How can a company avoid double taxation of profits earned abroad?
March 20, 2023 | 120,00 EUR | answered by Albrecht Schneider
Dear tax advisor,
I run a medium-sized company that also conducts business abroad. Lately, I have noticed that profits generated in a foreign country are being taxed both there and in Germany. This results in double taxation and increased tax burdens for my company.
I am concerned that this double taxation could make my international business less attractive and have a negative impact on my financial situation. Therefore, I am looking for ways in which my company can avoid the double taxation of profits earned abroad.
I have already tried to educate myself about the double taxation agreement between Germany and the respective country where my company operates. However, the regulations are very complex for me as a layman and I am unsure how to implement them in practice.
Could you please explain to me what options are available to avoid double taxation of profits earned abroad? Are there specific structuring options or tax optimizations that my company can utilize to operate more tax efficiently?
I would greatly appreciate a detailed consultation and specific recommendations for action. Thank you in advance for your assistance.
Best regards,
Ella Herrmann
Dear Mrs. Herrmann,
Thank you for your inquiry regarding the double taxation of profits abroad and possible solutions for your company. As a tax advisor specializing in this topic, I am happy to assist you.
Double taxation of profits abroad occurs when a company is required to pay taxes on these profits both in the country where they were earned and in Germany. This can lead to a significant tax burden and affect the attractiveness of international business.
One way to avoid double taxation is by utilizing Double Taxation Agreements (DTAs) between Germany and the country where your company conducts business. These agreements are designed to ensure that profits are only taxed in one of the two countries. However, understanding and applying the provisions of these agreements can be complex in practice.
It is important that you seek advice from an experienced tax advisor who can assist you in interpreting the DTAs and implementing them in tax practice. Together, we can assess whether and how your company can benefit from DTAs and how double taxation can be avoided.
Furthermore, there are various tax planning possibilities to minimize double taxation. These include choosing the optimal company structure, utilizing tax incentives, and implementing transfer pricing systems. Through targeted tax planning, we can ensure that your company operates tax efficiently and minimizes double taxation.
I recommend scheduling a consultation to discuss your individual situation and develop specific recommendations. I am available to answer any further questions and look forward to assisting you in optimizing your tax situation.
Best regards,
Albrecht Schneider
