Effective January 1, 2027, the Digital Payroll Interface (DLS) will be expanded in accordance with Section 4(2a) of the State Income Tax Regulation (LStDV) as part of the 7th amendment to tax regulations. In addition to wage and salary data, data relevant for payroll tax purposes from upstream and downstream systems will also have to be transmitted via the standardized interface of the Federal Central Tax Office (BZSt). These changes increase audit transparency and impose new requirements on system integration and data consolidation.
Key Changes Effective January 1, 2027
- Inclusion of Upstream and Auxiliary Systems: Not only must the data required to be recorded under Section 41 of the Income Tax Act (EStG) and Section 4 of the LStDV be provided via the digital interface, but also the data determined and used for this purpose from upstream and auxiliary systems. Relevant upstream and ancillary systems may include, for example, electronic time-tracking systems, travel expense reporting systems, electronic logbooks, and benefits systems.
- Consolidated data set per business location: All relevant wage tax information must be consolidated into a single, uniform data set for each business location.
Legal Basis
- Wage Tax Implementation Ordinance (LStDV), Section 4(2a)
Specific legal basis for the expanded obligation to transmit wage tax-related data via the standardized DLS interface; regulates the scope and integration of upstream systems. - Income Tax Act (EStG)
Relevant provisions regarding wage tax liability and wage tax withholding; decisive for the classification of individual data items (e.g., tax-exempt allowances, taxable income). - Tax Code (AO)
Fundamental obligations regarding cooperation, documentation, and record retention; legal basis for penalties and tax assessments in cases of lack of traceability. - Federal Central Tax Office (BZSt) – Technical Specifications
XML schemas, implementation guides, and version notes (e.g., DLS 2026.1/2027); compliance with these specifications is required for legally compliant data transmission.
Relevance for your Organization
- Audit risk increases: Inconsistent or missing integrations hinder traceability during external payroll tax audits and can lead to additional tax assessments or fines.
- Operational requirements: Data harmonization, standardized master data, and end-to-end data flows are becoming mandatory.
- Proof of compliance: Documented test runs, export logs, and evidence of data consolidation are recommended to demonstrate compliance to tax authorities.
Specific Recommendations for Action
- System and Gap Analysis: Verify whether payroll, HR, time tracking, travel expense, and logbook systems support the DLS export specifications (e.g., DLS 2026.1/2027).
- Technical Integration: Ensure that front-end and back-end systems are integrated (data formats, interfaces, consolidated exports per business location).
- Processes and Responsibilities: Formally define responsibilities among HR, Finance, and IT.
- Tests and Documentation: Conduct end-to-end tests; document export logs, reconciliation reports, and retention records.
- Vendor Coordination: Coordinate early on with software vendors and service providers regarding update schedules and the scope of implementation.
We would be happy to assist you with gap analysis, technical integration, test design, and compliance documentation, as well as with general payroll tax consulting. Please contact us.
