In which cases can double taxation of dividend income occur?
November 18, 2022 | 120,00 EUR | answered by Albrecht Schneider
Dear tax advisor,
I am Konrad Fischer and I am currently dealing with the issue of double taxation of dividend income. I have some questions about this and hope that you can help me.
The situation is as follows: I own shares in a foreign company and receive regular dividends from this investment. I am unsure whether and in which cases double taxation may occur.
Currently, I am a resident in Germany and have to pay taxes on the foreign dividends here. At the same time, the dividends are also subject to taxation in the foreign country where they were earned.
I am concerned that I may have to pay taxes twice and suffer a significant financial disadvantage as a result. I would like to know in which cases double taxation of dividend income can actually occur and how I can protect myself from it.
Therefore, my question to you is: In which cases can double taxation of dividend income occur and what options are available to avoid it? I would greatly appreciate it if you could assist me with this.
Thank you in advance for your support.
Sincerely,
Konrad Fischer
Dear Mr. Fischer,
Thank you for your question regarding the double taxation of dividend income. I understand your concern about having to pay taxes twice, and I will explain in detail below when double taxation can actually occur and what options are available to avoid it.
First of all, it is important to know that double taxation of dividend income can occur when two different states have the right to tax this income. This can happen, for example, if you as a taxpayer have your residence in a country where you need to pay taxes on your income, and at the same time receive income from another country where taxation of income is also carried out.
To avoid double taxation, there are various measures that can be taken. One option is to use Double Taxation Agreements (DTA) between the countries involved. These agreements regulate which state has the right to tax and thus prevent double taxation. It is important that you inform yourself about existing DTAs and, if necessary, meet the conditions for their application.
Another approach to avoid double taxation is the tax credit method. In this method, the tax already paid abroad is credited against the tax owed domestically to avoid double taxation. It is important that you provide all necessary evidence and make the appropriate applications to be able to use this method.
Choosing the right tax optimization strategy can also help avoid double taxation. It is advisable to seek advice from an experienced tax advisor who can provide you with individual solutions for your situation.
In summary, there are several ways to avoid double taxation of dividend income. By using Double Taxation Agreements, the tax credit method, and choosing the right tax optimization strategy, you can minimize your tax burden and avoid financial disadvantages.
I hope that this information has been helpful to you. If you have any further questions or require individual advice, I am at your disposal.
Best regards,
Albrecht Schneider
