Domestic Withholding Tax Rates
German domestic law imposes withholding tax (Kapitalertragsteuer) on outbound payments under EStG §43. These are the statutory rates before any DTA reduction.
| Payment Type | Domestic Rate | Effective Rate (incl. Soli) | Legal Basis |
|---|---|---|---|
| Dividends to non-residents | 25% | 26.375% | EStG §43(1) Nr 1 |
| Interest on bonds/deposits | 25% | 26.375% | EStG §43(1) Nr 7 |
| Royalties (non-residents) | 15% | 15.825% | EStG §50a(1) Nr 3 |
| Income from services (§50a) | 15% | 15.825% | EStG §50a(1) Nr 1–2 |
DTA-Reduced Rates for Dividends
Most German DTAs reduce the 25% domestic dividend withholding to significantly lower rates. The applicable rate depends on the shareholding percentage.
| Country | ≥10–25% stake | ≥25% stake | Notes |
|---|---|---|---|
| USA | 15% | 5% | Germany-USA DBA 1989/2006 |
| UK | 15% | 5% | Post-Brexit still applies |
| Switzerland | 15% | 0% if ≥20% | Germany-CH DBA |
| UAE | 15% | 5% | Germany-UAE DBA 1995 |
| China | 10% | 5% | Germany-China DBA 2016 |
| Netherlands | 0–10% | 0% | EU Parent-Sub Directive applies |
| Singapore | 15% | 5% | Germany-Singapore DBA |
EU Parent-Subsidiary Directive Exemption
Dividends paid by a German GmbH/AG to an EU parent holding ≥10% for at least 2 years are entirely exempt from German withholding tax under §43b EStG (implementing the EU Parent-Subsidiary Directive 2011/96/EU).
- EU/EEA parent company must hold ≥10% of the German subsidiary
- Minimum 2-year holding period (or commitment to hold)
- Exemption at source via Form KAP-INV submitted to the payer's Finanzamt
- Applies to GmbH, AG, SE, and other German corporate entities
DTA Relief Procedures — BZSt Refund
If German withholding was applied at the higher domestic rate (e.g. 25%), a refund under the applicable DTA can be claimed from the Bundeszentralamt für Steuern (BZSt).
- Pre-payment exemption: apply to BZSt for Freistellungsbescheinigung before payment
- Post-payment refund: apply within 4 years of payment (§50d EStG)
- Application form: KAP-1/INV-1 or country-specific BZSt form
- Treaty shopping prevention: beneficial ownership requirement and MLI PPT applies
Common questions.
What is the German dividend withholding tax rate for non-residents?
25% + 5.5% Soli = 26.375% domestic rate. Most DTAs reduce this — e.g. to 5% for 25%+ corporate shareholders under the USA and UK treaties. EU parents with ≥10% stake held for 2+ years are fully exempt under the EU Parent-Subsidiary Directive.
How do I claim a DTA reduction on German withholding tax?
Apply to the BZSt (Bundeszentralamt für Steuern) for a Freistellungsbescheinigung before payment to get relief at source, or apply for a retroactive refund within 4 years using Form KAP-INV/KAP-1.
What is the royalty withholding tax rate in Germany?
15% + Soli (15.825%) under EStG §50a. Most DTAs reduce the royalty rate to 0–5%. The EU Interest and Royalties Directive provides 0% for qualifying intra-EU royalty flows between associated companies.
Is German withholding tax creditable in my home country?
In most cases, yes. The DTA between Germany and your home country provides for credit of German withholding tax against your home country tax liability. Check the specific treaty's "elimination of double taxation" article (usually Article 22/23).
What is the withholding tax on interest paid by a German GmbH to a foreign lender?
Under EStG §43, German interest withholding tax generally does not apply to interest paid by a German GmbH to a foreign lender — there is no standard interest withholding in Germany (unlike dividends). However, interest on participating loans (partiarisches Darlehen) or silent partnerships (stille Beteiligung) is treated as a dividend and may attract 25% + Soli.
How does the EU Parent-Subsidiary Directive apply to German GmbH dividends?
Under the EU Parent-Subsidiary Directive (2011/96/EU), dividends paid by a German GmbH to an EU parent company holding ≥10% for ≥2 years are completely exempt from German withholding tax. The parent must provide a certificate of residency and demonstrate the arrangement is not an abuse structure. Application is via BZSt Form KAP-INV.
What is Kapitalertragsteuer and how does it work for German bank accounts?
Kapitalertragsteuer is the German withholding tax on investment income — 25% + Soli = 26.375%. German banks automatically withhold this on interest and dividends and remit it to the Finanzamt. If you have filed a Freistellungsauftrag up to the €1,000 Sparerpauschbetrag, the bank withholds nothing up to that amount.
Is there withholding tax on software licence fees paid from Germany to a foreign IP holder?
Yes — under §50a EStG, software licences paid from Germany to foreign rights holders are subject to 15.825% withholding (15% + Soli). This is significantly reduced or eliminated by most German DTAs. The UK-Germany DTA, US-Germany DTA, and most EU DTAs reduce this to 0% for qualifying royalties. Relief at source requires BZSt Freistellungsbescheinigung.
Can I get a refund of German withholding tax if I overpaid?
Yes. Refund applications must be filed with the BZSt within 4 years of the end of the calendar year in which withholding occurred. The form is KAP-INV (for investment income) or KAP-1 (for other withholding). You must provide proof of beneficial ownership, residence certificate from your home tax authority, and evidence of the withholding. Processing takes 3–12 months.
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