Are there ways to avoid double taxation on foreign investments?
January 13, 2022 | 110,00 EUR | answered by Isabel Zimmermann
Dear Tax Advisor,
My name is Siegfried Rosenblatt and I am facing the challenge of having recently invested more in foreign companies. I have come across the issue of double taxation and I am wondering if there are ways to avoid it.
The current situation is as follows: Through my investments abroad, I earn income that is taxed in both the respective country and in Germany. This results in double taxation, significantly reducing my returns. I am concerned that due to this double tax burden, I may not be able to achieve the desired profits in the long term and I am therefore wondering if there are legal ways to avoid it.
I have already done some research on the internet, but have not found a clear solution. That is why I am turning to you as an expert on the topic of double taxation in foreign investments. Can you show me possible strategies or structuring options to avoid double taxation and optimize my tax burden?
Thank you in advance for your support and I look forward to your professional advice.
Sincerely,
Siegfried Rosenblatt
Dear Mr. Rosenblatt,
Thank you for your inquiry regarding double taxation on foreign investments. It is understandable that you are concerned about the double tax burden and are looking for ways to avoid it. Indeed, double taxation can significantly impact your returns, and it is important that you inform yourself about the available options to optimize your tax burden.
One way to avoid or at least reduce double taxation is to enter into Double Taxation Agreements (DTAs) between Germany and the respective country in which you have invested. These agreements determine which country has the right to tax certain income, thus preventing you from paying taxes twice on the same income. It is important that you check whether a DTA exists between Germany and the relevant country and how it is specifically structured.
Furthermore, you can also rely on the European Union (EU) directive for the avoidance of double taxation on cross-border investments. This directive aims to avoid taxes within the EU by allowing, for example, losses from one EU country to be offset against profits from another EU country.
In addition, tax optimization strategies such as establishing holding companies or utilizing tax incentives and benefits abroad can help to minimize double taxation. However, it is important that you seek advice from an experienced tax advisor who can provide you with individual solutions for your specific situation.
I hope that this information is helpful to you and that you have gained an initial overview of possible strategies to avoid double taxation. I am happy to answer any further questions or provide personal consultation.
Sincerely,
Isabel Zimmermann
