Withholding Tax
Optimising cross-border transactions
Proactive planning
is the key factor
Cross-border transactions often involve complex tax obligations. We support you in planning your transactions and handling the respective compliance, ensuring the lowest possible tax burden. With our extensive experience , we provide expertise for clients worldwide.
Our Core Services
Advisory and Analysis
Review of your transactions and business models
Process Consulting for your business model to minimize risks.
Compliance and Processing
- Application for exemption certificates in accordance with the respective Double Tax Treaty (DTT)
- Withholding Tax Returns pursuant to Section 50a of the German Income Tax Act (EStG).
- Issuance of tax certificates.
Refund Procedures
- Execution of relief procedures in accordance with the respective Double tax Treaty (DTT)
- Communication with the domestic tax authorities.
Frequently Asked Questions
What is withholding tax, explained simply?
Withholding tax is levied by countries on certain transactions at the level of the paying party. The idea is that the paying party is better known to the local tax authorities and easier to tax due to local presence. The payer deducts the tax from the payment amount and remits it to the tax authorities.
Internationally, common examples include dividends, interest, royalties and payments for artistic services.
In Germany, withholding tax pursuant to Section 50a of the Income Tax Act (EStG) applies to persons subject to limited tax liability such as licensors, artists, athletes and members of supervisory boards who neither have their place of business nor their residence in Germany. For artists, athletes and license payments, the withholding tax rate is 15% (plus a 5.5% solidarity surcharge), while remuneration paid to members of supervisory boards is subject to a withholding tax of 30% (plus a 5.5% solidarity surcharge).
Who is liable to pay withholding tax?
Withholding tax is generally owed by the foreign recipient of the payment (the creditor) who has limited tax liability. However, it is withheld by the German payer (the debtor) at the time of payment and is reported and remitted to the Federal Central Tax Office (BZSt).
Can you be exempted from German withholding tax?
Yes, the foreign creditor has the option to apply for an exemption from German withholding tax. The prerequisite is that a Double Taxation Agreement (DTA) exists between Germany and the country of the creditor. This agreement also determines whether a full or only a partial exemption from German withholding tax can be requested.
Can withholding tax be refunded?
Yes, in many cases, overpaid withholding tax can be reclaimed. If a Double Taxation Agreement exists between Germany and the country concerned, there is often a claim for a partial or full refund of the tax withheld. As with the exemption, a refund of withholding tax can only be applied for by the creditor.