The withholding tax relief template can be used to draft a valid power of attorney. Important: The power of attorney must include the self-assessed tax return procedure (Section 50a EStG - Income Tax Act) and the relief procedure (Sections 50c and 50d EStG - Income Tax Act). This must also be presented if the remuneration creditor or remuneration debtor are represented by a Group company.

If the authorized representatives for the different procedures are not identical (Section 50a EStG or Sections 50c and 50d EStG), the powers of attorney must be distinguished clearly from one another.

Yes, electronic signatures are accepted if an original “signature” is printed on the application with them. Other forms, such as certification with certificates, or alphanumeric codes, cannot be accepted as there is no way for the tax authority to verify them. Electronic signatures can be used on applications, powers of attorney, etc.

Because the German Federal Central Tax Office is receiving a large number of applications and self-assessed tax returns relating to register cases, processing times may be delayed.

The German Federal Central Tax Office is responsible for withholding taxes under Section 50a EStG for the tax years 2014 and beyond. It is also in charge of withholding tax relief.

For sales cases that are to be assessed using limited tax liability (Section 31 Corporation Tax Act - KStG), the general responsibilities of the tax offices apply. The domestic nexus for limited tax liability depends on the entry in the domestic or European register. Because the German Patent and Trademark Office and the European Patent Office are located in Munich, as a rule the Munich Tax Office, Division III, is in charge. Please contact its central office for register cases.

The tax liability applies to all rights that are listed in domestic public book or a register. This includes patents and trademarks on file with the German Patent and Trademark Office (DPMA), for instance, and patents on file with the European Patent Office. European patents are filed with the DPMA for declaratory purposes only, so they do not result in a domestic tax liability.

However, trademarks and patents that are listed in the international register (WIPO) do result in a domestic tax liability if their registered territory of protection extends to Germany, since their registration in the DPMA has constitutive effect.

Furthermore, rights that are on file in other domestic public books or registries can result in a domestic tax liability (such as the entry of types in the variety register or emission rights if these are listed in a register).

The temporary licensing of rights that are on file in a domestic public book or register, between closely related persons, meets the definition under Section 49 (1) (2) f) aa) EstG even if payments are exchanged between two foreign companies only. As of January 1, 2023, the prerequisite for tax liability is that the taxation of the income is not contrary to the provisions of a treaty for the avoidance of double taxation, taking into account the regulations of this law that govern its application.

The review of the DBA correction or entitlement to tax relief of the respective remuneration creditor is the responsibility of the taxable person. In case of doubt, a self-assessed tax return must be submitted.

The payments made are domestic income for the licensor with limited tax liability and are subject to tax withholding under Section 50a (1) (3) EStG (see BMF Circular dated November 6, 2020, BStBl I 2020 P. 1060).

The tax is incurred once the remuneration creditor receives the payment (royalty). At this point, the remuneration debtor must deduct taxes under Section 50a (5) (2) EStG (Section 50a (1) (3) EstG), withhold the taxes and, for payments received on or after 01.01.2014 under Section 73e EStDV they must submit a self-assessed tax return to the German Federal Central Tax Office (No. 3 of the BMF Circular dated November 6, 2020, BStBl I 2020 P. 1060 and Nos. 7 and 8 of the BMF Circular dated February 11, 2021, BStBl. I 2021 P. 301).

Even if the taxes were not deducted, the remuneration creditor is still required to withhold, register and pay the tax under Section 50a (5) (3) EStG in conjunction with Section 73e (1) and (2) EStDV. If they do not meet their obligation properly, the competent authority authority can obtain the chargeable taxes in another manner by issuing notice of an additional claim or a formal notice of liability for taxes. For this purpose, the competent authority must be allowed to review the applicable amount of tax so that it can issue an additional claim or formal notice of liability for taxes in the appropriate amount. This applies particularly in cases where the deduction of tax amounts was omitted contrary to the requirements.

If no self-assessed tax returns have been submitted for register cases, this must be done as soon as possible.

The temporary licensing of rights that are on file in a domestic public book or register, between non-closely related persons as per Section 1 Para. 2 AStG meets the definition under Section 10 StAbwG. As per Section 10 Para. 2 StAbwG, a self-assessed tax return must also be done in these cases (see above). In the future, these must be reported using a separate portal. The following link will take you to the corresponding portal: www.elsteronline.de/bportal.

Under Section 50a (4) EStG, remuneration creditors who themselves are remuneration debtors for other remuneration creditors do not have to withhold taxes if their revenue was already subject to withholding taxes.

The tax withholding amounts for the second level must be paid (retroactively) if the remuneration creditor claims work-related expenses/operating expenses with regard to their revenue (first level), applies for an assessment, or submits a tax refund claim under Section 50c (3) EStG or other legislation.
If there is a license chain, i.e., the main licensee issues sub-licenses, pursuant to the provisions of Section 50a (4) EStG, as a rule the bottom level must be reviewed first. Thus, as a rule all sub-licensing relationships must be identified.

If tax relief is granted at the bottom level (such as pursuant to an application under No. 4 of the BMF Circular dated February 11, 2021), the tax withholding on the second level can be omitted only if, at the time of payment, a certificate of exemption under Section 50c (2) EStG was issued for this level, an application under No. 4 of the aforementioned BMF Circular was submitted, or a case under No. 7 of the BMF Circular applies.

A certificate of exemption or entitlement to tax relief for one level on the license chain has no impact on other levels.

No. Separate returns must be submitted for each remuneration debtor. The electronic transmission of the separate returns can also be handled centrally by one authorized person if the appropriate power of attorney is presented.

Individual returns must be submitted for each quarter. If it is no longer possible to separate the individual remuneration by quarter, the annual amount can be distributed equally among all quarters.

No, you cannot bundle the payment for different remuneration debtors. The payments must be made separately for each remuneration debtor including the relevant tax number and the corresponding quarter. Multiple quarters can be consolidated.

To determine the tax base, reference is made to Nos. 10 to 14 of BMF Circular dated February 11, 2021 (Ref. IV B 8 - S 2300/19/10016 :007, DOK 2021/0003450). As a rule, the tax base for tax withholding under Section 50a EstG is the gross remuneration for licensing the right that is registered domestically.

The tax base must be determined individually for each contractual relationship. If the contractual relationship is not suitable for specifically defining the portion of remuneration that relates to licensing the right that is registered domestically, the remuneration paid must be allocated in the appropriate manner. This is the case, for instance, if the contract covers a large number of rights, or rights are registered in multiple countries.

The starting point for appropriate allocation is the total remuneration actually paid (“top down approach”) that must be allocated taking account of the causation principle.

However, the first step in general is to determine the mathematical portion of the royalties attributable to Germany, usually on the basis of revenue amounts. In the second step, you must determine the amount (in %) of the royalties that are allocated to Germany were payments for patents protected in Germany (as well as utility patents, etc.), for protected trademarks (as well as design patents/designs), and for other intangible assets that are not protected by an entry in the register. For the portion allocated to the trademarks, you must also make a distinction whether these are listed with the German Patent and Trademark Office (DPMA) in Munich or the EU Intellectual Property Office (EUIPO) in Alicante.

Therefore, determining the tax base for withholding taxes only using the costs of an entry and maintenance of the rights in a domestic register does not constitute proper apportionment. The same is true for “bottom up approaches,” in which the license fees attributable to Germany are determined using database studies, for instance, as a (fictitious) percentage of revenue or profits.

Under Section 170 (2) (1) AO - Fiscal Code the period of limitation for assessment of chargeable taxes as defined by Section 49 (1) (1) (2) (f) or (6) EStG has a suspension of time limit for assessment of three years and a period of limitation of (regularly) seven years total. If no self-assessed tax returns have been submitted to date for a particular case, the period of limitation for assessment for chargeable taxes in the 2015 tax year will not take effect before midnight on December 31, 2022. See also Section 169 (2) (2) AO.

After submitting an application under No. 4 of the BMF Circular dated February 11, 2021, for current contractual relationships -- if No. 7 of the BMF Circular does not apply -- no taxes must be withheld until the German Federal Central Tax Office declares that taxes must be withheld effective immediately. In these cases, a review of the remuneration creditor’s entitlement to tax relief will be performed officially where possible.

Yes. The law must be interpreted broadly and will be reviewed in register cases. Due to the changes in Section 50d (3) EStG by Act on the Modernization of Relief from Withholding Taxes and the Certification of Capital Gains Tax - AbzStEntModG - for payments on or after June 9, 2021 Section 50d (3) EStG must also be reviewed. Under Section 52 (47b) EStG, a most favorable tax treatment review must be performed for payments that were made before June 9, 2021. For these time periods, under the old legislation only Art. 28 DTA USA applies.

The German Federal Central Tax Office will contact you with a specific request for documentation if (further) information, evidence, or documents are needed. As a general rule, a questionnaire is provided during the review of Section 50d Para. 3 EStG. The provision of a list of the licensing relationships, a representation in table form of the entered rights, and the overall group organizational charts for the corresponding years along with the application accelerates the processing times of the applications.

The German Federal Central Tax Office is subject to tax secrecy in accordance with Section 30 of the Fiscal Code. It is ensured that no unauthorized third parties can access the documents.

The documents and information requested pursuant to Section 88 of the Fiscal Code. Under Section 90 (2) of the Fiscal Code, the parties have an extended duty of cooperation with regard to clarifying all matters that relate to situations outside Germany.

No. However, due to the information requested in the regular application forms, it is helpful to submit these applications using the official forms for royalties and list the desired time period there.

According to the BMF Circular dated June 29, 2022 (IV B 8 - S 2300/19/10016 :009), applications to take part in the simplification procedure can be submitted until June 30, 2023.

The BZSt currently has a large number of applications for participation in the simplification procedure, which may result in longer processing times. As long as the application is being processed by the BZSt, no self-assessed tax return needs to be submitted for the contractual relationship/license payments on which the application is based. Only if the BZSt rejects the application for exemption described in no. 4 of the BMF Circular dated February 11, 2021 (IV B 8 - S 2300/19/10016 :007), the remuneration debtor must file a self-assessed tax return for the corresponding remunerations with the BZSt (for remunerations received by December 31, 2013, with the competent local tax authority) and pay the corresponding tax withholding amounts within one month of notification of the rejecting administrative act. This also applies if an appeal has been filed against the rejection of the application (no. 8 of the BMF Circular).

Documents can be evaluated in German or English only. In accordance with the BMF Circular dated February 11, 2021, licensing agreements must be submitted in German, at least in abridged form. An official translation is not required.