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Taxation of Dividends in Germany

Updated on Friday 21st April 2017

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Taxation-of-Dividends-in-Germany.jpgTaxable income in Germany

 
The taxation of dividends in Germany is part of the country’s overall taxation regime. The taxable income of a company is determined according to its profit, minus the deductions available in the country.
 
Foreign business owners in Germany need to observe the taxation rules in the country. Dividends are included in a special list of taxable income.
 
In cases where Germany has signed a double tax treaty with another jurisdiction, dividends, interest and royalties can be taxed at a preferential, reduced rate.
 

The withholding tax on dividends

 
The withholding tax rate on dividends in Germany is 25%. To this rate a solidarity surcharge is applicable bringing the total amount to 26.375%. Non-resident companies in Germany can benefit from a refund for this tax if they qualify for this exemption. 
 
The effective reduced withholding tax rate for non-resident companies that are not subject to any treaty is 15.825% but it can be lower if Germany has concluded a double tax treaty with the jurisdiction in which the company that receives the dividend payment is located.
 
Because Germany is a member of the European Union it observes the provisions of the Parent-Subsidiary Directive. According to this rule, the withholding tax can be reduced to 0% if the dividend payment is distributed to an EU shareholder that owns at least 10% of the capital of the company that makes the payment, at the date the payment is made. Moreover, the shareholding company must have held the shareholding in the other company for at least 12 months.
 

Taxation in Germany

 
Germany imposes a taxation system based on the company’s residence. A legal entity is considered a resident if it has a registered office or place of management in the country. The standard corporate income tax in Germany is 15% to which a solidarity surcharge applies.
 
Certain business expenses can be deductible for tax purposes. One of our specialists in Germany can help you with tax minimization and tax compliance in the country.
 
Contact our company registration consultants in Germany for more information about the taxes on dividends, overall taxation in the country, signed double tax treaties and other rules regarding company formation and management.
 
 

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