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Finally: clarity about Insolvency Fund contributions
Until recently, an agreement was in place with the German social security system, under which the Insolvenzumlage, a fund to which employers contribute and which is used to compensate companies in the event of bankruptcy, did not apply if an employer did not have their registered office in Germany. The German social security system, however, recently reversed this decision, and they are of the opinion that contribution to the fund applies to all employers with personnel in Germany.
Interfisc, together with its partner, Strick Rechtsanwälte und Steuerberater, have however ensured that this contribution will not be payable until 2018.
For 2018, the contribution will be 0.06% on a maximum of € 6,500 per employee or a maximum of € 46.80 per employee per year.
Background
In 2014, following years of legal proceedings, Germany’s federal Social Security Pension Insurance Scheme (Rentenversicherung) adopted Interfisc’s standpoint that companies without an actual registered office in Germany should be exempt from payment of so-called Insolvency Fund contributions (Insolvenzgeldumlage).
Personnel of German nationality, or those who worked subject to certain terms and conditions in Germany, however continued to be entitled to compensation in the event of bankruptcy (Insolvenzgeld). In short, a substantial saving on wage costs and administrative expenses. What is more, contributions already paid into the scheme were subsequently refunded to all Interfisc customers affected.
What is the Insolvency Fund?
The background to this levy is that, in 2009, as a result of an increasing number of bankruptcies, the German Federal Labour Office (Bundesagentur für Arbeit) was left with a one-billion-euro shortfall due to payment of so-called compensation in the event of bankruptcy using monies from the Insolvency Fund (Insolvenzgeldumlage).
Salaries continue to be paid for three months subsequent to bankruptcy by means of such compensation. In order to fill this enormous hole, it was decided to levy Insolvency Fund contributions from companies.
Related topics
- Publication date: 12/22/2017
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