Withholding tax relief through exemption or refund

Foreign tax debtors (remuneration creditors) receive relief from German withholding tax either through a refund of tax amounts that have already been paid or by being issued a certificate of exemption before the remuneration is paid.

The relief is based on Section 50c ITA and the DTAs that the Federal Republic of Germany has concluded with other states.

Royalty payments between affiliated companies in different European Union member states may be exempted if an exemption request is filed on the appropriate form and all application requirements are met (Section 50g ITA).

Remuneration creditors or their duly authorized representative may request a refund pursuant to Section 50c para 3 ITA if they want a refund of withholding tax has already been withheld and paid under Section 50a ITA. Remuneration creditors or their duly authorized representative may apply for a certificate of exemption pursuant to Section 50c para 2 sentence 1 no. 1 ITA if they want to have future remuneration preemptively exempted from withholding tax in order to reduce or completely eliminate the tax that the remuneration debtor has to withhold.

Note: An exemption or refund application can only be filed by foreign remuneration creditors within the meaning of Section 50c para 1 ITA. Remuneration debtors are not entitled to file these requests themselves. However, remuneration creditors can authorize remuneration debtors to file applications and perform other steps in tax procedures. Remuneration debtors who have not been so authorized cannot file applications or receive information or notices regarding pending exemption procedures due to the tax secrecy requirement set out in Section 30 German Fiscal Code (FC).

An exemption or refund will only be granted if the procedural and substantive requirements set out in Section 50c ITA and the relevant double taxation agreements have been met and proof thereof is furnished by the applicant. That also holds true for national and bilateral tax evasion prevention provisions such as Section 50d para 3 ITA, Art. 28 DTA USA, Art. 21 DTA Japan or Art. 31 DTA Liechtenstein.

Section 50c (2) sentence 1 no. 2 of the German Income Tax Act (EStG) is a simplified exemption procedure for remuneration for the transfer of rights (in particular license fees)..

For further information on simplified procedure, please refer to the relevant page.

Regulations

Leaflets

Leaflets on the legal situation as of June 9, 2021

General Leaflets