Taxable 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.