How to Get German Withholding Taxes Back on Dividends and Royalties: A Comprehensive Guide

Navigating the German withholding tax refund system can be a daunting task for both businesses and individuals, especially when it comes to dividends and royalties. Understanding how to get German withholding taxes back is essential for maximizing your returns on investments and intellectual properties. In this article, we will explore the step-by-step process of obtaining your refund, and discuss the legal requirements and criteria you must meet.

What are German Withholding Taxes on Dividends and Royalties?

In Germany, withholding taxes are deducted at source on various types of income, including dividends from shares and royalties from intellectual property. The current tax rate on dividends is 25%, plus a solidarity surcharge of 5.5%, while the rate on royalties usually is 15%.

Foreign nationals or entities may be entitled to a refund of these taxes or a reduced rate under a double taxation treaty between Germany and their resident country, under a European directive (e.g. Parent-Subsidiary-Dricetive) or special other rules.

Step-by-Step Guide on How to Get German Withholding Taxes Back

  1. Identify Your Eligibility for a Refund: Depending on your residency and the existence of a double taxation treaty, directives or other rules, you may be eligible for a full or partial refund of withholding taxes.
  2. Gather Necessary Documentation: Prepare all required documents, such as proof of identity, residency certificates, dividend or royalty receipts, and tax assessments.
  3. File the Application Form: Submit the application form to the German Federal Central Tax Office (BZSt) or other competent tax authorities.
  4. Wait for the Assessment: The authorities will assess your eligibility and calculate the refund. This may take several weeks or even months.
  5. Receive Your Refund: Once approved, the refund will be transferred to your designated bank account.

Criteria and Legal Requirements

Legal Claim: You must have a legal claim, e.g. under an applicable treaty or directive. Otherwise, the WHT becomes a permanent German tax.

Proof of Residency: You must provide evidence that you are a resident of a country that has a double taxation treaty with Germany.

Submission Deadline: Applications must generally be submitted within four years of the end of the calendar year in which the tax was withheld.

Withholding Tax Certificates: You must provide original or certified copies of withholding tax certificates issued by the payer of the dividends or royalties.

Bank Details: Ensure that you provide accurate international bank details for the refund.

Special Considerations for Businesses – Treaty Shopping

Businesses must adhere to additional specific regulations and document requirements, including providing evidence of corporate status and ownership. German tax law includes a very restrictive anti-treaty shopping rule. Consulting a German tax specialist or legal advisor can help ensure that your application is processed efficiently.

Tips to Streamline the Process

Consult a Tax Professional: If the process seems complicated, consider hiring a tax professional familiar with German tax laws. The advisors of GHS are experienced and can help you.

Keep All Relevant Documents: Ensure that you retain all relevant documents related to dividends or royalties as they will be needed for the application.

Certificate of exemption: It might be worth checking whether you can apply for a certificate of exemption. With such a certificate, WHT must not be withheld in the first place.

Get your German WHT back

Obtaining a refund of German withholding taxes on dividends and royalties can be a complex procedure. However, by understanding the process and legal requirements, you can successfully navigate the system and maximize your refunds. If in doubt, it’s advisable to seek professional assistance from a tax consultant specialized in German tax law to help with your specific situation.

By adhering to these guidelines, the seemingly cumbersome question of „how to get German withholding taxes back“ becomes a manageable and achievable task. Your efforts towards understanding and applying these procedures can significantly impact your financial bottom line. Whether you’re an individual investor or a business entity, knowing how to reclaim what’s rightfully yours is essential in international financial planning.