Double Tax Treaties in Germany

German double taxation agreements

In order to avoid double taxation on the same profits and to attract foreign investors to the country, Germany has entered into numerous double taxation treaties. Under Germany’s double taxation agreements, the avoidance can be made by:

• - providing tax exemptions,
• - by provided a credit against the tax levied in the country the profit was generated.

The second method means a German company will be given a refund of the tax paid in the country where the company has conducted business activities. However, if no credit or exemption is granted, Germany’s double taxation treaties may contain reduced tax rates for certain incomes. From this point of view, German double taxation agreements are very advantageous and businessmen setting up a company in Germany should benefit from their provisions.

What are the tax rates applicable under German double tax treaties?

The tax rates applied under Germany’s double taxation treaties are established individually with each country. On Germany’s list of double taxation agreements the following incomes are taxed:

• - dividends,
• - interests,
• - royalties,
• - corporate income,
• - personal income.

The German taxation system also includes a trade tax for companies which in certain cases will be subject to the country’s double taxation agreements. With respect to the withholding taxes, dividends, interests and royalties will usually be subject to reduced tax rates which vary from 5% to 15%. Germany’s double taxation treaties with certain countries provide for tax exemptions for the payment of dividends and interests.

For a complete list of all double taxation agreements you can get in touch with our consultants in company formation in Germany.

What are the countries Germany has signed double tax treaties with?

Germany’s list of double taxation treaties is quite extended. Among the countries Germany singed agreements for the avoidance of double taxation are: Cyprus, Croatia, the Czech Republic, Bulgaria, Estonia, Finland, the Netherlands, Hungary, Malta, Norway and Switzerland in Europe, Canada and the United States, China, Japan, Malaysia, Thailand and Singapore in Asia, Russia, Australia, New Zealand. Additionally, Germany also has a long list of double taxation treaties pending.

For complete information about taxation under the double taxation treaties, please contact our German representatives in company registration. They can help foreign investors interested in setting up a company in Germany.