Glossary

Dry Income

“Dry income” describes the situation where employees owe tax on shares or similar benefits before they have any cash to pay the bill. For example, if an employee is granted stock at a discount or for free, Germany’s previous rules required them to pay wage tax immediately, even though they couldn’t yet convert those shares into cash. Under the new Section 19a of the Income Tax Act (EStG), introduced through the Future Financing Act, tax can now be deferred until the employee actually sells the shares, preventing the problem of having to pay taxes without the necessary liquidity.