income tax
noun · Einkommensteuer
Einkommensteuer, but only for natural persons, § 1 EStG; a company’s income tax is Körperschaftsteuer, § 1 KStG, and the wage-withholding that an English reader calls PAYE is Lohnsteuer, § 38 EStG, not a separate tax but income tax collected at source.
Which translation, when
Why
English income tax runs across individuals and, in older usage, blurs into the tax a business pays; the German word is narrower and the narrowness is the trap. Einkommensteuer is the tax of natural persons, § 1 EStG, on the seven Einkunftsarten of § 2 Abs. 1 EStG, at the progressive tariff of § 32a EStG, though private capital income is largely taxed at the separate flat rate of § 32d EStG instead. A company does not pay it: a Kapitalgesellschaft pays Körperschaftsteuer, § 1 KStG, and rendering a GmbH’s income tax as Einkommensteuer names the wrong tax and the wrong statute. A partnership pays neither in its own name, because it is transparent and each Mitunternehmer is taxed on his share, § 15 Abs. 1 Nr. 2 EStG, or § 18 EStG for a partnership of the professions. The other half of the trap is Lohnsteuer. It looks like a separate wage tax and is not: § 38 EStG makes it the form in which Einkommensteuer on employment income is collected, withheld by the employer and set against the annual assessment, which is why an English PAYE reference should become Lohnsteuer and not a coined Gehaltssteuer. So the single English term has to be sorted by taxpayer before it is translated: natural person, company or partner.
Typical mistakes
- Einkommensteuer is for natural persons only, § 1 EStG; a company’s income tax is Körperschaftsteuer, § 1 KStG, and using Einkommensteuer for a GmbH or AG names the wrong tax.
- A partnership has no income tax of its own: it is transparent and the partners are taxed on their shares, § 15 Abs. 1 Nr. 2 EStG, so a warranty about the partnership’s income tax is a category error.
- Lohnsteuer is not a separate tax but withheld Einkommensteuer, § 38 EStG; translating a wage-tax or PAYE reference as anything but Lohnsteuer, or treating it as an extra liability on top of income tax, doubles a single tax.
What matters
Tax warranties that speak of the company’s income tax need re-pointing before they are rendered, because a Kapitalgesellschaft owes Körperschaftsteuer, § 1 KStG, not Einkommensteuer. Payroll and secondment papers meet the other fork: the PAYE-style deduction is Lohnsteuer, § 38 EStG, a collection form of income tax and not a second charge to be provided for twice.
What the machine misses
Income tax comes back as Einkommensteuer whatever the taxpayer, and for a company that is the wrong tax, since income tax on a GmbH or AG is Körperschaftsteuer, § 1 KStG. The machine also flattens Lohnsteuer, which is not a separate wage tax but income tax withheld from pay, § 38 EStG, so a translated sentence about a company’s income tax or about a PAYE deduction can point at the wrong statute or invent a second charge where German law has one.
Examples
| liable to income tax | einkommensteuerpflichtig |
| income tax is withheld at source | die Einkommensteuer wird an der Quelle einbehalten |
| the individual’s income tax return | die Einkommensteuererklärung der Person |
| income tax on employment | Lohnsteuer |
More notes on these sections
withholding tax Quellensteuer
corporation tax Körperschaftsteuer
capital gains tax Veräußerungsgewinn