JANUARY 2024 | KNOWLEDGE HUB
Withholding Tax Rates in Germany
Germany levies dividend withholding tax. The German dividend withholding tax rate is 25%. However, a so called solidarity surcharge applies, bringing the total effective tax rate to 26.375%. The rate applies to both domestic and cross border dividend distributions.
German dividend withholding tax recovery (forms to use, statute of limitations)
Double tax treaties and exemptions
Foreign corporations are eligible for refund of 40% of the withholding tax, irrespective of the application of a tax treaty, bringing the rate down to 15,825%.
German dividend withholding tax may be further reduced, or in some situations even eliminated, under Germany’s double tax treaties. Requests for refund must generally be submitted within four years from the end of the year in which the dividend withholding tax was paid.
Claims based on the free movement of capital
Absent a double tax treaty, or absent full refund provision in the applicable double tax treaty, foreign pension funds may be eligible for a refund of Germany dividend withholding tax under EU law. More specifically the free movement of capital (article 63 of the EU treaty). On 13 November 2019, the European Court of Justice ruled that Germany violates the free movement of capital by not refunding German dividend withholding tax to a Canadian pension fund if, like German pension funds, that Canadian pension fund “allocates dividends received to make provisions for pensions which it will have to pay in the future”. Whether the latter is the case was left to the German court of Munich to decide based on the facts of the case, but the German Federal Tax Court and subsequently the Supreme Court rejected the claim. The Supreme Court upheld the Federal Tax Court’s decision, stating it adhered to the ECJ’s guidelines and that Canadian accounting principles should be decisive in this matter.
Statute of limitations
In Germany, the statute of limitation for withholding tax reclaims is 4 years from the end of the year in which tax was withheld.
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