In which cases can double taxation of dividends occur?
January 7, 2024 | 120,00 EUR | answered by Albrecht Schneider
Dear tax advisor,
My name is Gerald Helbig and I have a question regarding double taxation of dividends. I recently invested in foreign stocks and have received dividends. I have noticed that both the foreign country and Germany are taxing these dividends. I am concerned that I may be double taxed and I am wondering in which cases double taxation of dividends can occur.
Currently, my investment portfolio consists mainly of German stocks. However, I wanted to diversify my portfolio, so I decided to also invest in foreign stocks. The dividends I received from these foreign stocks have brought the issue of double taxation to my attention. I want to ensure that I do not pay more taxes than necessary, so I am looking for possible solutions to avoid double taxation.
Could you please explain to me in which cases double taxation of dividends can occur and what measures I can take to avoid it? I would greatly appreciate your help and advice on this matter.
Thank you in advance.
Best regards,
Gerald Helbig
Dear Mr. Helbig,
Thank you for your question regarding the double taxation of dividends. It is understandable that you are concerned about being taxed twice when both the foreign country and Germany tax dividends. Indeed, in certain cases, double taxation can occur when dividends are taxed both in the source country (foreign country) and in the residence country (Germany).
Double taxation of dividends can occur when the source country has the right to levy withholding taxes on the dividends and the residence country also has the right to tax these dividends. In this case, you could indeed be taxed twice. However, there are various measures you can take to avoid double taxation.
One way to avoid double taxation is through the existence of Double Taxation Agreements (DTAs) between Germany and the respective foreign country in which you have invested. These agreements typically provide for the foreign withholding tax paid to be credited against the tax owed in the residence country. This helps to avoid double taxation.
Another approach to avoiding double taxation could be the use of exemption methods that may apply in some cases. In Germany, for example, sections 8b and 8c of the Corporate Income Tax Act (KStG) are relevant. These provisions reduce or completely avoid the domestic tax burden on dividend income.
It is important that you consult with an experienced tax advisor or tax expert to analyze your specific situation and determine the best measures to avoid double taxation. Each case is individual and requires a careful examination of the tax circumstances.
I hope this information helps you and supports you in your decision-making process. If you have any further questions or require more detailed advice, I am at your disposal.
Best regards,
Albrecht Schneider
Tax Advisor
