What role does double taxation play in the taxation of capital gains?
January 18, 2023 | 110,00 EUR | answered by Isabel Zimmermann
Dear tax consultant,
My name is Fanni Voigt and I have a question regarding the double taxation of capital gains. In my case, it concerns the taxation of dividends from stocks that I own in both Germany and another country.
So far, I have been paying taxes on my capital gains in Germany, as I am a resident there. However, I have now learned that there may be a possibility of double taxation, as the other country may also tax the dividends. I am concerned that I may end up having to pay taxes twice and therefore lose a significant portion of my earnings.
My question to you is: What role does double taxation play in the taxation of capital gains and what options are there to avoid or at least reduce double taxation? Are there any specific regulations or agreements between countries that could help me in this situation?
I would be very grateful if you could assist me with this complex issue and provide me with information on possible solutions. It is important to me to protect my assets as best as possible and to pay taxes only once and correctly.
Thank you in advance for your support.
Sincerely,
Fanni Voigt
Dear Mrs. Voigt,
Thank you for your question regarding the double taxation of capital gains, especially dividends from stocks that you own in both Germany and another country. The issue of double taxation is indeed complex and can be a burden for taxpayers. It is important to educate yourself on the ways to avoid or reduce this double taxation.
Double taxation occurs when two or more states have the right to tax the same income. In your case, this means that both Germany and the other country where you own stocks have the right to tax the dividends. This can result in you ultimately paying more taxes than justified.
There are various ways to avoid or reduce double taxation. One option is to utilize Double Taxation Agreements (DTAs) between the involved countries. These agreements determine which state has the right to tax certain types of income and how double taxation can be avoided. Typically, a DTA states that the right to tax lies with the taxpayer's country of residence and that the country of source provides exemption or credit for taxes paid there.
Therefore, it is important to check if there is a DTA between Germany and the other country where you own stocks, and how it specifically regulates the taxation of dividends. With the help of a tax advisor, you can develop an optimal strategy to avoid double taxation and minimize your tax burden.
I recommend reaching out to a specialized tax advisor who is knowledgeable in international tax matters and can provide you with individualized advice. Together, you can explore the options available to manage your capital gains in a tax-efficient manner and avoid double taxation.
I hope this information has been helpful, and I am available to assist with any further questions.
Best regards,
Isabel Zimmermann
