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Who is considered a relative (Angehöriger)?
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Spouse
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Children
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Parents
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Siblings
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Second-degree relatives (grandparents, grandchildren, parents-in-law …)
1. Income Tax (Lohnsteuer)
| Case | Tax deducted? | Notes |
|---|---|---|
| Official employment contract | Yes | Must register with the tax office (Finanzamt) |
| Without contract | Not recognized | Cannot deduct wages as business expense |
| Mini-job | Tax exemption possible | Must register with Minijob-Zentrale |
Tip: Contract must clearly state salary, tasks, working hours. Otherwise, Finanzamt rejects deduction.
2. Social Security Contributions If the relative is genuinely employed with real wages:
| Insurance | Mandatory? | Notes |
|---|---|---|
| Health insurance | Yes | Registration required |
| Pension insurance | Yes | Even for children |
| Unemployment insurance | Usually | Except mini-jobs |
| Nursing care insurance | Yes | Mandatory for all employees |
Special cases:
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Spouse: Can be employed with contract, treated as normal employee. Finanzamt checks strictly (real work, reasonable salary). If co-owner → considered partner, not employee → no social contributions.
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Adult children: treated as normal employees, salary must be appropriate.
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Minor children:
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Over 13: only light work after school, per child labor law.
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Under 13: completely prohibited.
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3. Deducting wages as business expense
| Condition | Explanation |
|---|---|
| Written contract | Includes salary, tasks, hours |
| Payment via bank account | Transfer from company to employee account |
| Work actually performed | Proof via timesheets or witnesses |
| Cash payment | Not accepted (except very small amounts with documentation) |
Example: Ali runs a small shop, employs his wife 20 hours/week for €800. Salary transferred to her account + official contract → deductible as expense + social contributions paid normally.
Administrative steps:
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Register employee with Finanzamt (Lohnsteuer)
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Register with social insurance (AOK/TK)
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Create legal contract
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Keep proof of monthly bank transfers
Common mistakes:
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No contract → deduction rejected + back taxes
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Unreasonable salary → Finanzamt considers hidden profit distribution
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Cash payment without proof → possible tax evasion
