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Germany: guidance published on tax refund and exemption procedure for withholding tax on dividends and other profit distributions received by nonresidents

On 28 March 2017, the tax administration published guidance on the tax refund and exemption procedure for the 26.38% withholding tax on dividends and other profit distributions received by nonresidents. Details are summarized below.

Refund procedure or Erstattungsverfahren

A refund of the excess dividend withholding tax can be claimed by companies and individuals by means of a form within four years after the end of the year in which the payments are received. From 1 January 2017, dividends are deemed to be received on the maturity date.

The period for claiming the refund does not end until six months after the withholding tax was paid.

Exemption procedure

The payer of dividends and royalties may immediately apply a treaty rate if the recipient has presented him with a certificate of (partial) exemption issued by the Federal Tax Office or Bundeszentralamt für Steuern. In order to obtain the certificate of exemption, the recipient generally has to submit a certificate of residence issued by the authorities of the treaty country. The maximum duration of certificates of exemption is three years.

The certificate applies at the earliest from the date on which the request was filed.

In the case of dividends, the certificate of exemption is issued if the shareholding company:

  • Is a resident of the treaty country for treaty purposes
  • Is subject to income tax in the treaty country and is not tax exempt
  • Holds directly a participation of at least 10% of the nominal capital in the German company

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