Any com\u00adpa\u00adny or part\u00adner\u00adship hol\u00adding for\u00adeign shares or bonds in a secu\u00adri\u00adties account will encoun\u00adter a tax issue with every divi\u00addend or inte\u00adrest pay\u00adment that is easi\u00adly over\u00adloo\u00adked: for\u00adeign with\u00adhol\u00adding tax. This is becau\u00adse not every euro with\u00adheld by ano\u00adther coun\u00adtry can be off\u00adset against tax in Germany.<\/p>\n
If a for\u00adeign com\u00adpa\u00adny pays out divi\u00addends, the rele\u00advant coun\u00adtry deducts a por\u00adti\u00adon direct\u00adly at source befo\u00adre the amount rea\u00adches the Ger\u00adman bank account. Whilst the cus\u00adto\u00addi\u00adan bank shows this amount, it does not pro\u00advi\u00adde any gui\u00addance on how it should be trea\u00adted for tax pur\u00adpo\u00adses. That remains the respon\u00adsi\u00adbi\u00adli\u00adty of the accounts depart\u00adment and the tax adviser.<\/p>\n
In prin\u00adci\u00adple, any for\u00adeign with\u00adhol\u00adding tax is divi\u00added into two parts. First\u00adly, the so-cal\u00adled resi\u00addu\u00adal rate: this is the maxi\u00admum tax rate that the rele\u00advant dou\u00adble taxa\u00adti\u00adon agree\u00adment (DTA) per\u00admits the source coun\u00adtry to app\u00adly. Under the OECD Model Tax Con\u00adven\u00adti\u00adon, this is usual\u00adly 15 per cent for free-float divi\u00addends. This por\u00adti\u00adon can be cre\u00addi\u00adted in Ger\u00adma\u00adny. Second\u00adly, the\u00adre is the excess: any amount retai\u00adned by the source coun\u00adtry in excess of this. This amount can only be reclai\u00admed abroad; for exam\u00adp\u00adle, in Switz\u00ader\u00adland using a spe\u00adci\u00adfic refund form.<\/p>\n
In the case of a GmbH or AG, the cre\u00addi\u00adta\u00adble for\u00adeign with\u00adhol\u00adding tax is set off against Ger\u00adman cor\u00adpo\u00adra\u00adti\u00adon tax. This sounds simp\u00adle, but the\u00adre is a cru\u00adcial limi\u00adta\u00adti\u00adon: the set-off is cap\u00adped at a maxi\u00admum amount, which is deter\u00admi\u00adned by the ratio of for\u00adeign inco\u00adme to the total tax lia\u00adbi\u00adli\u00adty. The\u00adre is no cre\u00addit against trade tax.<\/p>\n
This will beco\u00adme par\u00adti\u00adcu\u00adlar\u00adly rele\u00advant from 2028 onwards: the cor\u00adpo\u00adra\u00adti\u00adon tax rate is set to be gra\u00addu\u00adal\u00adly redu\u00adced from 15 to 10 per cent. This will also redu\u00adce the maxi\u00admum amount eli\u00adgi\u00adble for cre\u00addit. With a resi\u00addu\u00adal rate under a dou\u00adble taxa\u00adti\u00adon agree\u00adment (DTA) of 15 per cent, around 5 per\u00adcen\u00adta\u00adge points would remain per\u00adma\u00adnent\u00adly as a non-deduc\u00adti\u00adble tax expen\u00adse from 2032 onwards. This is a fac\u00adtor that should alre\u00ada\u00addy be taken into account when plan\u00adning the return on a com\u00adpa\u00adny invest\u00adment portfolio.<\/p>\n
A spe\u00adci\u00adfic exam\u00adp\u00adle illus\u00adtra\u00adtes this: A GmbH recei\u00adves a Swiss divi\u00addend of 10,000 euros. Switz\u00ader\u00adland with\u00adholds 35 per cent, i.e. 3,500 euros. Only 1,500 euros (15 per cent DTA rate) are cre\u00addi\u00adta\u00adble. A receiva\u00adble from the Swiss tax aut\u00adho\u00adri\u00adties is capi\u00adta\u00adli\u00adsed in the balan\u00adce sheet for the remai\u00adning \u20ac2,000. From 2032 onwards, only \u20ac1,000 of the \u20ac1,500 can actual\u00adly be cre\u00addi\u00adted; \u20ac500 remains as a final tax liability.<\/p>\n
In the case of a GmbH & Co. KG or ano\u00adther part\u00adner\u00adship, the inco\u00adme and with\u00adhol\u00adding tax are attri\u00adbu\u00adted to the indi\u00advi\u00addu\u00adal part\u00adners. This allo\u00adca\u00adti\u00adon is only made in each partner\u2019s per\u00adso\u00adnal tax return. Under com\u00admer\u00adcial law, with\u00adhol\u00adding tax is not trea\u00adted as an expen\u00adse for the part\u00adner\u00adship, but as a with\u00addra\u00adwal char\u00adged to the part\u00adners\u2019 accounts.<\/p>\n
Cha\u00adri\u00adta\u00adble foun\u00adda\u00adti\u00adons, on the other hand, do not pay cor\u00adpo\u00adra\u00adti\u00adon tax on invest\u00adment inco\u00adme; the\u00adr\u00ade\u00adfo\u00adre, the\u00adre is not\u00adhing against which such tax could be set off. For them, the full refund of the excess tax paid abroad is par\u00adti\u00adcu\u00adlar\u00adly important, becau\u00adse any with\u00adhol\u00adding tax that is not reclai\u00admed direct\u00adly redu\u00adces the funds available for the foundation\u2019s purpose.<\/p>\n
Anyo\u00adne who holds a com\u00adpa\u00adny secu\u00adri\u00adties account should check, for each for\u00adeign divi\u00addend, what pro\u00adpor\u00adti\u00adon is tax-deduc\u00adti\u00adble, what pro\u00adpor\u00adti\u00adon can be reclai\u00admed from the source coun\u00adtry, and what pro\u00adpor\u00adti\u00adon remains as a per\u00adma\u00adnent tax lia\u00adbi\u00adli\u00adty. It is essen\u00adti\u00adal to meet the dead\u00adlines for sub\u00admit\u00adting refund claims. In Switz\u00ader\u00adland, for exam\u00adp\u00adle, the entit\u00adle\u00adment expi\u00adres three years after the end of the year in which the pay\u00adment beca\u00adme due.<\/p>\n
The accoun\u00adting tre\u00adat\u00adment is also cle\u00adar\u00adly regu\u00adla\u00adted: the deduc\u00adti\u00adble por\u00adti\u00adon con\u00adsti\u00adtu\u00adtes a tax expen\u00adse, whilst the refundable sur\u00adplus must be capi\u00adta\u00adli\u00adsed as a receiva\u00adble. Anyo\u00adne who fails to fol\u00adlow this sys\u00adtem risks both tax dis\u00adad\u00advan\u00adta\u00adges and an inac\u00adcu\u00adra\u00adte balan\u00adce sheet. Indi\u00advi\u00addu\u00adal advice from a tax advi\u00adser is stron\u00adgly recom\u00admen\u00added for com\u00adpa\u00adny invest\u00adment port\u00adfo\u00adli\u00ados con\u00adtai\u00adning for\u00adeign holdings.<\/p>\n