFREI = 20350;
• the 2026 social-insurance parameters the net-tax calculation assumes (ceilings, rates, the assumed average KV supplementary rate of 2.9% for 2026).

The cadence is annual — draft around September, final in November for the following calendar year. But the final is not always final:

The annexes: Solidaritätszuschlag and church tax

Two further amounts ride on the Lohnsteuer and are withheld with it — both computed off the wage tax, not off the gross wage.

• Solidaritätszuschlag (SolZ): 5.5% of a modified annual wage-tax figure — but only where that figure exceeds the Freigrenze, €20,350 for 2026 (doubled where the splitting table applies). Below it the SolZ is zero; just above it a taper (Milderungszone) caps the SolZ at 11.9% of the excess over the Freigrenze. Since the 2021 reform most wage levels attract no SolZ at all — but the logic lives inside the PAP, so a compliant engine gets it for free.
• Kirchensteuer: withheld only for employees whose ELStAM carries a church-tax attribute — the ELStAM database itself performs the check of whether the employee's religious community is entitled to levy, and the duty applies only if that community levies church tax in the Bundesland where the employer is established. The rate is Land law: the attribute dataset carries a single digit, „derzeit ‚8' oder ‚9'" — currently "8" or "9" (our translation), i.e. 8% or 9% of the (§ 51a-reduced) wage tax depending on the Land. Which Länder apply which rate is set by each Land's Kirchensteuergesetz — confirm the rate for the Land in question rather than assuming; the PAP computes only the assessment base, and the employer applies the Land rate to it.

Apply, don't advise: the Steuerberater line

A recurring operational trap for foreign employers and platforms: employees ask payroll which tax-class combination to pick, whether III/V beats IV/IV-with-factor, or how to get a Freibetrag entered. None of that is the employer's call. The class combination is applied for jointly by the couple and formed in ELStAM; allowances are granted by the Finanzamt on the employee's application; the employer's job is to retrieve what results and apply it faithfully. Beyond explaining what the payslip shows, individual tax advice in Germany is reserved by the Steuerberatungsgesetz to the advising professions — Steuerberater, Rechtsanwälte and the other professions it names. The safe pattern: apply the ELStAM as delivered, show them on the payslip, and route "which class should I choose?" questions to the employee's Finanzamt or their Steuerberater.

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