Financial investors and IP holders face similar challenges when receiving payments from Germany: German withholding tax (WHT) on dividends (25%) and royalties (15%). EU Directives or double tax treaties can provide for reductions. However, procedures on how to reduce German WHT are quite complex.

German tax law does not automatically allow the payor to refrain from withholding taxes. The recipient of a payment must apply for an exemption certificate upfront (“exemption procedure”) or may claim a refund afterwards (“refund procedure”). The purpose of this is to enable the German tax authorities to verify the requirements for a reduction.

In addition, the German anti-treaty/directive-shopping provision applies and its complexity goes beyond many other anti-avoidance-rules. According to the provision, WHT relief is only granted if certain very specific substance and activity requirements are met. Following recent EU case law, the German legislator amended the provision in 2021. This, however, made the requirements for a relief even more complicated.

Dealing with the provision in combination with exemption/refund procedures is therefore challenging and time consuming for both advisors and the tax authorities. Investors and their advisors should be aware of the challenges the procedures provide, given that they may significantly affect the strategy on how investments or licensing are structured.

Take part in our webinar to get an understanding of the German exemption/refund procedure.
This will help you form a first analysis on the chances of getting a WHT reduction in Germany and the potential time needed to do so. The focus group for this webinar are strategic and financial investors operating business in Germany as well as IP holders licensing IP to German tax residents and their tax advisors.

You can register for the webinar via this link. The webinar will be held in English.

Veranstalter: Flick Gocke Schaumburg