Withholding method

The withholding tax is a tax collection procedure in which - as the term expresses it - the tax is collected directly at the source when the taxable income is generated.

Examples of taxes levied using the withholding method are wage tax, which is paid directly by the employer to the tax authorities, and the withholding tax on investment income, which has been levied since January 1, 2009 and which the banks pay directly to the tax office. With the withholding procedure, the tax authorities reduce the possibility of evading the tax in question. However, the principle of the ability of the taxpayer to pay is less taken into account in the withholding process, because it only covers the type of income that exists.

A high total income, which is made up of various types of income such as wages and investment income, can no longer be taxed in its entirety according to progressive tariffs.

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