Germany Tax Treaties with other countries

Germany has signed Double Taxation Agreements (DTA) with over 90 countries.
International tax law in Germany consists of domestic German tax legislation such as Income Tax Act and the Fiscal Code, as well as double taxation agreements that Germany has concluded with other countries.
DTA with Germany aims to prevent double taxation. DTA distributes taxation rights among countries.
They allocate the taxation right to only one of the countries involved, to prevent double taxation.

Germany Tax Treaties with Taiwan
Germany Tax Treaties with China

Email: fra4ww@evershinecpa.com
The Engaging Manager from Headquarter
Ms. Anna Wang, Speak German English, and Chinese.
skype: burlinna

We set up below judgment criteria on Treaty application:

Scenario:
If you are not a German legal resident, and if your resident country has DTA with Germany, and if you are without PE (Permanent Establishment), please go to Section A.
If you are not a German legal resident, and if your resident country has DTA with Germany, and if you are with PE (Permanent Establishment) please go to Section B.
If you are not a German legal resident, and if your resident country has no DTA with Germany, please go to Section C.

Section A:
Scenario: If you are not a German legal resident, and if your resident country has DTA with Germany, and if you are without PE (Permanent Establishment), it will be redeemed as “non-Germany Domestic Sourced Income”.
That means Germany will levy zero-tax.
However, you still need to send the zero-tax application to the German Tax Bureau for being approved.
Below, we will let you understand through Q&A.

DTA-Q-10:
德國的哪些外國法律居民公司可以依DTA申請沒有常設機構(PE)下零稅率?
In Germany, which foreign legal resident company can apply for zero tax rate without PE under DTA?

DTA-A-10:
Germany has signed DTAs with over 96 countries:

DTA-Q-20:
為什麼在DTA下該國外資沒有常設機構 (PE)之外資所得，可以享受零稅率?
Why does the Country’s foreign capital without a permanent establishment (PE) in Germany, under the DTA enjoy zero tax rate?

DTA-A-20:
It follows Article 5 and Articles 7 in the DTA Treaty. The article defines if the foreign entity has PE in Germany. Article 7 regulates if no PE, non-Germany domestic sourced income will not be levied tax in Germany.

DTA-A-Q30:
哪些情況被視為沒有PE，外資在該國設立子公司會被視為外資的在該國的子公司嗎? Under what circumstances are deemed to have no PE, and will the establishment of a foreign-funded subsidiary in Germany be regarded as a foreign-funded subsidiary in Germany?

DTA-A-30:
According to DTA Article 5 item 7, A Wholly Foreign Owned subsidiary in Germany will not be treated as PE because it is a separate legal entity.
That means if a Germany Subsidiary pays a service fee to a non-Germany Parent Company through a service contract signed between the subsidiary and non -Germany Parent company as an investor, non-Germany Parent Company can apply zero tax.
As for if the paid amount is reasonable, it will get involved TP (Transfer Pricing) judgment by Germany Tax Bureau.
Please see the Germany Transfer Pricing webpage

DTA-Q-40:
外資在德國設立分公司或辦事處，可否適用沒有PE下的零稅率?
If a foreign company establishes a branch or office in Germany, can the zero-tax rate without PE be applied?

DTA-A-40:
According to DTA Article 5 item 2, If a foreign company sets up a branch or Office in Germany, then will be considered as Germany’s domestic Income.
But According to DTA Article 5 item 4, if an Office is only doing a preparatory or auxiliary activity, will apply a zero-tax rate.

DTA-Q-50:
德國依DTA沒有PE下零稅率申請的程序為何?
What is the procedure for Germany to apply for zero tax rate under DTA without PE?

DTA-A-50:
A relief from withholding taxes according to S 50a EStG takes place either by issuing a certificate of exemption before payment or reimbursement on the tax deducted and withheld.
Refer to the below website for procedures to apply for withholding tax reduction or exemption:

https://www.bzst.de/DE/Unternehmen/Abzugsteuern/Abzugsteuerentlastung/abzugsteuerentlastung_node.html#js-toc-entry5

The following documents must be submitted with the application:

1. Written application signed using a prescribed form.
2. Power of attorney (in case of authorization).
3. Certificate of residence.
4. Copy of contract.
5. Commercial register extract.
6. Organizational chart
7. Balance sheet and profit and loss account for the relevant financial year.
8. A No PE declaration letter.

However, due to the sometimes, long process times from the receipt of the application to the issuance of a certificate of exemption, it is recommended to submit applications for reimbursement in parallel to open exemption procedures as soon as payment has been made that had to be subject to tax deduction because the certificate of exemption has not yet been issued.
The processing time can be up to 3 months after all necessary documents have been submitted.
The period of validity of the certificate of exemption is at least 1 year and may not exceed 3 years.

Section B:

Scenario:
If you are not a German legal resident, and if your resident country has DTA with Germany, and if you are with PE (Permanent Establishment), your income will be considered as Germany domestic sourced income.
As for levying Tax Rate, please be aware:
if Germany Tax rate > DTA Rate, adopt DTA Rate; if Germany Tax rate < DTA Rate, adopt Germany Rate.
Below, we will let you understand through Q&A

DTA-Q-60:
被視為德國來源所得的判定要素?
What are the factors that are deemed to be the country’s domestic source income?

DTA-A-60:
Below are included as German-source income:

*Income from agriculture and forestry was carried out in Germany.
*Income from business operations, for whom a permanent establishment is maintained in Germany.
*Income from self-employed work that is or has been exercised in Germany.
*Income from the sale of assets that belong to the fixed assets of a company if the assets are in Germany.
*Income from capital assets if the debtor has a residence, management, or headquarters in Germany or if the capital assets are secured by German property.
*Income from renting and leasing the immovable property in Germany.
*Other income if the person is obliged to pay the recurring payments where the place of residence, management, or headquarters in Germany.
*Other income if income from services, including income from services where a place of residence, management, or headquarters in Germany.

DTA-Q-70:
DTA第五條及第七條優先於德國來源所得的判定要素?
Does Article 5 and Article 7 in the DTA take precedence over the Germany determination factors on Germany’s domestic sourced income?

DTA-A-70:
When DTA is applied, in the event of a different PE definition between Germany’s domestic tax laws and Article 5 in the DTA, the definition under the DTA shall prevail over the domestic regulations.

When DTA is applied, if a foreign company is defined as without PE (Permanent Establishment) in Germany, they will be considered non-Germany domestic sourced income, in the event business profit is relevant to this issue, the clause in Article 7 in the DTA zero-rate tax can be applied accordingly.

In this scenario, please see section A.

DTA-Q-80:
當非德國稅務居民有德國來源所得，不考慮DTA 情況下，德國稅法扣繳稅率多少?
When non-tax residents of Germany have German domestic sourced income, what is the withholding tax rate according to Germany tax regulations excluding DTA?

DTA-A-80:
The withholding tax rates under domestic law are:
Business Profits – 15%
Dividend – 25%/ 0% (EU Parent-Subsidiary Directive)
Interest (General loan) – 0%
Royalties fee – 15%/ 0% (EU Interest and Royalties Directive)
Technical services – 0%
Professional services – 0%
*There is also a solidarity surcharge of 5.5% on the tax due.

DTA-Q-90:
If DTA Tax Rate is higher than the German tax rate, apply which tax rate?

DTA-A-90
As for levying Tax Rate, please be aware:
if Germany Tax rate > DTA Rate, adopt DTA Rate; if Germany Tax rate < DTA Rate, adopt Germany Rate.

DTA-Q-A0:
當非德國稅務居民有德國來源所得，依DTA優惠稅率申請的程序為何?
When non-tax residents of Germany have Germany’s domestic sourced income, what is Germany’s application procedure based on the DTA preferential tax rate?

DTA-A-A0:

A relief from withholding taxes according to S 50a EStG takes place either by issuing a certificate of exemption before payment or reimburse on the tax deducted and withheld.
Refer to the below website for procedures to apply for withholding tax reduction or exemption:

https://www.bzst.de/DE/Unternehmen/Abzugsteuern/Abzugsteuerentlastung/abzugsteuerentlastung_node.html#js-toc-entry5

The following documents must be submitted with the application:

1. Written application signed using a prescribed form.
2. Power of attorney (in case of authorization).
3. Certificate of residence.
4. Copy of contract.
5. Commercial register extract.
6. Organizational chart
7. Balance sheet and profit and loss account for the relevant financial year.

However, due to the sometimes, long process times from the receipt of the application to the issuance of a certificate of exemption, it is recommended to submit applications for reimbursement in parallel to open exemption procedures as soon as payment has been made that had to be subject to a tax deduction because the certificate of exemption has not yet been issued.
The processing time can be up to 3 months after all necessary documents have been submitted.
The period of validity of the certificate of exemption is at least 1 year and may not exceed 3 years.

Section Ｃ:

DTA-Q-B0:
As an investor, if your country has not signed DTA with Germany, what kinds of tax rates when you have German relevant income?

DTA-A-B0:
The withholding tax rates under domestic law are:
Business Profits – 15%
Dividend – 25%/ 0% (EU Parent-Subsidiary Directive)
Interest (General loan) – 0%
Royalties fee – 15%/ 0% (EU Interest and Royalties Directive)
Technical services – 0%
Professional services – 0%
*There is also a solidarity surcharge of 5.5% on the tax due.

Please be aware of below Warning:
The above contents are digested by Evershine R&D  and Education Center in October 2021.
Regulations might be changed as time goes forward and different scenarios will adopt different options.
Before choosing options, please contact us or consult with your trusted professionals in this area.

Contact Us

Frankfurt Evershine BPO Service Limited Corp.
Email: fra4ww@evershinecpa.com
The Engaging Manager from Headquarter
Ms. Anna Wang, Speak German, English and Chinese.
skype: burlinna

or
For how to exchange data files between your Finance Accounting System and Evershine Cloud Accounting Information System, please send an email to HQ4fra@evershinecpa.com
Dale Chen, Principal Partner/CPA in Taiwan+China+UK will be accountable for your case.
LinkedIn address:Dale Chen

Additional Information

Evershine CPAs Firm Headquarters
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Tel No.: +886-2-27170515 ext. 105
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Email: kerrychen@evershinecpa.com
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(version: 2024/07)

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