# Payroll tax

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Published: 2026-10-25T22:28:37.745Z

Updated: 2026-10-25T22:28:37.745Z

A payroll tax may be imposed on employers or employees. They are usually calculated as a percentage of the salaries that employers pay their employees. By law, some payroll taxes are the responsibility of the employee and others fall on the employer, but almost all economists agree that the true economic incidence of a payroll tax is unaffected by this distinction, and falls largely or e

## Key facts

## Overview

A payroll tax may be imposed on employers or employees. They are usually calculated as a percentage of the salaries that employers pay their employees. By law, some payroll taxes are the responsibility of the employee and others fall on the employer, but almost all economists agree that the true economic incidence of a payroll tax is unaffected by this distinction, and falls largely or entirely on workers in the form of lower wages. Because payroll taxes fall exclusively on wages and not on returns to financial or physical investments, payroll taxes may contribute to underinvestment in human capital.

## Australia

Payroll taxes in Australia are levied by state governments and not at a federal level. Payroll tax rates and the threshold at which these are levied vary between states.

## Bermuda

In Bermuda, payroll tax accounts for over a 3rd of the annual national budget, making it the primary source of government revenue.  The tax is paid by employers based on the total remuneration (salary and benefits) paid to all employees, at a standard rate of 14% (though, under certain circumstances, can be as low as 4.75%). Employers are allowed to deduct a small percentage of an employee's pay (around 4%).  Another tax, social insurance, is withheld by the employer.

## Brazil

In Brazil, employers are required to withhold 11% of the employee's wages for Social Security and a certain percentage as Income Tax (according to the applicable tax bracket). The employer is required to contribute an additional 20% of the total payroll value to the Social Security system. Depending on the company's main activity, the employer must also contribute to federally funded insurance and educational programs. There is also a required deposit of 8% of the employee's wages (not withheld from him) into a bank account that can be withdrawn only when the employee is fired, or under certain other extraordinary circumstances, such as serious illness (called a "Security Fund for Duration of Employment"). All these contributions amount to a total tax burden of almost 40% of the payroll for the employer and 15% of the employee's wages.

## Canada

The Northwest Territories in Canada applies a payroll tax of 2% to all employees. It is an example of the second type of payroll tax, but unlike in other jurisdictions, it is paid directly by employees rather than employers. Unlike the first type of payroll tax as it is applied in Canada, though, there is no basic personal exemption below which employees are not required to pay the tax. Ontario applies a health premium tax to all payrolls on a sliding scale up to $900 per year.

## China

In China, the payroll tax is a specific tax that is paid to provinces and territories by employers, not by employees. The tax is deducted from the worker's pay. The Chinese Government itself requires only one tax to be withheld from paychecks: the PAYG (or pay-as-you-go) tax, which includes medicare levies and insurances. Tax calculations and contributions differ from city to city in China, and each city's data will be updated yearly. Taxable Income = Gross Salary – Social Benefits – ¥3,500 IIT = Taxable Income x Tax Rate – Quick Deduction Net Salary = Gross Salary – Social Benefits – IIT

## Croatia

In Croatia, the payroll tax is composed of several items:

national income tax on personal income (Croatian: porez na dohodak), which is applied incrementally with rates of 0% (personal exemption = 3800 HRK), 24% (3800-30000 HRK) and 36% (30000 HRK - ) optional local surcharge on personal income (Croatian: prirez), which is applied by some cities and municipalities on the amount of national tax, currently up to 18% (in Zagreb) pension insurance (Croatian: mirovinsko osiguranje), universal 20%, for some people divided into two different funds, one of which is government-managed (15%) and the other is a personal pension fund (5%) health insurance (Croatian: zdravstveno osiguranje), universal 16.5% health insurance exemption exists for the population below 30 years of age as part of government policy to encourage youth employment.

## Czech Republic

The income tax in the Czech Republic is progressive. The primary tax rate is 15% of gross income, but for an annual salary that is 48 times bigger than the average monthly salary (38.911 CZK in 2022, around 1.600 EUR), the rate is 23%. That applies only to the difference. The minimum wage to pay income tax is 27.840CZK in 2021 (approx. 1140EUR). For people with trade certificates, the rate applies only to 40% of their revenue. The remaining 60% can be deducted as a standard expense. Freelancers also have to file an Income tax return every year. Taxpayers can apply a few tax deductions, such as a deduction for a child (starting at approx. 600EUR annually in 2021), for being a student (approx. 160EUR in 2021), for a dependent spouse (approx. 1000EUR in 2021) and more. Health and social insurance are mandatory and a part of a payroll tax. The health insurance rate is 13,5%. For employees with a salary higher than the minimum wage (16.200CZK in the year 2022, approximately 660EUR), 9% pay the employers, and only 4,5% pay the employees. Trade license workers pay it themselves. Categories that do not have to pay health and social insurance are, for example, students or people registered at the unemployment department. The social insurance rate is 31,5% for employees (6,5% paid by the employee and 25% by the employer) and 29,2% for freelancers. The income tax makes up to half of the national income. The health and social insurance make another 30-40%.

## Finland

In Finland, payroll taxes and mandatory social security contributions are divided into those deducted from the employee's gross salary (withholding) and those paid by the employer. As of 2025, employees are subject to the following withholdings:

Pension insurance fee (työeläkevakuutusmaksu): 7.15% for employees aged 17–52 and 63–67; 8.65% for those aged 53–62. Unemployment insurance fee (työttömyysvakuutusmaksu): 0.59% for employees aged 18–64. Health insurance daily allowance contribution (päivärahamaksu): 1.01% on gross income if annual income exceeds €16,862; otherwise 0%. Employers pay separate social security contributions based on the total wages paid:

Pension insurance contribution (TyEL): Averages approximately 17.38%. Health insurance contribution (sava-maksu): 1.87%. Unemployment insurance contribution: 0.20% on the first €2,455,500 of payroll; 0.80% on the amount exceeding the limit. Other insurance: Accident and occupational disease insurance (avg. 0.54%) and Group life insurance (avg. 0.06%). In addition to these specific payroll fees, employers are obligated to withhold income taxes from the employee's salary (Pay-As-You-Earn). This includes the progressive state income tax, a flat municipal tax (approx. 4.4%–10.9%), and, where applicable, church tax and public broadcasting tax.

## France

In France, statutory payroll tax only covers employee and employer contributions to the social security system. Income tax deductions from the payroll are voluntary and may be requested by the employee, otherwise, employees are billed 2 mandatory income tax prepayments during the year directly by the tax authority (set at 1/3 of the prior year's final tax bill). Employee payroll tax is made up of assigned taxes for the three branches of the social security system and includes both basic and supplementary coverage. Different percentages apply depending on thresholds that are multiples of the social security earnings ceiling (in 2012 = 36,372 euro per year). Contributions for salaries between the minimum wage and 1.6 times the minimum wage are eligible to relief (known as Fillon relief) of up to 28 percentage points of employer contributions, effectively halving employer non-wage costs.

## Germany

German employers are obliged to withhold wage tax on a monthly basis. The wage tax withheld will be qualified as prepayment of the income tax of the employee in case the taxpayer files an annual income tax return. The actual tax rate depends on the personal income of the employee and the tax class the employee (and his/her partner) has chosen. The choice of tax class is only important for withholding tax, and therefore for immediately disposable income. The choice of tax class has no effect on tax refunds. In addition to income tax withheld, employees and employers in Germany must pay contributions to finance social security benefits. The social security system consists of four insurances, for which the contribution will be (nearly) equally shared between employer and employee (old age insurance, unemployment insurance, health insurance and nursing care insurance). Contributions are payable only on wages up to the social security threshold:

In addition, there are some insurances which are covered by the employee only (accident insurance, insolvency insurance, contribution to the maternity allocation, contribution for sick pay allocation for small companies). The following table shows employee and employer contributions by category for the year 2015.

## Greece

An employer is obligated to deduct tax at source from an employee and to make additional contributions to social security as in many other EU member states. The employer's contribution amounts to 28.06% of the salary. The employee's contribution is 16%.

## Sources

- Payroll tax · Wikipedia: https://en.wikipedia.org/?curid=438978

Source: Wikipedia contributors — https://en.wikipedia.org/?curid=438978&oldid=1380699669

Licence: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/

Adaptation notice: Reformatted for XPay; the source may be abridged, restructured or translated. Consult the cited revision for the original.